CIT Strikes Down Section 122 Tariffs (May 7, 2026): What Importers Need to Do This Week
# CIT Strikes Down Section 122 Tariffs (May 7, 2026): What Importers Need to Do This Week
On the afternoon of Thursday, May 7, 2026, a divided three-judge panel of the United States Court of International Trade issued a summary-judgment decision in *Burlap & Barrel Inc. v. United States* and the consolidated cases brought by Basic Fun! Inc. and the State of Washington. The court held that the President's February 24, 2026 proclamation invoking Section 122 of the Trade Act of 1974 to impose a 10% universal import surcharge was unlawful, and entered a permanent injunction against further collection — but only as to the named importer plaintiffs in the consolidated cases.
For every other importer paying Section 122 today, the duty line on Monday's entry summary still says 10%. Liquidation continues. CBP has not issued a stand-down, and Treasury is expected to file a notice of appeal with the Federal Circuit within days. The ruling is not a nationwide injunction, and it is not a refund window — yet. But it does reshape the refund map for the next 60 days, and importers who treat it as a non-event are leaving real money on the table.
This guide walks through what the court actually held, what the limited relief means for non-plaintiffs, the refund and protest calendar that opens up if the ruling survives appeal, and the eight things importers should do this week regardless of how the appeal lands.
What the Court Actually Held
The legal question was narrow: did the February 24 proclamation identify a "large and serious United States balance-of-payments deficit" within the meaning of Section 122 of the Trade Act of 1974? The administration argued that the chronic US trade deficit, the broader current account deficit, and the negative net international investment position together satisfied the statutory standard.
The CIT majority disagreed. Writing for the panel, the court held that "balance-of-payments deficit" is a term of art Congress used in 1974, referring specifically to the basic balance, official-settlements balance, and liquidity balance measures that were standard in international monetary economics at the time the Trade Act was drafted. None of those measures appears in the proclamation. A trade deficit is not a balance-of-payments deficit. A current account deficit, while related, is not the same statutory predicate. The negative net international investment position measures cumulative wealth flows, not periodic payments, and is even further removed from the 1974 meaning.
Without the statutory predicate, the President had no Section 122 authority. The proclamation was *ultra vires*. The 10% surcharge collected under it has been collected without lawful authority. The court granted summary judgment for the plaintiffs and issued a permanent injunction against further collection from those plaintiffs.
The dissent argued that "balance-of-payments deficit" should be interpreted as a flexible economic concept that has evolved since 1974, and that the President's findings on the trade deficit were sufficient. That dissent likely previews the government's appeal posture.
The Scope of Relief Is Narrow — On Purpose
Three things importers need to understand about what the ruling did *not* do:
It did not enjoin Section 122 nationwide. The court explicitly declined to enter a nationwide injunction. The permanent injunction runs only to the two named importer plaintiffs (Burlap & Barrel and Basic Fun!) and the State of Washington. The Liberty Justice Center and the Pacific Legal Foundation, who litigated the case, are already preparing class-certification and intervention motions to expand the scope.
It did not stay collection. CBP continues to collect Section 122 at 10% on every covered entry. Until either (a) the Federal Circuit affirms and broadens the relief, (b) the administration suspends collection administratively, or (c) Congress acts, the duty line stays.
It did not invalidate Section 232 or Section 301. The 50% steel and aluminum duties under Section 232, the 25% China List 1–3 and 7.5% List 4A duties under Section 301, and the antidumping and countervailing duty regimes are untouched by the ruling. Only the February 24 Section 122 proclamation was struck down.
The court's narrow relief is a feature, not a bug. CIT has been cautious about issuing nationwide injunctions in tariff cases since the Supreme Court's recent skepticism about universal injunctive relief. By limiting the injunction to the named plaintiffs, the panel produced a holding that is harder to overturn on procedural grounds at the Federal Circuit and that allows the Article III standing inquiry to remain clean.
