On May 7, 2026, a divided three-judge panel of the U.S. Court of International Trade (“CIT”) issued a significant, but carefully bounded, opinion. The court held that the 10% across-the-board import tariffs imposed under Section 122 of the Trade Act of 1974 are unlawful. The Section 122 tariffs were issued by the Trump administration to replace the IEEPA tariffs held invalid by the U.S. Supreme Court in February, 2026. While the decision has generated considerable attention in the trade community, its practical impact on most importers is, for now, limited. Here is what you need to know.
1. The Court’s Opinion and Order – Applies Narrowly
President Trump introduced the global Section 122 tariff due to “fundamental international payments problems” via Proclamation No. 11012. The CIT, in a 2-1 opinion, issued a permanent injunction against enforcing the Section 122 tariff, but only with respect to three parties: the State of Washington (and its instrumentalities), Burlap and Barrel, Inc., and Basic Fun, Inc. Every other importer in the United States is unaffected by the injunction. Moreover, the court held it had no standing over non-importer of record plaintiffs.
The majority’s analysis centered on whether the President invoked Section 122 within its statutory limits: specifically, whether the Proclamation asserted the existence of the conditions required under the statute. The parties did not dispute that Section 122 requires the existence of “large and serious United States balance-of-payments deficits.” The parties also agreed that whether such deficits are “large and serious” is a discretionary executive determination.
The threshold question was what “balance-of-payments deficits” means in the first place, a question which the majority addresses by examining legislative intent. The court examined the history of the Trade Act of 1974, finding that Congress understood balance-of-payments deficits to refer specifically to deficits measured by (1) liquidity, (2) official settlements, or (3) basic balance, the three metrics addressed in Senate Finance Committee reports at the time of enactment. The court held that, rather than identifying “balance-of-payment” deficits as intended, Proclamation No. 11012 instead relied on current account deficits and trade deficits, which the majority held to be distinct from balance-of-payments deficits. Because the Proclamation nowhere identified a balance-of-payments deficit within the meaning of Section 122 as enacted in 1974, the court held it to be ultra vires and invalid as contrary to law.
Why did the injunction apply so narrowly? The answer lies in the court’s standing analysis. The court found that the standing inquiry for the importer plaintiffs (the State of Washington, Burlap and Barrel, and Basic Fun) was straightforward: as direct importers facing imminent and certain duty payments, they readily demonstrated a concrete and particularized injury. The 23 additional States which were plaintiffs on the suit were not importers of merchandise.
The same could not be said for the remaining 23 non-importer plaintiffs. The court found it necessary to examine their standing to inform the scope of any relief it might award, because those non-importer plaintiffs sought a universal injunction to remedy indirect harm they claimed to suffer. None of the non-importer state plaintiffs, however, identified actual indirect harm resulting from Section 122 duties. Instead, they urged the court to find imminent injury based on their past experiences with IEEPA duties, a speculative showing that fell short of Article III standing. Because the non-importer plaintiffs lacked standing, the court dismissed all of their claims were without prejudice.
On the question of universal injunctive relief, the court declined to issue such relief. The court found standing only with respect to the importer plaintiffs and concluded that those plaintiffs could be made whole by a specific injunction, along with refunds with interest for any Section 122 duties paid before the injunction takes effect. Additionally, the private plaintiffs made no specific arguments for a universal injunction.
2. The Government is Already at the Federal Circuit
The Administration moved quickly. The Department of Justice has filed an appeal and an entry of appearance at the Federal Circuit, along with motions to stay the CIT order pending appeal before both the Federal Circuit and the CIT. Today, the Federal Circuit has issued an immediate administrative stay of the CIT order, pending its ruling on the merits of whether a stay should be granted.
The Federal Circuit’s approach in the earlier IEEPA tariff litigation, where it stayed the CIT’s order pending appeal, provides a relevant precedent. There is a reasonable basis to expect the Federal Circuit to do the same here, which would suspend the practical effect of the CIT’s ruling while the appeal is pending.
We do not have any indication yet on how the Federal Circuit will rule on the merits. However, it is noteworthy that the plaintiffs in V.O.S. Selections Inc. vs Trump, the case in which the Supreme Court struck down IEEPA tariffs, had stated during oral arguments that Section 122 was an appropriate alternative through which President Trump could promulgate reciprocal tariffs.[1]
3. Section 122 Tariffs Set to be Replaced Regardless of Ruling
Even setting aside the litigation, the Section 122 tariff program has a built-in expiration date. The 10% duty went into effect on February 24, 2026, and is set to remain in effect until on July 24, 2026, the 150-day statutory maximum, unless suspended, modified, or terminated earlier, or extended by Act of Congress.
Importers should not interpret that expiration date as relief on the horizon. Section 122 has functioned as a legal bridge following the Supreme Court’s invalidation of the IEEPA tariffs in February 2026. Moreover, ongoing Section 301 investigations into foreign industrial overcapacity are expected to produce replacement tariffs that could take effect on or around the expiration of the Section 122 tariffs. The practical burden on importers is likely to continue in some form regardless of how the Section 122 litigation ultimately resolves.
4. Importers Should Monitor the Situation
Importers should carefully monitor the Federal Circuit phase of this litigation. In the meantime, no specific action is demanded of importers by the CIT decision. Three factors limit the actions importers could take now: (1) the CIT permanent injunction only applies to the three named plaintiffs, (2) the Federal Circuit will likely stay the order pending appeal as it did in the V.O.S. Selections IEEPA litigation, and (3) there are no Section 122 entries that would be close to “final” liquidation[2].
Because Section 122 tariffs became effective Feb. 24, 2026, most entries subject to these tariffs will not reach final liquidation until early summer 2027. Importers will have until then to file administrative protests for Section 122 duty refunds if necessary.
In the meantime, importers should:
- Monitor the Federal Circuit proceedings, including any stay motion and briefing schedule.
- Track any administrative action by the Administration in response to the decision, including a potential modification or reissuance of Proclamation No. 11012.
- Stay informed on developments in the Section 301 overcapacity investigations, which are likely to shape the tariff landscape beyond July 24, 2026.
- Document and preserve records of all Section 122 duty payments in the event that future action becomes appropriate.
FOOTNOTES
[1] For further analysis of the Supreme Court’s IEEPA decision, see our blog post.
[2] Final liquidation, the deadline for filing a protest, occurs 180 days after liquidation, while liquidation normally occurs 314 days after entry. See 19 CFR 174.12(e).