Section 122 Tariffs Ruled Unlawful

Key Takeaways

• In a 2-1 decision, the U.S. Court of International Trade (CIT) has ruled that President Trump’s 10% global tariffs under Section 122 are unlawful, but the U.S. government has already appealed, and interim relief is limited.
• Broader injunctions are not yet in place, and most importers will still be required to pay duties absent further litigation.
• Refunds may be available in the future if the court’s decision is upheld after appeals, presumably through the same mechanism U.S. Customs and Border Protection (CBP) created for International Emergency Economic Powers Act (IEEPA) tariff refunds.
• Compliance discipline now will position companies to minimize risk and maximize recovery if the tariffs are ultimately struck down after appeals are completed.

Executive Summary

On Thursday, May 7, 2026, a divided panel of the CIT held, in related cases State of Oregon v. Trump (No. 26-cv-01472) and Burlap and Barrel, Inc. v. Trump (No. 26-cv-01606), that the Trump administration’s 10% global tariffs imposed under Section 122 of the Trade Act of 1974 (Section 122)[1] are unlawful. The majority concluded that the statutory prerequisites for invoking Section 122—namely the existence of a “large and serious United States balance‑of‑payments deficit”—were not satisfied, rendering the proclamation imposing the tariffs invalid as a matter of law.

The decision represents the latest in a series of judicial setbacks for the Trump administration’s tariff actions. The Section 122 tariffs were a response to the Supreme Court of the United States' February 2026 ruling invalidating tariffs imposed under the IEEPA.[2]

In contrast to the IEEPA tariff cases, however, the CIT declined to issue a nationwide injunction against collection of the tariffs: It enjoined the tariffs only as to those plaintiffs in the case who demonstrated they paid Section 122 tariffs and would suffer irreparable harm without an injunction—two company importers and the state of Washington. The CIT found the remaining states that sued lacked standing because they did not pay the Section 122 tariffs directly (and their alleged indirect injuries were too speculative) and, therefore, dismissed their claims.

The U.S. government has already noticed its appeal of the decision to the U.S. Court of Appeals for the Federal Circuit (CAFC), and based on the prior IEEPA cases, it may seek a stay to keep the tariffs in place during appellate proceedings even for the three prevailing CIT plaintiffs. 

Companies and importers should, therefore, prepare for a period of continued uncertainty, including questions regarding ongoing duty payments. If the CIT’s ruling is ultimately upheld by the CAFC, and after potential Supreme Court review, companies would likely be eligible for refunds.

The Court’s Ruling

Section 122 authorizes the president to impose temporary import surcharges of up to 15% for no more than 150 days to address “fundamental international payments problems,” including “large and serious United States balance‑of‑payments deficits.” Prior to 2026, this authority had never been used. Following the Supreme Court’s decision striking down IEEPA‑based tariffs, the Trump administration invoked Section 122 in February 2026 to impose a temporary 10% global tariff on most U.S. imports.

In a 2–1 decision, the CIT majority comprising Chief Judge Mark Barnett and Judge Claire Kelly held that the administration failed to demonstrate the existence of a balance‑of‑payments deficit as understood in 1974 when Section 122 was enacted and, instead, improperly relied on the existence of persistent trade deficits or current‑account deficits. The CIT also noted that accepting the government’s broader interpretation would raise serious constitutional concerns, including under the nondelegation doctrine, by effectively allowing the executive branch to impose tariffs at will without meaningful Congressional constraints.

In dissent, Judge Timothy Stanceu argued that the majority erred in confining the president's discretion under Section 122 to reliance on liquidity, official settlements, or basic balance as measures of the balance of payments. He also disagreed with the majority’s procedural approach to the case, arguing that more time should have been provided for the parties to flesh out the legal arguments and stating that with adequate notice and additional time, the parties could have presented more complete arguments as to the permissible measures of a balance of payments deficit under Section 122. However, he stopped short of finding Proclamation 11012 lawful, believing that decision to be premature given his procedural concerns.

As noted, the scope of relief is currently limited: The court enjoined enforcement of the tariffs against the two importer‑plaintiffs and the state of Washington while declining to issue a universal injunction applicable to all importers.

Appeal and Timing

On Friday, May 8, the U.S. government noticed its appeal of the CIT’s decision to the CAFC. Even though the CIT’s injunction is limited to three plaintiffs, the government may seek emergency relief from that court to preserve the status quo pending appeal (as it did in the IEEPA tariff challenge). Given the stakes and the overlap with earlier IEEPA litigation, the case could reach the Supreme Court, which would significantly delay a final decision on the legality of the Section 122 tariffs. Meanwhile, the Section 122 tariffs are set to expire, pursuant to the statutory limit, on July 24, 2026, unless explicitly extended by Congress.

Potential for Future Refunds

Although the CIT’s Section 122 decision will not be the final word on the legality of the Section 122 tariffs, the previous IEEPA cases provide a useful analog if the CIT’s decision is ultimately upheld. In March 2026, following the Supreme Court’s ruling on the IEEPA tariffs, the CIT issued an order directing nationwide refunds of unlawful IEEPA tariffs, including through liquidation of unliquidated entries and reliquidation of certain liquidated entries—even for importers that were not parties to the litigation. The CIT confirmed its authority to order such relief and rejected arguments that refunds would cause irreparable harm or exceed its jurisdiction. 

If the illegality of the Section 122 tariffs is affirmed on appeal, a similar reliquidation‑based refund process may ultimately become available, though this could depend on customs entry status and timing. Based on the status of the Consolidated Administration and Processing for Entries (CAPE) functionality developed by CBP to process IEEPA refund claims, the timing and availability of potential future Section 122 refunds may depend on the type of customs entry associated with a particular refund claim and/or the liquidation status of the entry.[3]

Next Steps for Importers and Downstream Purchasers 

Accordingly, importers that continue to pay Section 122 duties as the litigation continues should preserve their potential right to future refunds by ensuring accurate entry documentation, tracking of liquidation dates, and filing protests where necessary to prevent finality of liquidation (i.e., within 180 days of liquidation). Downstream purchasers may also wish to coordinate with their importer-of-record suppliers to ensure that potential future refunds are preserved.

Moreover, the fact that the CIT did not grant a universal injunction as part of its Section 122 opinion may indicate that—even if the CIT’s decision is upheld on appeal—further litigation could be required for additional importers to obtain tariff refunds. Importers considering such litigation must weigh the potential for obtaining an injunction against the possibility that follow-on litigation will be stayed pending the CAFC appeal and that, as noted above, the Section 122 tariffs are set to expire on July 24, 2026. 

We will continue to monitor developments closely and provide updates as the appellate process unfolds. Because of the uncertainty and potential for expanded and continued litigation, companies should also coordinate with their customs brokers, finance teams, and legal counsel to ensure that operational decisions align with both current law and potential future refund opportunities.

Endnotes

[1] Proclamation No. 11012, Imposing a Temporary Import Surcharge to Address Fundamental International Payments Problems (Feb. 20, 2026).

[2] Learning Resources, Inc. v. Trump, 146 S. Ct. 628 (2026), discussed in our prior Update.

[3] Discussed in our April 20, 2026, blog post.