On May 7, 2026, the U.S. Court of International Trade (USCIT) ruled in a 2-1 decision that Presidential Proclamation 11012,1 which imposed a 10% tariff under Section 122 of the Trade Act of 1974, does not rest on a statutorily valid justification.2 The USCIT permanently enjoined Proclamation 11012 with respect to the two named private plaintiffs and the State of Washington and ordered the Government to refund with interest Section 122 tariffs that they paid. The Court did not order the Government to stop collecting Section 122 tariffs from other importers.
Background
After the U.S. Supreme Court’s February 20, 2026, decision striking down the tariffs imposed by President Trump under the International Emergency Powers Act (IEEPA), he issued Proclamation 11012, which imposed a sweeping 10% tariff under Section 122 of the Trade Act of 1974. The Section 122 tariff replaced IEEPA tariffs for goods entered on or after February 24, 2026.
Two private importers, Burlap and Barrel, Inc. and Basic Fun, Inc., and several states challenged the Section 122 tariffs in the USCIT. While the USCIT dismissed the states that had not imported goods for lack of standing, it found that the private plaintiffs and the State of Washington, which had imported goods subject to Section 122 tariffs, had standing, and ruled in their favor on the merits.
The Decision
Section 122 permits the President to impose a temporary import surcharge to, among other things, “deal with large and serious United States balance-of-payments deficits.” The USCIT majority found that the types of issues cited by Proclamation 11012 as justifications for the Section 122 tariff were not “balance-of-payments deficits” as that term was understood by Congress when it drafted Section 122.
The USCIT’s judgments declare Proclamation 11012 invalid as contrary to law. The USCIT also enjoined Proclamation 11012 with respect to the private plaintiffs and the State of Washington and ordered implementation of the injunction within five days. The Court, however, declined to issue a universal injunction prohibiting collection of the tariff from all importers, noting that only the importer plaintiffs had standing and that they could “be made whole by an injunction specific to them and refunds[.]” The USCIT also ordered the refund, with interest, of the Section 122 tariffs paid by the importer plaintiffs.
Subsequent Steps in the Litigation
On May 8, the Government appealed the USCIT’s decision to the U.S. Court of Appeals for the Federal Circuit (Federal Circuit). On May 11, 2026, the Government asked both the USCIT and the Federal Circuit to stay the USCIT’s judgments pending appeal. The Government also asked the Federal Circuit to issue an administrative stay of the USCIT’s judgments while the Federal Circuit considers the request for a stay pending appeal. The Federal Circuit granted that administrative stay on May 12.
Appellate litigation on the validity of Proclamation 11012 will likely take at least several months. There is a significant chance that the U.S. Supreme Court will have the final word on whether that Proclamation’s imposition of Section 122 tariffs had an adequate legal foundation.
Implications for Importers
The USCIT’s decision has no immediate impact on importers besides those involved in the litigation. However, the decision highlights the possibility that importers will ultimately be able to obtain refunds of Section 122 tariffs. Importers should carefully track Section 122 tariff payments and consult with counsel about appropriate steps to ensure that they can obtain refunds in the event the Section 122 tariffs are ultimately ruled unlawful in a final and unappealable decision.
Moreover, in the unlikely event that the USCIT’s May 7 judgments concerning Proclamation 11012 are allowed to take effect while appeals proceed, that may open short-run opportunities for other importers to obtain relief by filing their own cases. Importers are encouraged to monitor developments and consult promptly with counsel about options in the event that the Government’s stay requests are denied.
Cozen O’Connor’s international trade attorneys are available to consult with you regarding Section 122 tariffs and other international trade matters.
1 Proclamation No. 11012 (Feb. 20, 2026), Imposing a Temporary Import Surcharge To Address Fundamental International Payments Problems, 91 Fed. Reg. 9,339 (Feb. 25, 2026).
2 Oregon v. United States, No. 26-1472, Slip Op. 26-47 (Ct. Int’l Trade May 7, 2026); Burlap and Barrell, Inc. v. United States, No. 26-1606, Slip Op. 26-47 (Ct. Int’l Trade May 7, 2026).