U.S. Court of International Trade Strikes Down 10% Section 122 Tariffs as Ultra Vires — But Limits Permanent Injunction to Two Importer Plaintiffs and the State of Washington (May 7, 2026)
On May 7, 2026, the U.S. Court of International Trade (CIT) ruled that the 10% Section 122 import surcharge imposed under Proclamation 11012 (issued February 20, 2026) exceeded the President's statutory authority under Section 122 of the Trade Act of 1974. The court held that 'balance-of-payments deficits' is a term of art grounded in 1974 economic concepts — specifically the three established measures of basic balance, liquidity, and official settlements — and rejected the administration's reliance on modern 'current account deficit' and goods-trade-deficit data as ultra vires. Critically, the CIT entered a permanent injunction only against collection of the surcharge from the named plaintiffs with standing: two private importers (Burlap & Barrel and Basic Fun!) and the State of Washington as an importer. The court declined to issue a nationwide injunction and dismissed claims from approximately 23 other non-importer states for lack of standing. For all other FBA and FBM importers, the 10% Section 122 surcharge continues to be collected pending the government's expected appeal to the U.S. Court of Appeals for the Federal Circuit. The Section 122 surcharge remains scheduled to expire by operation of the statute on or about July 24, 2026 (the 150-day statutory limit), unless Congress acts to extend it.
Real-World Impact
For a non-plaintiff seller, the math has not changed: a product imported from China at $10 landed cost (post-Section-301) still attracts roughly $1.25/unit in Section 122 duty (10% of the post-301 landed value). On 1,000 units/month that is still about $1,250 in monthly Section 122 duty — none of which is automatically refunded by the May 7 ruling unless the seller is itself a named plaintiff with a permanent injunction.
Key Points
- On May 7, 2026 the U.S. Court of International Trade ruled in the consolidated cases (including State of Oregon et al. v. Trump and Burlap & Barrel v. Trump) that the 10% Section 122 surcharge exceeded statutory authority — the tariffs were deemed ultra vires
- Legal basis: the court read Section 122's 'large and serious balance-of-payments deficits' as the 1974 term of art using basic balance, liquidity, and official settlements measures — not the modern current-account or goods-trade metrics the administration used
- The permanent injunction is NOT nationwide — it applies only to the named importer plaintiffs Burlap & Barrel and Basic Fun! and to the State of Washington as an importer; claims from approximately 23 non-importer states were dismissed for lack of standing
- For all other importers (including the vast majority of FBA and FBM sellers), Customs continues to collect the 10% Section 122 surcharge while the case is appealed
- Proclamation 11012, issued February 20, 2026, imposed the 10% surcharge on virtually all imports — that proclamation is the legal instrument the CIT struck down for the named plaintiffs
- Section 122's 150-day statutory limit means the surcharge expires on or about July 24, 2026 by operation of law unless Congress affirmatively extends it
- The government is widely expected to appeal to the U.S. Court of Appeals for the Federal Circuit — refunds and broader relief are not automatic for non-plaintiffs and depend on the appeal outcome and on each importer's own protest/refund posture
What You Should Do Now
- 1Do not assume the surcharge is gone — for any seller who is not Burlap & Barrel, Basic Fun!, or the State of Washington, CBP is still collecting the 10% Section 122 duty on entries, so do not reprice products or change supplier contracts on the assumption of immediate relief
- 2Preserve every entry document and protest deadline now: keep CBP entry summaries, commercial invoices, and HTS classifications organized so you can file timely protests (typically 180 days from liquidation) if appellate relief or refund authority expands later
- 3Track the government's appeal to the U.S. Court of Appeals for the Federal Circuit — a reversal would restore the surcharge for the named plaintiffs, while an affirmance would not automatically extend relief to other importers without further litigation
- 4Consult a licensed customs broker or trade attorney about whether your business has facts similar enough to the successful plaintiffs (status as a direct importer paying Section 122 duties on identifiable entries) to consider its own litigation or refund posture
- 5Continue planning for the July 24, 2026 statutory expiration date — that remains the firm legal sunset for the Section 122 surcharge under the Trade Act's 150-day limit, absent Congressional extension