CIT Rules Against Section 122 Tariffs

Originally posted May 8, 2026. We will be updating this article as more information comes in. Additional updates will be available on our Trade and Tariff Hub. 

On May 7, 2026, the U.S. Court of International Trade (CIT) issued a 2-1 decision regarding Section 122 tariffs in Oregon v. United States and Burlap and Barrel v. United States (PDF) finding that Proclamation 11012, the temporary 10% import surcharge invoked under Section 122 of the Trade Act of 1974, exceeded the President’s statutory authority. The court entered a permanent injunction blocking collection of those duties from the named importer plaintiffs. 

The injunction is narrow. It applies only to the three plaintiffs in the case. For most importers paying Section 122 duties today, the tariffs remain in effect and remain due. The administration is expected to appeal, and replacement Section 301 actions are already in development. 

What the CIT actually decided 

The case turned on the meaning of “balance-of-payments deficits” in Section 122 of the Trade Act of 1974. Proclamation 11012 invoked Section 122 by citing the U.S. trade deficit, the current account deficit, and the negative net international investment position as the qualifying conditions. 

The CIT majority held that “balance-of-payments deficits,” as Congress understood the term in 1974, refers specifically to deficits measured by liquidity, official settlements, or basic balance. It does not refer to current account or trade deficits, which are separate accounting concepts. Because Proclamation 11012 did not identify a balance-of-payments deficit within that statutory meaning, the majority concluded the surcharge was issued without statutory authority and is invalid as to the plaintiffs before the court. 

The decision was 2-1. Judge Stanceu’s dissent argued that the legislative history does not lock the term to those three measurement methods and that summary judgment was procedurally premature. Both arguments are likely to feature in any appeal. 

Who the ruling applies to 

The CIT explicitly declined to issue a universal injunction. Relief was granted only to three plaintiffs: 

• Burlap and Barrel, a New York based spice importer 

• Basic Fun, a Florida based toy company 

• The State of Washington, in its capacity as an importer through state instrumentalities including the University of Washington 

Twenty-three of the twenty-four state plaintiffs were dismissed for lack of Article III standing. The court found that purchasing tariffed goods from third-party importers, without paying duties to U.S. Customs and Border Protection (CBP) directly, is too attenuated an injury to support standing. 

For every other importer of record currently paying Section 122 duties, those duties remain in effect. CBP collection has not been suspended outside the named plaintiffs. 

What still stands 

The decision is narrow in scope. The following remain in effect: 

• The Section 122 tariffs themselves remain in effect for non-plaintiff importers. Importers entering goods today should expect Section 122 duties to continue applying through the 150-day statutory window. 

• Section 232, Section 301, and other tariff authorities are unaffected. Like the Supreme Court IEEPA decision earlier this year, this ruling addresses one specific statutory authority. It does not invalidate other tariff frameworks. 

• The Section 122 surcharge is set to sunset on July 24, 2026 absent congressional extension. The 150-day statutory clock continues to run regardless of how the appeal resolves. 

Merchants should not assume a return to pre-2026 duty rates. Even if the CIT decision is affirmed on appeal, replacement actions under other authorities are already in motion. 

What happens next 

Three developments are reasonably foreseeable. 

An appeal is expected. The Federal Circuit will likely receive the appeal in short order. A stay request typically accompanies an appeal of an injunction at this scale. The recent IEEPA cases (V.O.S. Selections and Learning Resources, Inc. v. Trump) demonstrated how quickly the appellate posture can shift the practical picture in either direction. 

Section 301 actions are running in parallel. Backup Section 301 investigations have been in progress throughout the Section 122 period. Section 301 is a slower and more procedurally rigorous tariff authority, but a more durable one. A successful affirmance of the CIT decision does not necessarily mean a return to pre-2026 duty rates. It may mean a change in the legal basis under which similar rates are imposed. 

The replacement question is the more important one. As we noted following the Supreme Court IEEPA ruling in February, striking down a tariff authority is not the same as ending tariff exposure. The U.S. effective tariff rate has remained elevated relative to pre-2025 levels even as specific authorities have been challenged. 

Impact on merchants 

For merchants currently paying Section 122 duties, the practical implications in the near term are limited. 

1. Do not expect adjusted landed cost calculations based on this ruling unless you are a named plaintiff. The duty remains in effect for all other entries.

2. Watch the Section 301 docket as closely as the appeal. If Section 122 falls and Section 301 replaces it, the underlying duty rates may not change as much as the legal mechanism does. Accurate HS classification, country of origin documentation, and USMCA qualification become more important under a Section 301 framework, not less. 

3. Treat tariff volatility as an operating condition rather than a temporary disruption. The pattern of the last 18 months across IEEPA, Section 122, and Section 301, with court challenges and appeals at each step, is the new baseline for cross border commerce. Operational visibility into landed costs and automated customs compliance is not a one-time setup. It is a continuous requirement. 

What to watch next 

Three developments worth tracking: 

1. The Federal Circuit appeal docket, including any stay request and the court’s ruling on it

2. Section 301 investigation progress and any new tariff actions issued under Section 301 authority

3. CBP guidance on entries already collected under Section 122, including whether a refund pathway opens for non-plaintiff importers similar to the IEEPA CAPE declaration process 

Stay ahead of tariff volatility 

Cross border tariff regimes are changing faster than most teams can keep up with. Every new statutory authority, court ruling, and agency action introduces another set of HS classification questions, landed cost recalculations, and duty exposure decisions that need to be reflected in pricing before the next shipment goes out. 

FlavorCloud’s platform handles that work continuously. Guaranteed DDP, automated customs brokerage, and AI-driven landed cost calculation absorb regulatory change so merchants do not rebuild their stack every time a court issues a ruling. 

Book a demo to see how FlavorCloud’s customs and compliance infrastructure can protect and grow your business under today’s tariff conditions. 

This article is intended as general information for FlavorCloud customers, partners, DTC brands and other U.S. importers. It does not constitute legal, tax, or customs compliance advice. For specific filing decisions, consult your licensed customs broker or trade counsel.