The Post-IEEPA Landscape: Practical Guidance for Government Contractors

The U.S. Supreme Court on February 20, 2026, issued a landmark decision in Learning Resources, Inc. v. Trump, resulting in a fundamental shift in the legal framework governing recent U.S. tariffs. As previously discussed by Holland & Knight's International Trade Group, by holding that the International Emergency Economic Powers Act (IEEPA) does not authorize the president to impose tariffs, the Court invalidated the legal basis for nearly $175 billion in duties collected since March 4, 2025, and triggered a fast-moving scramble over who can recover what and when.

For government contractors, the stakes are especially high. Many contractors either absorbed IEEPA‑driven cost increases or passed them through to the government and other customers under existing contract mechanisms. As refund pathways and new tariff authorities continue to evolve, contractors will need to move quickly on two fronts: 1) preserving potential rights to IEEPA tariff refunds within their supply chains and 2) managing the government's likely efforts to recoup amounts that were already reimbursed under federal contracts.

Against this unsettled backdrop, this alert cuts through the noise to address key questions and highlight practical steps government contractors should consider now to preserve potential tariff reimbursement rights and plan for the road ahead. It also highlights threshold questions, practical steps to preserve potential recovery and contracting strategies to address the next wave of tariffs.

The Threshold Question: Will IEEPA Tariffs Be Refunded?

Importers of record that paid IEEPA duties in 2025-2026 have a legal basis for recovery. However, the process for securing refunds is unsettled and evolving. As of today, U.S. Customs and Border Protection (CBP) has not issued guidance on pursuing refunds administratively, and the Trump Administration has suggested that refund claims may require prolonged litigation. Recently, in a filing made by the administration at the U.S. Court of Appeals for the Federal Circuit, the government suggested that the courts should delay the next steps in litigation to allow "the political branches an opportunity to consider options." The courts, however, are not persuaded. On March 2, 2026, the Federal Circuit issued an immediate mandate – over the government's objection – denying its request to delay the ongoing tariff‑refund litigation.

In response to the Supreme Court's opinion, many companies have filed lawsuits at the U.S. Court of International Trade (CIT), while others have pursued administrative remedies – though the viability of administrative protests remains unclear. What's clear is that importers should act promptly to identify applicable deadlines and take affirmative steps to safeguard their entitlement to reimbursement.

What This Means for Government Contractors: The Importer of Record Issue

The right to seek a refund belongs to the importer of record. Companies should therefore closely monitor refund developments and act promptly to recover tariff costs that were passed down to them.

Government contractors that purchase commercial items, components or finished goods from U.S. manufacturers, distributors or resellers therefore are frequently not the importer of record, even where they ultimately bore the economic impact of the tariff through increased input costs passed into their contract pricing.

Because only the importer of record may file protests or post‑importation refund claims with CBP or at the CIT, contractors that are not importers of record will need to coordinate with their suppliers to ensure that eligible entries are identified, timely claims are filed and contractual mechanisms are in place to share any refunds. Contractors should review the terms and conditions of their downstream supply chain contracts to determine what rights and remedies they might have to recover tariff refunds.

Any claim for reimbursement by downstream purchasers – including prime contractors and higher‑tier subcontractors – will be contingent on the importer first securing a tariff refund. Companies should therefore closely track refund developments, map which suppliers are acting as importers of record for affected items and act promptly to recover tariff costs that were passed down to them through price increases, surcharges or other contract adjustments.

What Remedies Are Available to Companies That Absorbed Tariffs Costs?

For downstream customers, the ability to recover tariff costs will largely depend on how tariff risk and pricing authority were allocated by contract. Companies throughout the supply chain should closely review their agreements for:

• provisions addressing tariff or duty refunds or other pass-through mechanisms
• material adverse change clauses tied to significant tariff or trade developments
• cost‑plus or other pricing provisions that encompass duties and surcharges

Where contracts do not clearly address tariffs, companies should identify documentation linking price increases to IEEPA tariffs, including:

• written communications with suppliers regarding tariff-driven price changes
• invoices or purchase orders with separately itemized tariff surcharges

To preserve potential recovery rights, companies should act promptly and consider issuing written demands or preservation‑of‑rights notices asserting a claim to any IEEPA tariff refunds.

What if the Contract Is Unclear or Silent?

Even where contracts do not expressly address tariffs, companies may still have viable paths to recovery. These include:

• renegotiating contract terms or pursuing practical, cooperative solutions, such as sharing the costs and potential benefits of seeking IEEPA refunds with the importer
• requesting credits, rebates or reimbursements
• revising pricing arrangements on a go-forward basis

Where importers passed tariff costs through to customers, they may have limited incentive to pursue refunds independently. Companies should therefore take immediate steps to engage importers and to negotiate workable, mutually beneficial arrangements, including express agreements on how any refunds will be allocated.

Must Federal Contractors Credit the Government for IEEPA Tariff Refunds?

If IEEPA tariffs are refunded, federal contractors that previously absorbed those costs – or were compensated for them – may be required to credit the government for any resulting refund. Whether a credit is owed will depend on the contract type, applicable contract clauses and whether the contractor previously recovered the tariff costs through billing, price adjustments or claims.

For example, under cost‑reimbursement contracts, if IEEPA tariffs were treated as allowable costs and billed to the government, any subsequent refund may be viewed as a credit allocable to the contract, requiring repayment or an offset against future billings.

