U.S. Court of International Trade Invalidates the Administration's Section 122 Tariffs

Section 122 of the Trade Act of 1974 authorizes a temporary import surcharge of up to 15 percent for a period not exceeding 150 days when "fundamental international payments problems require special import measures," including to address "large and serious" U.S. balance‑of‑payments deficits.

On February 20, 2026, President Donald Trump issued Proclamation 11012 to impose a 10 percent surcharge on virtually all imports effective February 24, 2026, through July 24, 2026, unless extended by the U.S. Congress. The Section 122 proclamation was issued the same day the U.S. Supreme Court invalidated the administration's earlier tariff program under the International Emergency Economic Powers Act (IEEPA).

In early March, the U.S. Trade Representative (USTR) announced two investigations under Section 301 of the Trade Act of 1974 concerning forced labor and manufacturing excess capacity. USTR is currently soliciting comments, holding public hearings and conducting consultations with target countries as required under Section 301. These investigations are expected to conclude in time for new Section 301 tariffs to be imposed before the Section 122 tariffs expire on July 24, 2026.

The Court's Reasoning

The actions challenging the Section 122 tariffs were brought by 24 states and two small business importers. The challenges focused on the lawfulness of the Section 122 duties imposed through Proclamation 11012.

The government conceded standing for the state of Washington and importer plaintiffs but disputed standing for the remaining non-importer states. The U.S. Court of International Trade (CIT) agreed with the government on that issue and dismissed the claims by the non-importer states.

The CIT held that Section 122 requires the president to identify "large and serious" U.S. balance‑of‑payments deficits as that term was understood and measured when Congress enacted the statute in 1974. Legislative history reflected three established balance-of-payment measures recognized at the time Congress adopted Section 122: the basic balance, liquidity and official settlements.

The court found that the two measures relied upon by the government – the current account balance and goods trade deficits – did not constitute balance-of-payments deficits as Congress understood the term in 1974. Because the proclamation did not identify a balance‑of‑payments deficit measured consistently with the statute's original meaning, the CIT held that the action was ultra vires and invalidated the tariffs as to the plaintiffs, entering a permanent injunction against further collection from those importers.

CIT Judge Timothy Stanceu dissented, noting that the statute does not freeze economic measurement methodologies in time and that the president reasonably relied on U.S. Department of Commerce Bureau of Economic Analysis data showing a severe current account deficit and historically negative net international investment position.

If upheld on appeal, the CIT decision would eliminate another statutory basis for the broad tariffs the administration seeks to impose on imports into the U.S.

Next Steps

The Federal Government Will Likely Appeal

The U.S. Department of Justice is likely to appeal to the U.S. Court of Appeals for the Federal Circuit and may seek a stay pending the appeal. For now, the CIT's relief is limited to the plaintiffs, and the U.S. government will continue collecting Section 122 tariffs from non-plaintiff importers.

Section 301 Tariffs Are Likely Forthcoming

The administration has already signaled its intention to impose Section 301 tariffs as its primary long-term, country-specific tariff mechanism. Multiple investigations are already underway and will likely result in new tariffs timed to take effect before the Section 122 tariffs expire.

Given the intense judicial scrutiny applied to both the IEEPA tariffs and Section 122 tariffs, expect USTR to proceed carefully to ensure that all substantive and procedural requirements are satisfied before imposing new Section 301 tariffs.

Refunds

For the two aforementioned importers, the permanent injunction halts tariff collection and sets the stage for refunds through existing U.S. Customs and Border Protection procedures. The state of Washington likewise benefits based on its standing as an importer.

For non‑plaintiff importers, tariff collection will continue for now. Nevertheless, the ruling signals that broader refund opportunities may be available in the future. To preserve potential refund rights, companies should organize and preserve entry documentation, track deadlines for post‑summary corrections and protests, and closely monitor the appeal process.

Conclusion

The CIT invalidated the administration's 10 percent tariffs under Section 122 while limiting immediate relief to the named importer plaintiffs and state of Washington. The decision also comes amid the administration's broader effort to replace the expiring Section 122 tariffs with tariffs imposed under Section 301.

Unlike Section 122, Section 301 does not impose comparable limits on the duration or magnitude of tariffs. Stakeholders therefore should prepare for the possibility of higher tariffs that may remain in place for an extended period. Importantly, none of these developments affects tariffs imposed under other statutory authorities, including Section 232 of the Trade Expansion Act of 1962.

For importers whose entries were subject to the Section 122 surcharge or those who anticipate exposure under forthcoming Section 301 measures, please contact a member of Holland & Knight's Tariff Task Force to assess exposure, preserve refund options and plan next steps.

Information contained in this alert is for the general education and knowledge of our readers. It is not designed to be, and should not be used as, the sole source of information when analyzing and resolving a legal problem, and it should not be substituted for legal advice, which relies on a specific factual analysis. Moreover, the laws of each jurisdiction are different and are constantly changing. This information is not intended to create, and receipt of it does not constitute, an attorney-client relationship. If you have specific questions regarding a particular fact situation, we urge you to consult the authors of this publication, your Holland & Knight representative or other competent legal counsel.