The Refund Map: Three Paths for Non-Plaintiffs
If you are not Burlap & Barrel, Basic Fun!, or the State of Washington, the ruling does not directly entitle you to a refund. But it opens three procedural paths that did not previously exist as cleanly:
Path 1: File a CIT case of your own (or join an existing one). Multiple importer plaintiffs are pursuing similar challenges. The Liberty Justice Center has indicated it will accept additional importer plaintiffs to broaden the relief. Filing a CIT complaint within the 180-day statute of limitations from your first Section 122-affected entry preserves your ability to recover if the ruling is affirmed — and gets you in front of the same panel that has already rejected the government's argument. Filing fees are modest. The merits are now favorable.
Path 2: Protest under 19 USC §1514. Once a Section 122 entry liquidates, you have 180 days to file a protest challenging the duty assessment. The protest grounds now include the CIT's holding that the underlying authority was unlawful. CBP will likely deny these protests pending the Federal Circuit appeal — but a denied protest is the procedural prerequisite for a CIT case under 28 USC §1581(a), which is the cleanest jurisdictional path. Plan to file protests on every liquidated Section 122 entry through the appeal period, even if you expect denial.
Path 3: File a Post-Summary Correction (PSC). Within 300 days of the date of entry, you can file a PSC through ACE to flag the Section 122 line and adjust. PSCs are typically used for clean math errors, and CBP may reject one citing an unlawful-authority basis — but the filing creates a paper trail that supports later relief.
The strategic choice is between protecting the maximum number of entries (file PSCs and protests prophylactically) and conserving customs broker hours (wait for the appeal and file relief retrospectively if the ruling stands). For most importers paying Section 122 on more than a handful of entries per week, prophylactic protest is worth the broker time. The downside if the appeal reverses is small — denied protests are routine. The upside if the appeal affirms is full refund of the 10% surcharge across every protected entry.
The Appeal Calendar
Treasury will file a notice of appeal to the US Court of Appeals for the Federal Circuit, almost certainly within the 60-day appeal window. The Federal Circuit could:
- Affirm. A clean affirmance on the statutory-construction holding ends Section 122 collection nationwide. Refunds become administrable through PSC, protest, and 19 USC §1520 reliquidation. This is the importer-favorable scenario. - Reverse. The dissent's flexible-interpretation theory could carry the day at the Federal Circuit. This would reinstate Section 122 collection at 10%, leaving the July 24, 2026 statutory expiration as the only remaining limit. - Vacate and remand. The panel could vacate the CIT's nationwide-relief analysis (already narrow) without reaching the merits, or remand for additional fact-finding on the balance-of-payments determination. This delays resolution. - Stay pending appeal. The government may seek a stay of the injunction itself. Because the injunction is already limited to three plaintiffs, a stay would have minimal practical effect on the broader collection regime.
The Federal Circuit typically resolves expedited tariff appeals in 6 to 12 months. Even on the fastest track, a final decision is unlikely before late 2026. The Section 122 surcharge is currently scheduled to expire on or about July 24, 2026 under the statute's 150-day cap, which means the appeal may go effectively moot before the Federal Circuit rules — unless Congress extends Section 122 or the administration replaces it with a successor authority.
The Section 232 and Section 301 Replacement Risk
The most important strategic implication of the ruling is what comes after Section 122 disappears — whether by court order, by appeal-mooted expiration, or by Congressional inaction in late July.
The administration has signaled for months that the long-term tariff architecture will rely on expanded Section 232 (national security) and Section 301 (unfair trade practice) authority rather than the temporary Section 122 surcharge. Both of those statutes have survived court review for decades, both produce more revenue than Section 122 at current rates, and both can be expanded by sector and country without the 150-day clock.
Importers who are sourcing today around the 10% Section 122 line should be modeling two distinct scenarios for the back half of 2026:
1. Section 122 vacated, no replacement. Total tariff burden drops by 10% across non-USMCA, non-Section-232, non-Section-301 origins. This is the importer-favorable path and creates margin headroom that could pull forward inventory commitments. 2. Section 122 replaced by Section 232 expansion at higher rates. Sectors not currently on the Section 232 list (electronics, machinery, consumer goods, apparel) could see new 25%, 35%, or 50% Section 232 tariffs in the August–October window if the administration moves on existing investigations. The total tariff burden could *increase* relative to the 10% Section 122 baseline.