As another example, contractors should be cautious of nuances in firm‑fixed‑price (FFP) contracts. Although contractors generally bear the risk of cost increases and benefit from cost decreases in FFP contracts, certain provisions such as price adjustment clauses addressing taxes and duties or prior equitable adjustments tied to tariff increases may give the government a right to recoup or offset refunded amounts.

In short, where the government has already borne the cost of tariffs, it may seek recovery if those costs are later eliminated through reimbursement. As refund mechanisms continue to develop, contractors should conduct a contract‑by‑contract review to assess how tariff costs were treated and identify relevant clauses (including Taxes, Changes and Economic Price Adjustment). Failure to do so may expose contractors to audit risk or, in some circumstances, False Claims Act (FCA) liability. Contractors should not assume tariff refunds may be retained without careful contractual and regulatory analysis.

Can a Contractor Offset the Costs of Pursuing IEEPA Tariff Reimbursement?

The Federal Acquisition Regulation (FAR) does not provide an automatic right to offset recovery costs against any required credit to the government. Instead, a contractor will likely need to demonstrate that such costs are allowable and allocable under the specific contract terms or address cost recovery through negotiation with the government (for example, through indirect cost rates or a tailored agreement on how refund-related expenses will be treated).

How Should Companies Plan for Future Tariffs?

Tariffs are not going away. In fact, effective February 24, 2026, the U.S. replaced IEEPA‑based tariffs with a 10 percent global import surcharge under Section 122 of the Trade Act of 1974 – a temporary, 150‑day measure aimed at balance‑of‑payments concerns, with the potential to increase to 15 percent. The administration has also signaled a transition to more long-lasting tariffs under Section 301 of the Trade Act. It remains to be seen whether these tariffs will withstand future legal challenges, though the legality of these tariff authorities is on firmer footing.

Going forward, companies should closely monitor new tariff developments that may affect pricing and margins. In the wake of tariff uncertainty, agreements for imported goods should consider expressly addressing:

• allocation of tariff risk across the supply chain
• mechanisms for sharing or passing through tariff-related costs and refunds
• procedures for repricing or renegotiation in response to material tariff changes

Early coordination with suppliers – and for government contractors, with contracting officers – supported by legal guidance and contract modifications can help manage risk and preserve flexibility as tariff law and enforcement continue to evolve.

Key Takeaways for Government Contractors

In the wake of Learning Resources and the rapid pivot from IEEPA‑based tariffs to Section 122 and anticipated Section 301 measures, federal contractors face a compressed timeline to assess both refund opportunities and potential repayment obligations to the government. The action items below distill the practical steps contractors should prioritize now – both to preserve their place in any refund waterfall and to manage audit, overpayment and FCA risk. Taken together, they provide a road map for coordinating with importers, contracting officers and suppliers as the post‑IEEPA regime continues to unfold.

• Move Quickly on Refund Preservation. Identify 2025-2026 imports subject to IEEPA tariffs and identify the importer of record. Coordinate with importers now on litigation, administrative challenges (such as protests) and documentation to preserve refund rights and negotiate how any refunds will be allocated. Holland & Knight is actively handling these matters, and timing is critical.
• Map Tariff Costs to Specific Contracts. For each major federal contract, determine whether IEEPA tariff costs were 1) absorbed by the contractor, 2) passed through to the government via cost‑type billing, equitable adjustments or economic price adjustments, or 3) embedded in firm‑fixed prices without adjustment.
• Perform a Clause‑by‑Clause Risk Assessment. Review key clauses (i.e., Taxes, Changes, Economic Price Adjustment, Allowable Cost and Payment) and any prior equitable adjustments to assess whether tariff refunds may be treated as credits to the government and where the government may assert offset rights.
• Anticipate Audits and Potential FCA Exposure. Contractors that received tariff‑driven increases or billed IEEPA duties as costs should plan for audit scrutiny. Develop a strategy now for how refunds will be identified, tracked and credited to avoid allegations of overpayment retention or false claims.
• Address Recovery Costs Up Front. Consider how legal fees and administrative costs associated with pursuing IEEPA refunds will be handled – both in negotiations with importers and in discussions with contracting officers regarding allowability, allocability and any net‑to‑government credit.
• Recalibrate Contracting Strategy for Future Tariffs. As Section 122 surcharges and anticipated Section 301 measures take hold, incorporate explicit tariff allocation and refund‑sharing provisions into subcontracts and prime contracts where possible and consider pricing, indexing and economic price adjustment mechanisms that address future tariff volatility.
• Document Everything. Maintain contemporaneous records linking pricing decisions and surcharges to specific tariffs and document any communications with suppliers, importers and government counterparts about tariff impacts and refunds. This documentation will be critical both to support refund claims and to defend against potential government recoupment efforts.

For more information on navigating today's trade environment, contact the authors of this alert with any questions or for assistance in assessing your specific exposure and recovery options.

You can also register to join Holland & Knight attorneys for a timely webinar, "The End of IEEPA Tariffs: Refunds, Risks and the Next Phase of U.S. Trade Policy," on March 5, 2026, from 3 to 4 p.m. ET.

Information contained in this alert is for the general education and knowledge of our readers. It is not designed to be, and should not be used as, the sole source of information when analyzing and resolving a legal problem, and it should not be substituted for legal advice, which relies on a specific factual analysis. Moreover, the laws of each jurisdiction are different and are constantly changing. This information is not intended to create, and receipt of it does not constitute, an attorney-client relationship. If you have specific questions regarding a particular fact situation, we urge you to consult the authors of this publication, your Holland & Knight representative or other competent legal counsel.