Key Takeaways:
- The temporary Section 122 tariffs that replaced the IEEPA tariffs have been ruled unlawful by a 2-1 decision at the U.S. Court of International Trade.
- The court granted a preliminary injunction that applies only to the importers that had brought the case.
- The decision is likely to be appealed and could prompt a wave of complaints from importers seeking tariff refunds.
The U.S. Court of International Trade (CIT) on May 7 ruled by a 2-1 vote that the 10 percent temporary tariffs imposed under Section 122 of the Trade Act of 1974 are unlawful. The administration imposed the Section 122 tariffs beginning Feb. 24, 2026, shortly after the Supreme Court struck down the tariffs imposed under the International Emergency Economic Powers Act (IEEPA). In this case, Oregon v. United States, the CIT held that Section 122 authorized tariffs in response to “large and serious United States balance-of-payments deficits” and that the president’s proclamation authorizing the tariffs did not identify that type of deficit as Congress used the term in the statute.
The majority believed Congress understood the term “balance-of-payments” to mean something different than “balance-of-trade.” According to the court, balance-of-payments concerns liquidity, official settlements and basic balance – i.e., the balance of inflows and outflows of money. The proclamation imposing the Section 122 tariffs, however, was considered to be focusing on other types of economic issues: current account deficits, trade deficits and the negative net international investment position. Because the proclamation did not identify balance-of-payments deficits within Congress’s intended meaning when the statute was implemented, the majority held the proclamation to be ultra vires and the Section 122 tariffs to be unauthorized by law.
The court granted a permanent injunction for the private companies but declined to issue universal relief, limiting the injunction to the importer plaintiffs that had standing. The court also found most of the states that joined the suit lacked standing as they were not importers of record. The decision is likely to be appealed and, given that the relief was specific to the importing plaintiffs, could trigger another wave of lawsuits by importers at the CIT. The administration had announced previously that the Section 122 tariffs would be temporary until new tariff investigations under Section 232 and Section 301 could progress in the summer of 2026 to make up the difference from the removal of the IEEPA tariffs.
