Section 122 Surcharge: 60 Days to Statutory Expiration (May 27, 2026 Status Update)

Section 122 Surcharge: 60 Days to Statutory Expiration (May 27, 2026 Status Update)

As of Wednesday, May 27, 2026, the 10% Section 122 balance-of-payments surcharge is still being collected on essentially every covered import entry crossing a U.S. port of entry. The Court of International Trade ruled the surcharge unlawful on May 7. The Federal Circuit stayed that ruling on May 12. The CIT denied the government's separate motion to stay enforcement of its judgment on May 20. And the statutory authority for the underlying February 24, 2026 proclamation runs out by operation of law on July 24, 2026 — exactly 58 days from today.

For importers staring at landed-cost models and trying to forecast what August looks like, the most important fact is that none of those courtroom developments has yet changed the duty line on the ACE entry summary. Customs and Border Protection continues to assess Section 122 at 10% on every covered HTS line. The CAFC administrative stay locked the status quo in place, and the agency has issued no CSMS notice paring back collection.

This update covers what has actually happened in the three weeks since the May 7 CIT decision, where the appeal sits in the Federal Circuit calendar, and the concrete operational moves that make sense for importers in the next 60 days — whether the surcharge expires on schedule, gets extended by Congress, gets replaced by a Section 232 expansion, or survives appellate review and stays in force into 2027.

The Procedural Stack as of May 27

Three court orders now define the legal posture of every Section 122 dollar paid since February 24, 2026.

May 7, 2026 — CIT final judgment and permanent injunction. In *V.O.S. Selections, Inc. v. Trump* and the consolidated cases, a divided three-judge CIT panel held that the February 24, 2026 presidential proclamation imposing a 10% across-the-board surcharge exceeded the statutory authority granted by Section 122 of the Trade Act of 1974 (19 USC §2132). The CIT entered a permanent injunction barring CBP from collecting Section 122 duties — but only against the three named plaintiffs (Burlap & Barrel, Basic Fun!, and the State of Washington), not nationwide.

May 12, 2026 — CAFC administrative stay. Five days after the CIT decision, the U.S. Court of Appeals for the Federal Circuit entered a one-paragraph administrative stay of the CIT's order and injunction, suspending the injunction for all three named plaintiffs while the panel considers the government's separate stay-pending-appeal motion. The administrative stay is not a merits ruling. It is a status-quo-preservation order that lets CBP continue collecting from the named plaintiffs during the stay-motion briefing period. See the CAFC stay walkthrough for the full mechanics.

May 20, 2026 — CIT denies government's stay-pending-appeal motion. Eight days after the Federal Circuit issued its administrative stay, the CIT itself ruled on the government's parallel motion for a stay of its own judgment pending appeal and denied the motion. The CIT held that the equities did not favor allowing collection to continue indefinitely against parties the court had already determined were paying unlawfully assessed duties. The practical effect of the May 20 ruling is narrow because the CAFC's earlier administrative stay supersedes the CIT's denial — but the ruling is signal-rich. It tells the Federal Circuit that the lower court does not believe the merits factors favor the government, which makes the panel less likely to grant a full stay pending appeal.

For non-plaintiff importers, the May 20 ruling did not change anything on the duty line. CBP continues to collect, ACE continues to liquidate, and the 180-day protest window under 19 USC §1514 continues to run from the date of liquidation on every Section 122 entry. What the May 20 ruling did change is the appellate-success probability that most trade attorneys are now pricing into protest cost-benefit math — most estimates have moved from 40% to 50–55% after the CIT's stay denial.

The CAFC Stay-Pending-Appeal Briefing Has Closed

The Federal Circuit briefing schedule on the stay-pending-appeal motion closed last week.

Plaintiffs' opposition brief was filed on May 19, 2026, on the seven-day clock set by the May 12 administrative-stay order. The brief argues that the government cannot satisfy any of the four stay factors: it is unlikely to succeed on the merits because the CIT's statutory-construction analysis was correct, the plaintiffs face concrete and unrefundable harm if collection continues during the appeal, the equities tip toward the importers who have already obtained final judgment on the merits, and the public interest favors not collecting unlawful duties.

The government's reply was filed on May 22, 2026. It emphasizes the public-fisc harm of refunding tens of billions of dollars if the appeal is later reversed, argues that the CIT's standing analysis swept in plaintiffs who did not have the concrete injury required by Article III, and invokes the appellate-deference principles that historically favor maintaining executive trade action during pendency.

The motion is now under submission. Based on historical CAFC trade-case timing, a ruling on the stay-pending-appeal motion is most likely between approximately June 5 and June 19, 2026. That ruling is the next operationally significant date on the calendar. It will tell importers whether the CAFC believes a stay is warranted on a merits-adjacent standard, which is a much stronger signal about appellate success than the procedural administrative stay was.

