Tax Insight

CIT adopts narrow interpretation of Section 122

Insight
3 minute read
May 11, 2026

What happened?

In a divided 2-1 decision issued May 7, the US Court of International Trade (CIT) invalidated tariffs imposed under Section 122 of the Trade Act of 1974, finding that the President exceeded statutory authority in issuing Proclamation 11012. The Administration justified the tariffs, which imposed a 10% duty on most imports, based on trade deficits, current account deficits, and related economic indicators. The majority held that the Administration’s economic justification does not meet the “large and serious balance-of-payments deficits” requirement under Section 122 and concluded that the proclamation exceeded the authority delegated by Congress. As a result, the court granted summary judgment and permanent injunctive relief to the private plaintiffs and the state of Washington, while dismissing other state claims for lack of standing. The Trump administration has appealed the ruling to the US Court of Appeals for the Federal Circuit.

Why is it relevant?

This decision provides the first and a significant interpretation of Section 122 and reinforces judicial limits on Presidential tariff authority where Congress has imposed specific statutory limitations. The ruling also may constrain future efforts to invoke Section 122 or similar authorities to justify broad tariffs, and highlights continued judicial scrutiny of executive trade actions following recent challenges under other statutes, including the International Emergency Economic Powers Act (IEEPA). However, the court limited injunctive relief to the importer plaintiffs and declined to issue a universal injunction, which means the Section 122 tariffs may continue to apply to importers that were not a party to this litigation.

Actions to consider

Companies should assess whether they have paid duties under the Section 122 tariffs and determine options for relief, particularly if they are similarly situated to the successful importer plaintiffs. Because the court declined to issue a universal injunction, companies that were not a party to the litigation also may consider filing or joining litigation to preserve or obtain relief from the Section 122 tariffs. Businesses may want to monitor the Trump Administration’s appeal, as well as further litigation or administrative developments that could expand or narrow the scope of relief. Given the court’s refusal to issue a universal injunction, companies not a party to this case should continue to assess compliance obligations carefully. Companies should continue to remain vigilant regarding other pending or potential trade actions, including developments involving Section 301 tariffs and possible future tariff measures under other authorities, such as Section 338. Finally, this decision underscores the importance of proactive tariff mitigation strategies and ongoing monitoring of trade policy developments.