CIT Rules Section 122 Tariffs Unlawful – Yet Most Importers Still Affected

On May 7, 2026, the U.S. Court of International Trade (CIT) ruled against the imposition of 10% temporary global tariffs by the administration under Section 122 of the Trade Act 1974 by calling it “unlawful.” In a split 2-1 decision, the court found that the administration failed to meet the strict legal requirements of Section 122 when they imposed those duties beginning in February, after the previous set of punishing IEEPA tariffs were deemed unconstitutional by the Supreme Court’s ruling. However, while the court declared Section 122 tariffs to be illegal, it only explicitly blocked their collection from the two importers and the State of Washington under appeal that had sued over their legality. The Court’s decision leaves the temporary tariffs in place for all other importers while any appeal by the administration plays out or until it expires in July. We are tracking this development and will update this article once more guidance is available.

Why the CIT Ruled the Section 122 Tariffs Unlawful

For background, after the Supreme Court invalidated the International Emergency Economic Powers Act (IEEPA) tariffs in February, the administration employed a never-before-used provision in the Trade Act of 1974, known as Section 122, and imposed 10% temporary tariffs on most products imported into the U.S. While Section 122 allows the administration to put temporary tariff of up to 15% on imported goods for a maximum 150 days, after which they must seek Congressional approval, these powers can only be exercised in response to “large and serious United States balance-of-payments deficits” and situations that present “fundamental international payments problems.” The CIT ruled that a trade deficit is not legally the same as a balance-of-payments deficit within the meaning of Section 122 of the Trade Act of 1974, and no such emergency existed to justify the imposition of these temporary tariffs. Accordingly, the court held the proclamation filed by the administration to be “invalid” and the tariffs imposed on plaintiffs under Section 122 “unauthorized by law.”

Why Most Importers Are Still Affected (for Now)

While the CIT declared Section 122 tariffs to be illegal, the court issued a narrow block. The ruling currently only stops collection and requires refunds for the specific plaintiffs in this case — the State of Washington (through the University of Washington), toy company Basic Fun! and spice importer Burlap & Barrel. Because the court declined to issue a “universal injunction,” other importers must continue paying the tariffs until they expire on July 24, 2026, or until further legal challenges succeed. The court’s decision also raised the likelihood that the administration might once again have to pay back money collected from the illegal duties. A refund process is already underway for the roughly $166 billion collected under the administration’s prior set of IEEPA tariffs.

Withum’s Global Transfer Pricing Services Team is here to support. Feel free to reach out with questions on the IEEPA tariff refund process, Section 122 tariffs, the expanding 232 tariffs or any new tariffs under consideration. It’s a great time for a complimentary 30-minute health check on transfer pricing and tariff mitigation strategies that may be available for your business. We are assisting multinationals to ensure they are declaring the correct dutiable customs value to CBP, which includes only product-related (along with Assists) costs.