24 States Challenge Section 122 Tariffs in Court: What the CIT Hearing Means for Importers

24 States Challenge Section 122 Tariffs in Court: What the CIT Hearing Means for Importers

On April 10, 2026, a three-judge panel at the U.S. Court of International Trade heard more than three hours of oral argument in two consolidated cases challenging the legality of the Section 122 universal tariff: *State of Oregon et al. v. Trump* and *Burlap & Barrel, Inc. v. Trump*. Twenty-four state attorneys general, led by Oregon, are asking the court to strike down the 10% across-the-board tariff that has applied to most U.S. imports since February 24, 2026.

This is the first courtroom test of Section 122 of the Trade Act of 1974 — a provision that had never been used to impose tariffs before this year. The outcome could determine whether the 10% universal surcharge survives until its scheduled July 24 expiration, gets struck down earlier, or faces modification. For importers paying Section 122 duties on every non-exempt shipment, the stakes are significant.

How We Got Here

When the Supreme Court struck down the IEEPA-based reciprocal tariffs in *Learning Resources v. Trump* on February 20, 2026, the administration needed a legal replacement fast. Within four days, the president invoked Section 122 of the Trade Act of 1974 to impose a 10% ad valorem tariff on imports from all countries except Canada and Mexico (exempt under USMCA). Products already subject to Section 232 tariffs (steel, aluminum, copper) were also excluded from the Section 122 surcharge.

Section 122 is a narrow statute. It authorizes the president to impose temporary import surcharges of up to 15% for a maximum of 150 days to address "large and serious" balance-of-payments deficits. It was enacted in 1974 during a period of dollar instability and fixed exchange rates. It has never been used for broad trade policy purposes — until now.

On March 5, 2026, twenty-four states filed suit at the CIT arguing that Section 122 does not authorize tariffs to address general trade deficits, that the president's proclamation exceeds the statute's scope, and that the tariff violates the constitutional separation of powers by allowing the executive branch to set tax policy without congressional approval.

What Happened at the April 10 Hearing

The three-hour hearing focused on two central questions. First, does a persistent goods trade deficit qualify as the "large and serious balance-of-payments deficit" that Section 122 requires? The states argued that the statute was written for currency crises and short-term payments emergencies, not as a general protectionist tool. The government argued that the trade deficit is a balance-of-payments problem by definition and that the president has broad discretion to act.

Second, is the tariff "temporary" within the meaning of Section 122 if the administration has signaled intent to replace it with permanent Section 301 tariffs before the 150-day window expires? The states argued this reveals that Section 122 is being used as a bridge to permanent trade barriers, not as the emergency measure the statute contemplates. The government argued the tariff is textually temporary — it expires in 150 days regardless of what follows.

The judges asked pointed questions of both sides. No ruling was issued from the bench, and the court gave no timeline for a decision. Legal observers expect a ruling within four to eight weeks, which would place it between mid-May and early June 2026 — well before the July 24 expiration date.

Three Possible Outcomes

Outcome 1: The court upholds the tariff. The 10% Section 122 rate stays in place through July 24, 2026. Nothing changes for importers operationally. The administration continues using Section 122 as a bridge while the new Section 301 investigations conclude. This is the status quo scenario.

Outcome 2: The court strikes down the tariff. If the CIT rules that Section 122 does not authorize the current tariff, the 10% surcharge could be vacated — potentially with a refund obligation similar to the IEEPA refund process. This would be a major cost reduction for importers: the Section 122 layer disappears from the tariff stack overnight. However, the government would almost certainly seek an emergency stay from the Federal Circuit, and the Supreme Court could ultimately weigh in.

Outcome 3: The court narrows the tariff. The court could find that Section 122 authorizes some tariff action but that the current implementation is overbroad — for example, ruling that the 10% rate is permissible but that certain product categories or countries must be excluded. This middle-ground outcome is less likely but possible.

What This Means for Importers

Regardless of which outcome materializes, importers should be planning for both continuity and disruption. Here is what to do now.

Keep paying Section 122 duties. Unless and until a court order suspends the tariff, Section 122 duties remain legally owed. Do not adjust your import cost models or stop paying based on the expectation of a favorable ruling. CBP will continue to assess and collect the 10% surcharge.

Track your Section 122 duty exposure. If the tariff is ultimately struck down, a refund process may follow — similar to the IEEPA CAPE process launching April 20. Ask your customs broker to flag every entry that includes Section 122 duties so you have a clean dataset ready if refund eligibility opens up. For details on how the IEEPA refund process works, see our guide on the CBP CAPE Tool.

Model both scenarios in your landed cost calculations. Run your import cost models with and without the 10% Section 122 layer. This gives you a pricing range and helps you respond quickly when the court rules. Use the Duty & Tariff Calculator to see exactly how Section 122 affects your specific products and origin countries.

Watch the July 24 expiration regardless. Even if the court upholds the tariff, Section 122 has a statutory 150-day limit that expires July 24, 2026. Extending it requires an act of Congress — and as of mid-April, no extension bill has been introduced. The administration's stated plan is to have new Section 301 tariffs ready by then. See our Section 122 Expiration Countdown for the full timeline.

Understand what replaces Section 122. The USTR has initiated expedited Section 301 investigations targeting forced labor practices (60 economies) and structural excess capacity (16+ economies). Public hearings begin April 28, with findings expected before July 24. If Section 301 tariffs are imposed on schedule, they could match or exceed the 10% Section 122 rate — meaning the net duty bill for many importers may not decrease even if Section 122 ends. See our analysis of the Section 301 Hearings for what to expect.

The Bigger Picture

The Section 122 legal challenge is part of a broader constitutional battle over presidential tariff authority that began with the Supreme Court's IEEPA ruling in February. The central question — how much power does the president have to impose tariffs without Congress — is being litigated across multiple statutes and multiple courts simultaneously.

For importers, the practical takeaway is uncertainty. The tariff landscape could shift again with a single court ruling, just as it did on February 20 when the Supreme Court struck down IEEPA tariffs. Building flexibility into your supply chain — maintaining multiple sourcing options, keeping landed cost models current, and tracking your duty exposure by statute — is the most effective hedge against legal and policy volatility.

Use the Duty & Tariff Calculator to keep your rate assumptions current, the Tariff Stacking Calculator to see how your total duty bill changes under different scenarios, and the USMCA Duty-Free Benefits guide to evaluate whether USMCA sourcing could reduce your exposure regardless of what the courts decide.

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