TRADE ALERT – IEEPA TARIFFS
HEADLINE	Court of International Trade Determines Section 122 Tariffs are Unlawful
DATE	May 7, 2026
EFFECTIVE DATE	TBD
SUMMARY OF CHANGES	The Court of International Trade (“CIT”) held that Proclamation 11012 does not establish a balance-of-payment deficit within the meaning of Section 122 of the Trade Act of 1974 (“Section 122”). It orders that the Proclamation is invalid, and that the United States is permanently enjoined from collecting the tariffs on the importer plaintiffs in the case. The CIT declined to enter a universal injunction. None of the orders affect Section 232 Tariffs (steel/aluminum/auto parts/pharmaceuticals) or the Section 301 tariffs.
BACKGROUND	On February 20, 2026, following the Supreme Court’s ruling invalidating the tariffs issued under the International Emergency Economic Powers Act (“IEEPA”), President Trump issued Proclamation 11012, imposing a 10% tariff on all imports, with limited exceptions, for a period of 150 days under Section 122. Section 122 allows for temporary duties of up to 15% or import quotas for up to 150 days to address balance-of-payment deficits. Section 122 and the Proclamation intend to address “fundamental international payments problems, such as large and serious balance-of-payments deficits, an imminent and significant depreciation of its currency in foreign exchange markets, or an international balance-of-payments disequilibrium.”   The 10% surcharge remains effective until July 24, 2026, unless terminated early or extended by an Act of Congress.
DETAILS	Unlike the IEEPA decisions where the courts focused on whether the statute authorized the President to impose the tariffs, this decision looks at the substantive foundation of the President’s decision in imposing the Section 122 tariffs. In a 2-1 ruling, the Court of International Trade found that while the President’s Proclamation supporting the imposition of the Section 122 tariffs cited to “a net international investment position, and a deficit on the balance on primary and secondary income” these factors do not constitute a balance-of-payments deficit within the meaning of Section 122. “Because the Proclamation’s use of trade and current account deficits to stand in the place of balance-of-payment deficits within the meaning of the statute renders the Proclamation ultra vires.”   In a dissenting opinion, Judge Stanceu found that the court’s review of the President’s exercise of delegated legislative authority must be “limited and deferential,” and that since the statute does not limit the mechanism for determining whether a balance of payment issue exists, deference must be given to the President’s interpretation.     The majority also ruled that only the importer plaintiffs who brought the case had standing, and permanently enjoined the collection of the Section 122 tariffs against these importers. The majority declined to enter a universal injunction that would affect all importers. The dissent objected to this holding as well and would have allowed the Section 122 tariffs to remain in place while the case proceeded, finding that without further briefing, the Proclamation sufficiently supports a finding of a large and serious balance-of-payments deficit.   In sum, this case establishes a basis for the revocation of the Section 122 tariffs, but does not, in and of itself, revoke these tariffs for anyone other than the litigants.   This case is subject to appeal. We anticipate that the Government will request that the decision be stayed pending the appeal. As with the IEEPA cases, it is likely to be months until the appeal is decided and subsequent administrative remedies take place.
CITE	CIT decision: Burlap and Barrel, Inc., et al. v. United States, Court No. 26-01606 (Ct. Int’l Trade, May 7, 2026)

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