Section 122 Tariffs Struck Down: What Importers Need to Know Now

Published May 8, 2026

Key Points

• CIT struck down 10% Section 122 tariffs on May 7 in a 2-1 decision
• Importers paid an estimated $25 billion in just 72 days since February 24
• Injunction is narrow and applies only to named plaintiffs, not all importers
• Most importers must continue paying Section 122 tariffs at the border
• Named plaintiffs get refunds with interest within 5 days
• Court found the proclamation failed to identify a true balance-of-payments deficit
• Government is expected to appeal quickly and seek a stay
• Appeal goes to the Federal Circuit, with possible Supreme Court review
• Preserving refund rights through protests and CAPE is critical now

O​​​​​​​​​​​​​​​​​​​​​​​​​​n May 7, the U.S. Court of International Trade (CIT) ruled in a 2-1 decision that the 10% Section 122 tariffs imposed under Presidential Proclamation No. 11012 are unlawful. Importers have paid an estimated $25 billion in these duties since February 24, just 72 days of collection.

This is a major development, but it comes with critical caveats that every import operation needs to understand before changing course.

Bottom Line for Importers

The injunction is narrow, not universal. The CIT majority refused to issue a universal injunction halting Section 122 tariffs across the board, holding that “the potential for increased costs to one plaintiff is not an appropriate basis for the imposition of a universal injunction.” Instead, the court issued a permanent injunction that applies only to the named plaintiffs, which include the State of Washington in its capacity as an importer.

For everyone else, Section 122 tariffs continue to apply at the border.

If you are not a named plaintiff, you should:

• Continue paying Section 122 tariffs on entries as you have been
• Begin preserving refund rights through protests and other administrative mechanisms
• Watch for guidance on a potential CAPE Phase 10 submission process

Refunds: Who Gets What, and When

For the named plaintiffs, the government has been ordered to stop collecting Section 122 tariffs from them within five days and to refund all Section 122 tariffs already paid, with interest.

For non-plaintiff importers, there is no automatic refund mechanism. If the ruling survives appeal and is eventually extended more broadly, refunds would likely flow through a process similar to the IEEPA tariff refund experience, which the majority itself acknowledged comes with “significant delays from the time the imposition of tariffs are first held unlawful before refunds are effectuated.” The court actually cited that delay as one reason for granting injunctive relief to the named parties.

This is exactly why preserving your refund rights matters right now. CAPE submissions, timely protests, and clean entry summary documentation are not optional. They are the mechanisms that will determine whether you recover anything if the ruling holds.

The Legal Reasoning

The case came down to whether the President exceeded his authority under Section 122 of the Trade Act of 1974. Section 122 authorizes tariffs to address a “balance-of-payments” deficit. The proclamation, however, pointed to four different things: a large trade deficit, a current account deficit, a negative net international investment position, and a deficit on the balance on primary and secondary income.

The majority held that none of these equates to a balance-of-payments deficit within the meaning of the 1974 statute. In the court’s words: “Nowhere does Proclamation No. 11012 identify balance-of-payments deficits within the meaning of Section 122 as it was enacted in 1974.”

Judge Timothy Stanceu dissented, arguing that BEA statistics on these related measures could reasonably support a balance-of-payments finding, and that the majority erred procedurally by granting summary judgment without giving the government an opportunity to contest the plaintiffs’ factual assertions.

What Happens Next

The government is expected to appeal quickly and move for a stay pending appeal. Appeals from the CIT go to the U.S. Court of Appeals for the Federal Circuit, with potential further review at the Supreme Court. A stay would effectively pause the ruling, including the injunction for the named plaintiffs, until the appellate court weighs in.

The decision also adds to a developing line of precedent limiting the President’s unilateral tariff authority and pushing trade policy back toward more traditional channels: Section 301 actions and tariffs enacted through Congress.

• Don’t stop paying. Unless you are a named plaintiff, Section 122 tariffs still apply at entry.
• Preserve refund rights now. File protests within statutory windows for already-liquidated entries, and confirm entry summaries are coded to support a future refund claim.
• Audit your Section 122 entries. Compliant entries have never mattered more. Any eventual refund process will scrutinize entry-level data closely. Errors today become barriers to recovery later, and they bring audit risk along with them.
• Talk to your broker about CAPE. A CAPE Phase 10 submission process may emerge. Brokers should already be modeling the workload, and importers should know who is doing what.
• Watch the next 1 to 3 days. A stay pending appeal would meaningfully change the calculus, and an administration response is likely imminent.
  

The ruling represents a significant legal challenge to the use of Section 122 for broad tariffs, but the practical reality for most importers today is unchanged, with one major addition: a narrow window to get your compliance and refund posture right before the next phase of this fight begins.

How GHY Can Help?

GHY specializes in helping businesses navigate and reduce the impacts of tariffs through strategic solutions tailored to their needs. Our experts can audit your supply chain to identify inefficiencies, uncover cost-saving opportunities, and ensure compliance with evolving trade regulations. We also employ tariff engineering techniques to optimize product classification and sourcing strategies, minimizing duty exposure and maximizing profitability.

By partnering with GHY, your business gains access to the tools and expertise needed to streamline operations and stay competitive in a challenging trade environment.

Contact Us Today! Booking a Meeting, email consult@ghy.com, or call +1 (800) 667-0771.