For a customs strategy that survives both scenarios, the FreightFigures Duty & Tariff Calculator lets you model country comparisons across the full stack of MFN, Section 301, Section 232, and Section 122 layers. Run your top SKUs at three rate environments — current 10%, 0% (Section 122 vacated), and a stress scenario with new Section 232 sector inclusions — and you will see which suppliers, which lanes, and which product mixes have the most rate-elasticity in your portfolio.
Eight Things to Do This Week
For most importers, the right response to the May 7 ruling is operational discipline, not panic. The 10% line stays on Monday's entry summary. The path to recovery is procedural and predictable. Here is the eight-item checklist:
1. Pull every Section 122 entry summary from February 24, 2026 forward. Pull CBP Form 7501s through your broker or directly from ACE. Build a single spreadsheet with the entry number, date of entry, customs value, Section 122 duty paid, and current liquidation status (liquidated or not). This is the universe of money potentially recoverable.
2. Calendar the protest deadline for every liquidated entry. 180 days from liquidation. Set the calendar with a 30-day forward reminder. Missing a protest deadline forfeits that entry's recovery path.
3. Calendar the PSC deadline for every entry not yet liquidated. 300 days from date of entry. PSCs are easier than protests and worth filing prophylactically on the largest-value entries.
4. Decide on a protest filing posture and stick to it. Either you are filing protests on every Section 122 entry (recommended for high-volume importers), filing only on the largest-value entries, or waiting for the Federal Circuit. Document the choice and apply it consistently. Selective filing creates messy reconciliation later.
5. Update your landed-cost model with a Section 122 sensitivity flag. Add a binary toggle in your duty calculation: `section_122_active = true` (10% adds) versus `section_122_active = false` (0% adds). Run both scenarios on every quote you give a customer between now and the Federal Circuit decision. Pricing decisions made in this window need to survive both outcomes.
6. Talk to your customs broker about prophylactic protest filing. Most brokers will file protests for $50 to $150 per entry, depending on volume and complexity. For an entry with $10,000 of Section 122 duty at risk, the math is obvious. For an entry with $100 at risk, it is not. Set a value threshold and apply it.
7. Watch for a CBP guidance memo or CSMS message. CBP typically issues operational guidance after major court rulings affecting collection. If CBP issues a CSMS confirming that collection continues pending appeal — or, less likely, a CSMS suspending collection — your operating posture changes immediately. Subscribe to CSMS messages if you have not already.
8. Re-run the [FreightFigures Duty & Tariff Calculator](/tools/duty-tariff-calculator) for your top 20 SKUs at the post-ruling scenarios. The calculator already shows the full Section 301, Section 232, and Section 122 stack for 18 product categories across 16 countries. Use the country comparison view to see which of your sourcing alternatives become more or less attractive if Section 122 disappears — and which become problematic if Section 232 expansion replaces it.
A Note on the USMCA Position
USMCA-qualifying goods from Canada and Mexico were already exempt from Section 122 under the February 24 proclamation. The May 7 ruling has no incremental effect on USMCA shipments — they were paying 0% Section 122 before, and they still pay 0% Section 122. However, USMCA shipments remain fully subject to Section 232 (50% on steel, aluminum, copper articles) regardless of Certificate of Origin. The ruling does not change that.
If your sourcing model uses USMCA to avoid Section 122 today, the ruling is neutral. If you have been quoting non-USMCA Mexican-origin goods at 10%-plus, audit those entries for USMCA eligibility. The Certificate of Origin process is straightforward, the duty savings are immediate, and they survive any outcome of the Federal Circuit appeal.
The Bottom Line
The May 7, 2026 CIT ruling is a real legal milestone — the first federal court decision invalidating a major Trump-era tariff authority on statutory-construction grounds. But for non-plaintiff importers, the operational picture today is unchanged: pay 10% on entry, watch the appeal, file protests prophylactically, and model both outcomes for the back half of 2026.
The team at Cate Freight helps importers think through Section 122 entry audits, protest filing strategy, USMCA optimization, and Section 232 sourcing alternatives. If you want a working session to walk through your top-10 SKU duty stack and decide where to deploy customs broker hours over the next 60 days, the door is open.