Three outcomes remain on the table for the stay-pending-appeal motion. If the CAFC grants the stay, the CIT injunction stays paused through the merits appeal and CBP continues collecting from everyone. If the CAFC denies the stay, the administrative stay lifts and the CIT injunction snaps back into effect for the three named plaintiffs (but still not for non-plaintiffs). If the CAFC fashions partial or modified relief — escrow accounts, refund-deferral, or duty-amount caps — the structure of importer-side cash-flow planning gets more complex but not categorically different.

The July 24 Statutory Cliff Now Drives Everything

Whatever the CAFC does on the stay motion, the 150-day cap built into Section 122 itself runs out on July 24, 2026. That cliff is now the single most important date in the entire Section 122 timeline, and every operational decision an importer makes between now and August 1 should be made with both sides of that date in view.

Section 122 of the Trade Act of 1974 authorizes the President to impose a temporary import surcharge to address "large and serious United States balance-of-payments deficits," but caps the surcharge at 150 days unless extended by specific Congressional legislation. The February 24, 2026 proclamation started the 150-day clock, which expires on July 24, 2026 by operation of law.

Four scenarios are possible at the cliff. Each materially changes the August landed-cost picture.

Scenario 1 — Surcharge expires on schedule, no replacement. The simplest and currently most likely outcome based on Hill chatter. The 10% Section 122 line zeroes out on entries filed on or after July 25, 2026. Section 232 (steel, aluminum, copper, autos) and Section 301 (China) duties continue at their current rates because they are independent legal authorities not affected by the Section 122 expiration. Landed cost on a typical China-origin consumer-goods import drops by roughly 10 percentage points on August 1.

Scenario 2 — Congress extends Section 122. Section 122(c) requires affirmative Congressional action through legislation to extend the surcharge beyond 150 days. As of May 27, no extension legislation has been introduced in either chamber, and committee-level discussions suggest an extension faces material political resistance from agriculture-state senators concerned about retaliatory measures and from importers in consumer-goods-heavy districts. An extension cannot pass through reconciliation and would require a simple-majority floor vote in both chambers — procedurally feasible but politically heavy. Probability is low but not zero.

Scenario 3 — Substitute tariff authority. The administration could replace the Section 122 surcharge with an expanded Section 232 action covering broader product categories, a new Section 301 retaliation targeting specific trading partners, a fresh IEEPA invocation citing different statutory triggers, or a Section 201 safeguard. Each substitute has different procedural requirements (Section 232 requires Commerce Department investigation, Section 301 requires USTR determination, IEEPA requires a national-emergency finding under different criteria than the one the CIT just rejected). The likeliest substitute is Section 232 because the underlying investigations for several product categories are already complete and can be activated administratively. A Section 232 substitute would typically expand the affected product list rather than maintain a 10% across-the-board structure, which means some product categories would see higher landed-cost exposure than they have today.

Scenario 4 — CAFC rules on the merits before July 24. Possible but improbable. Standard CAFC briefing on the merits appeal runs into late 2026 at the earliest, with oral argument and opinion typically deferred into early 2027. A pre-cliff merits opinion would require an expedited briefing schedule, which the panel has not yet set.

The base case for landed-cost planning should be Scenario 1 — expiration on schedule, no replacement — with Scenario 3 (Section 232 substitute) as the contingency. Landed-cost models should support both pricing views, and customer-facing quotes should reflect the active duty stack rather than the cliff-side stack until the cliff actually arrives.

Operational Posture for the Final 60 Days

The next 60 days are about protecting refund rights on entries already paid and minimizing duty exposure on entries still to come.

Protect refund rights on every Section 122 entry. The 180-day post-liquidation protest window under 19 USC §1514 is independent of the CAFC appeal timeline. Whether the surcharge ultimately survives appellate review or expires on July 24, the protest deadlines for entries already filed will run from the liquidation date of those entries — typically 314 days after entry. For every Section 122 entry you have filed since February 24, 2026, you should know the projected liquidation date and the protest deadline. Set calendar reminders on each. For entries that have already liquidated, file protests now while the volume is manageable and the CIT merits-decision narrative is still fresh in CBP's protest-review pipeline.

Run protest cost-benefit math at the new probability estimates. With trade attorneys now pricing appellate-success probability in the 50–55% range after the May 20 CIT ruling, the break-even Section 122 duty per entry at a $100 protest cost is roughly $182. Above that, protests are clearly positive expected value. Below that, batch filings still make economic sense when broker capacity allows but the case for individual filings weakens. Set a value threshold (commonly $200 to $500 per entry) and file protests on every entry above the threshold; run discretionary batch filings on the lower-value entries when bandwidth allows.

