On May 7, 2026, the U.S. Court of International Trade (CIT) issued a decision holding that recent tariffs imposed by the President under Section 122 of the Trade Act of 1974 exceeded statutory authority. The court granted summary judgment in favor of the importer plaintiffs and enjoined enforcement of the challenged tariffs as applied to those parties only. This means that the duties cannot be collected for the plaintiffs in the case. For all other importers, the 10% duty remains in effect at this point.
Background
Following the Supreme Court decision holding that tariffs imposed under the International Emergency Economic Powers Act (IEEPA) were unlawful, President Trump issued Proclamation No. 11012, imposing a temporary 10% ad valorem import surcharge on most imports. The Proclamation cited Section 122, which permits the President to impose temporary import restrictions when “fundamental international payments problems” require such measures, including to address “large and serious United States balance-of-payments deficits.” The tariffs applied broadly but included numerous product-based and country-based exceptions based on similar exceptions from the IEEPA tariffs. Shortly after the proclamation, multiple US states and individual importers brought the present suit to challenge the proclamation, arguing that the statutory prerequisites for invoking Section 122 were not satisfied.
The Court’s Reasoning
A divided three-judge CIT panel held that the President’s findings did not establish the existence of a “large and serious United States balance-of-payments deficit” within the meaning of Section 122, and therefore the tariffs were unlawful. The majority concluded that, based on the statutory text and legislative history of the statute, Congress used “balance of payments deficits” as a term of art when enacting Section 122 in 1974. The court found that the statute contemplated specific balance of payments measures historically used at that time (such as liquidity, official settlements, or basic balance) and not simply trade deficits or modern current account measures.
Although the Proclamation cited large trade deficits, current account deficits, and the net international investment position, the court held that these findings did not satisfy the statutory requirement of identifying a balance of payments deficit as contemplated by Section 122. While acknowledging that courts may not review the President’s factual determinations where discretion is delegated, the court emphasized that it must determine whether the President acted within the scope of the authority delegated by Congress.
Claims by most state plaintiffs were dismissed for lack of standing. The court found standing only for importers of record (including certain private companies and the State of Washington in its capacity as an importer).
One judge of the three-judge panel dissented, stating that Section 122 does not limit the President to historical balance of payments measurement methodologies and that the majority’s interpretation unduly constrained presidential discretion. The dissent also took issue with the procedural posture of the summary judgment ruling.
Remedy
The court entered a permanent injunction barring enforcement of the Section 122 tariffs against the plaintiff importers and noted that those parties could seek refunds of duties paid. The court did not rule on broader application of the tariffs to non-party importers and declined to enter a nationwide injunction. This stance reflects judicial skepticism toward nationwide (or “universal”) injunctions following the Supreme Court decision in Trump v. CASA and stands in contrast to the CIT’s initial decision in VOS Selections, in which it invalidated tariffs imposed under the IEEPA in respect of all importers. In its decision on appeal in that case, the Federal Circuit upheld the finding that the IEEPA tariffs were unlawful but vacated the broad injunction for violating the rule in CASA, which had been decided while the appeal was pending.
Looking Ahead
The CIT’s decision invalidating the Section 122 tariffs is likely to be appealed to the U.S. Court of Appeals for the Federal Circuit, with potential further review by the Supreme Court. The tariffs under Section 122 will expire in late July, reflecting a 150-day statutory limit for the imposition of Section 122 tariffs, while additional tariffs are expected to be introduced under other authorities to replace the Section 122 tariffs.
While the ruling limits enforcement of the Section 122 tariffs as to the plaintiffs, it expressly denies relief to non-parties. This means that, absent further action, duties will continue to be collected from (and refunds will not be available to) non-party importers in connection with the current litigation. The court is silent on what mechanisms are available to non-party importers to seek redress should the decision stand.
Importers should work with counsel to assess how the decision applies to their specific circumstances and to evaluate potential options for pursuing relief and mitigating compliance risk. We will continue to monitor related developments and provide updates as the situation evolves.
(Update: On May 8, 2026, the U.S. Government filed notices of appeal with the CIT.)