Frequently Asked Questions
Common questions about cit strikes down section 122 tariffs (may 7, 2026)
Did the CIT ruling on May 7, 2026 end Section 122 tariffs nationwide?
No. The Court of International Trade granted summary judgment for the named importer plaintiffs (Burlap & Barrel, Basic Fun!) and the State of Washington, and entered a permanent injunction against further collection of Section 122 duties from those plaintiffs only. The court explicitly declined to issue a nationwide injunction. CBP continues to collect Section 122 at 10% on every other importer's entries pending appeal to the Federal Circuit.
Can I get a refund for Section 122 duties I have paid since February 24, 2026?
Not directly — yet. As a non-plaintiff, your refund path runs through (1) filing a CIT case of your own or joining an existing one within the 180-day statute of limitations from your first affected entry, (2) filing a protest under 19 USC §1514 within 180 days of liquidation, or (3) filing a Post-Summary Correction within 300 days of date of entry. CBP will likely deny protests pending the Federal Circuit appeal, but a denied protest is the procedural prerequisite for a later CIT challenge if the May 7 ruling is affirmed.
When will the Federal Circuit decide the appeal?
Treasury is expected to file a notice of appeal within the 60-day appeal window. The Federal Circuit typically resolves expedited tariff appeals in 6 to 12 months. A final decision is unlikely before late 2026. Note that Section 122 is statutorily limited to 150 days from the February 24 proclamation, so the surcharge expires on or about July 24, 2026 unless Congress acts — which means the appeal may go effectively moot before the Federal Circuit rules.
Should I file protests on every Section 122 entry just in case?
For high-volume importers, yes. Protests cost $50 to $150 per entry through most customs brokers, and the upside if the May 7 ruling is affirmed is full refund of the 10% Section 122 line on every protected entry. The downside if the appeal reverses is a denied protest, which is routine. Set a value threshold (e.g., file protests on every entry where Section 122 duty exceeds $500) and apply it consistently across your liquidated entries.
Did the ruling invalidate Section 232 or Section 301 tariffs?
No. The May 7 ruling addressed only the February 24 Section 122 proclamation. The 50% Section 232 duties on steel, aluminum, and (since April 6, 2026) copper articles remain in force. The 25% Section 301 duties on China List 1–3 and 7.5% on List 4A remain in force. The antidumping and countervailing duty regimes are untouched. Only the 10% Section 122 universal surcharge was struck down — and even that injunction runs only to the named plaintiffs.
Are USMCA-qualifying shipments affected by the ruling?
No — they were already exempt from Section 122 under the February 24 proclamation, and they remain exempt now. USMCA-qualifying goods from Canada and Mexico continue to enter at 0% Section 122. The ruling has no incremental effect on USMCA shipments. Note that USMCA does NOT exempt goods from Section 232: steel, aluminum, and copper articles from Canada and Mexico still pay the 50% Section 232 duty regardless of a valid Certificate of Origin.
What happens if Section 122 expires on July 24, 2026 before the Federal Circuit rules?
If the surcharge expires by operation of the 150-day statutory cap before the Federal Circuit decides the appeal, the appeal becomes effectively moot for prospective collection — but the refund question for entries already paid remains live. Importers who filed protests during the surcharge period preserve their refund rights regardless of the appeal outcome. The administration is expected to replace Section 122 with expanded Section 232 sectoral coverage and Section 301 enforcement actions rather than seek Congressional extension of Section 122.
What is the strategic risk of Section 122 going away?
The biggest strategic risk is replacement, not elimination. The administration has signaled for months that long-term tariff architecture will rely on expanded Section 232 (national security) and Section 301 (unfair trade practice) authority. Both statutes have survived decades of court review and can be expanded by sector and country without a 150-day clock. Sectors not currently covered (electronics, machinery, consumer goods, apparel) could see new 25% to 50% Section 232 duties in the August–October 2026 window. Importers should model both outcomes — Section 122 vacated with no replacement, and Section 122 replaced by Section 232 expansion at higher rates — when making sourcing decisions today.
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