Time entries strategically against the cliff if possible. If Scenario 1 plays out, entries filed on or after July 25 escape the 10% Section 122 layer entirely. For products where landed-cost margins are tight, see whether your forwarder can adjust sailing schedules, port-of-entry logistics, or CBP entry filing timing to push borderline entries past the cliff. The savings on a single 40-foot container of $200,000 entered value is $20,000 — enough to justify a one-week sailing delay or a switch from FCL to expedited LCL.

Update landed-cost models to support a cliff scenario. Quote customers off the active duty stack (Section 122 still live) but run a parallel pricing view that drops the 10% line on August 1. For longer-cycle quotes — anything with a delivery window extending past July 24 — flag the cliff risk explicitly. If a customer is paying for goods that will land in late August, the cost basis you quote in May should reflect either the assumption that Section 122 has expired or include a hedge clause that adjusts at delivery for any post-cliff duty restructuring.

Coordinate with bonded-warehouse partners for inventory landing near the cliff. A U.S. Customs Bonded Warehouse lets the importer defer the duty payment until withdrawal for consumption. Goods landed in mid-July and held in bond until August 1 could withdraw post-cliff at the lower duty stack if Section 122 expires on schedule. For high-value imports landing in the final two weeks before the cliff, the duty-deferral arithmetic of bonded storage often beats the cost of storage. Cate Freight runs a U.S. Customs Bonded warehouse at the Port of Charleston and can quote bonded storage for cliff-timing imports — reach out for a quote if you are weighing the trade-off.

Document everything. If protests are denied and you proceed to a CIT case post-merits-decision, you will need contemporaneous documentation of the original duty payment, the protest filing, the protest denial, and any communications with CBP. Build the documentation pipeline now while the volume is manageable. Trying to assemble it retroactively after a CIT filing is expensive and error-prone.

What Has Not Changed

The Section 122 story has dominated trade-press attention for three weeks, but for non-plaintiff importers the entire duty stack outside Section 122 has continued running on its own track unchanged.

Section 232 steel and aluminum duties remain at 50%, and the April 2026 proclamation expanding the metal-content test continues to apply. Section 232 copper rates are tiered per the April 2026 restructure. Section 232 auto parts inclusions, pharmaceutical tariffs, and semiconductor duties all continue under their respective proclamations.

Section 301 duties on China-origin goods continue at their current rates — 25% on Lists 1–3, 7.5% on List 4A — with the April–May 2026 USTR forced-labor hearings producing the next round of potential Section 301 modifications later this summer.

CBP's CAPE Phase 1 IEEPA refund processing continues at scale. The system now covers approximately 82% of IEEPA-affected entries, with Phase 2 expected to roll out covering the remainder later in 2026. Importers with stuck refunds should run through the top 10 CAPE validation failures and the ACH bank info issue checklist before re-submitting.

The MPF and HMF user-fee structure continues unchanged. Antidumping and countervailing duty determinations continue case-by-case through Commerce and USITC. USMCA preference claims continue to be the most reliable way to zero out the base MFN line for qualifying Mexico- and Canada-origin goods.

In short: Section 122 is the headline, but the rest of the duty stack is operating normally and importers should not lose sight of compliance work on the other tariff layers while the Section 122 litigation plays out.

The Bottom Line

Section 122 collection continues today, 20 days after the CIT ruling that found the surcharge unlawful. The CAFC will rule on the stay-pending-appeal motion within the next two to four weeks. The statutory authority expires by operation of law on July 24, 2026 regardless of what happens at the Federal Circuit. The most likely outcome is that the surcharge ends on the cliff, the appeal becomes prospectively moot, and the refund question for entries already paid gets fought out through the protest-and-litigation pipeline over the next 12 to 24 months.

The operational posture that makes sense in the meantime is unchanged from the day after the May 7 ruling: file protests on every liquidated Section 122 entry above a reasonable value threshold, build a refund-recovery documentation pipeline, model both the cliff and the post-cliff duty stack, and use bonded storage strategically to defer duty exposure on inventory landing near the cliff.

For importers running through the Duty & Tariff Calculator, the current model assumes Section 122 is active. Toggle the country and product mix to see how the duty stack changes when the 10% line drops, and use the Landed Cost Calculator to translate the duty-line change into per-unit cost impact.

The next 60 days will resolve more about the Section 122 surcharge than the prior six months. Run your back office as if the surcharge is alive — because today it is — but make sure your model, your protest queue, and your bonded-storage relationships are ready for the cliff. The importers who do both will be best positioned regardless of which scenario actually plays out on July 24.

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