A new tariff horizon

On Friday 20 February, the US Supreme Court overturned the lower court ruling that IEEPA could be used as a tariff-imposition authority. The Court ruled 6-3 that the 1977 emergency powers law does not authorise broad revenue-raising tariffs and should only be used by the President where he has authority in limited circumstances. Further, there were other mechanisms, whilst not as fast, which would have given the same result. On this basis, the court invalidated the IEEPA tariffs.

The Justices reiterated that tariff authority remains with Congress under the Constitution, and it is for the courts to enforce the limits written by Congress. Major economic decisions such as tariffs, which have economic impacts, require clear, congressional approval. 

IEEPA tariffs will no longer be enforceable from 25 February but the decision left unresolved whether importers – who paid over US$200 billion – will receive refunds. The Court of International Trade (CIT) will decide how the refund processes will be made, however, this will inevitably take some time. It is worth noting that interest at a rate of 6% will be applied until the refunds are made. 6% on US$200 billion is no small change…

On Saturday 21 February, the US administration introduced revised and increased tariffs under alternative statutory authorities, namely:

a) Section 122, Trade Act 1974: this allows the US administration to impose temporary, across the board tariffs of up to 15% for up to 150 days, without declaring a national emergency

b) Section 232, Trade Expansion Act 1962: this authorises tariffs when imports threaten national security – ongoing or new S.232 investigations could justify additional tariffs.

These will likely be implemented shortly. Whilst not mentioned, there is speculation that the administration may also use Section 338 of the Tariff Act 1930 to impose retaliatory tariffs when another country is found to be discriminating against US commerce.

However, any new tariffs brought under these three authorities can still be challenged on whether the chosen statutes genuinely authorise such broad, global duties.

So what next?

Trade flows are likely to adjust rapidly as the supply chain seeks to re-route cargo and mitigate cost exposure. It was on 2 April 2025 where the US first announced plans to impose tariffs ranging from 10% to 50% in 185 countries. We have come some way since ‘Liberation Day’ with the threat of tariffs coming and going creating great uncertainty for manufacturers, sellers, buyers and carriers.

Whilst many in the marine space adopted a more ‘sit and wait’ attitude due to the ever evolving tariff war, others had already made arrangements to divert shipments away from the US.

Implications

• Increased valuation complexity for marine and cargo placements. Insurers need to consider their basis of valuation clauses carefully. Goods that are transported will likely have a substantially different value upon loading than when they get to their destination. Insurers need to consider whether their policies, in the event of a claim, will cover the increased value upon delivery which is generated by the imposition of such tariffs.
• If the policy covers market value of the goods, then the question is, what is ‘market value’ when the goods have not previously been sold in a market where significant tariffs have been imposed.
• Insurers and insureds need to be considering whether there will be significant underinsurance for such claims. This is more so now that the threat of tariffs has now become a global reality.
• Potential risk as supply chains concentrate in alternative jurisdictions. Alternative shipping routes and delivery ports come with an element of the unknown. Whilst savings may be made in avoiding tariffs, there may be additional losses from inexperienced handling at ports, increase in thefts from the less secure ports/warehouses, and claims for delay where alternative shipping routes take longer to complete.

Action points

Engage brokers and insureds on revised declared values for shipment, volume of cargo being stored at any one location and changes to shipping routes. All three come with the potential for additional claims being presented under marine policies.

Finally, insurers and insureds need to give some thought as to whether they are entitled to a refund of any tariffs already paid. Whilst the indications are that this will be a long drawn out process, the supply chain will no doubt be quick to start that refund process. There is a question as to whether the market will see a demand for ‘refunds’ from those in the supply chain who had to pay more for particular services due to the imposition of tariffs. Will the supply chain become the supply circle with the payment of tariffs still having to be absorbed by the original payor?

We are closely tracking and monitoring the evolving unrest in the Middle East. We are preparing a separate client alert that will address cargo, war risk, political risk and trade credit implications in greater detail.