On Thursday, May 7th, the U.S. Court of International Trade (CIT) ruled that the Trump administration’s 10% tariffs imposed under Section 122 of the Trade Act of 1974 are unlawful. Section 122 permits temporary import surcharges only when necessary “to deal with large and serious United States balance-of-payments deficits.” The court found that the administration had not satisfied that statutory requirement. Instead, the court concluded that the proclamation relied on current-account and trade-deficit concepts that did not match the balance-of-payments standard Congress used when it enacted Section 122. As the court explained, “trade deficits are conceptually distinct from balance-of-payments deficits.”

The decision is favorable for importers, but it is narrow in its immediate effect. Although the CIT held that the Section 122 tariffs are unlawful, it issued a permanent injunction only for the importer plaintiffs in the case. The court did not issue a universal injunction covering all importers. As a result, the government may continue collecting Section 122 duties from non-plaintiff importers unless and until further relief is granted, the government changes its administration of the tariffs, or an appellate court takes further action.

The action was brought under the CIT’s residual jurisdiction provision, 28 U.S.C. § 1581(i), rather than through the ordinary protest-denial route under 28 U.S.C. § 1581(a). Because the case was brought directly in the CIT and the injunction applies only to the plaintiffs before the court, the decision does not at this stage automatically establish a refund process or bar collection of Section 122 duties for all other importers.

The Section 122 tariffs were imposed as a temporary measure after the Supreme Court struck down the administration’s IEEPA tariffs and were scheduled to expire in July. The government filed notices of appeal on Friday afternoon to appeal to the U.S. Court of Appeals for the Federal Circuit and may seek a stay of the CIT’s judgment pending appeal. For now there remains significant uncertainty for importers that have paid or continue to pay Section 122 duties but were not parties to the case.

As for next steps, it is still early. It is unknown whether or how the decision will be applied more broadly to non-plaintiff importers. There are also unresolved procedural questions regarding how importers that paid Section 122 duties may need to preserve refund rights. Depending on how the litigation, appeal, and any government implementation guidance develop, importers may need to consider filing administrative protests, commencing an action at the CIT, or taking both steps to protect potential refund claims.

Practical Takeaway

Companies that have paid Section 122 duties should remain flexible and closely monitor entry status, liquidation dates, protest deadlines, appeal developments, and any CBP guidance. Until there is broader relief or a clear refund procedure, importers should be prepared for the possibility that further action may be required, whether through protests, CIT litigation, or both, to secure refunds, including their own request to the CIT under 28 USC 1581(i) to enjoin CBP from the assessment of any further Section 122 duties.

Importers should also monitor potential replacement tariff actions, including any new Section 301 measures that may be issued before or around the scheduled expiration of the Section 122 tariffs.

For further information about this and other customs matters, contact George Tuttle III at geo@tuttlelaw.com or 415-986-8780.

The information in this article is general in nature and is not intended to constitute legal advice or to create an attorney-client relationship with respect to any event or occurrence and may not be considered as such.

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