The CIT's Section 122 Tariff Ruling: Key Takeaways, Refund Outlook, and Next Steps for Importers

On May 12, 2026, the U.S. Court of Appeals for the Federal Circuit issued a temporary stay that freezes the Court of International Trade’s (CIT) recent ruling against President Trump’s 10% Section 122 tariff. The stay—which pauses both the judgment and the injunction that had shielded the three winning plaintiffs from the tariffs—came just days after the Trump administration appealed the CIT’s May 7 ruling. The Federal Circuit also consolidated the companion cases into a single appeal and gave plaintiffs seven days to respond.

The CIT’s underlying decision is narrow in scope, granting relief to only three plaintiffs who demonstrated standing as direct importers. The CIT had held that the tariff exceeded the president’s statutory authority, stating it relied on current account deficits and trade deficits instead of “balance-of-payments deficits.”

With the stay now in effect, U.S. Customs and Border Protection (CBP) will continue to collect the 10% Section 122 tariff from all importers.

Inside the CIT Decision

Before the stay, the CIT had entered a permanent injunction and ordered refunds with interest for the three plaintiffs that demonstrated standing as direct importers:

• The State of Washington (through the University of Washington, which imports products and pays duties directly through a customs broker)
• Burlap and Barrel, Inc. (a New-York-based spice importer)
• Basic Fun, Inc. (a Florida-based toy company)

The CIT dismissed the remaining 23 state plaintiffs for lack of standing, finding that their alleged harms—tariff costs passed through by third-party importers—were insufficient.

At the center of the case is a decades-old trade statute: Section 122 of the Trade Act of 1974, which permits the president to impose temporary tariffs during a balance-of-payments crisis. President Trump had implemented the 10% Section 122 tariff on February 24, 2026, shortly after the U.S. Supreme Court ruled against the Trump administration’s IEEPA tariffs.

The question in the CIT case surrounded what counts as proof of that crisis. Section 122 requires a “balance-of-payments deficit,” but the statute never defines the term. Two of the three judges on the panel referenced the legislative record from when Congress drafted the law, finding that lawmakers had specific yardsticks in mind: liquidity balance, official settlements balance, and basic balance.

The Trump administration’s proclamation did not attempt to show a deficit under any of those three metrics. Instead, it pointed to trade deficits and current account shortfalls—measures the majority indicated were too broad to satisfy the statute.

Will the Ruling Survive on Appeal?

The Trump administration’s appeal to the Federal Circuit was expected. With the temporary stay now in effect, the plaintiffs have seven days to argue against a longer-term stay. How the Federal Circuit handles that motion will be an early signal of how it views the merits.

Several factors could favor the CIT’s majority on appeal. The Supreme Court’s February decision against IEEPA tariffs set a clear marker: presidential tariff authority requires explicit authorization from Congress. The CIT majority applied the same principle: if the statute ties tariff authority to a specific economic condition, the president has to meet that condition on the statute’s own terms, not on broader ones.

From here, resolution will take time. The Federal Circuit is likely months away from a final decision, and even then the case could move to the Supreme Court. Note that the 10% Section 122 tariff is set to expire on July 24, 2026, which could reduce the urgency for expedited review at the high court level.

What About Refunds?

If the CIT’s ruling is ultimately upheld, refunds will likely flow through CBP’s existing infrastructure—potentially through the CAPE system already being used for IEEPA duty refunds. But it is unclear how far those potential refunds will extend.

Drawing from CBP’s posture in the IEEPA context, the government could resist refunding entries that have already been liquidated beyond the 90-day reliquidation window. CBP could also decide that only importers who have filed their own legal challenges are entitled to refunds, consistent with the CIT’s emphasis on individual standing.

What Importers Should Do Now

1. Assess your exposure. Determine how much you’ve paid in Section 122 duties since their implementation in February.
2. Consider filing suit. The CIT’s standing analysis makes clear that only direct importers who are parties to the litigation received relief. Importers who want to preserve their right to stop paying these duties and recover what they’ve already paid should consider filing their own legal challenge.
3. Monitor the appeal. The Federal Circuit’s temporary stay is the first inflection point. Watch for the plaintiffs’ response over the next seven days, and the court’s subsequent ruling on whether to extend the stay through the full appeal. Those decisions will set the pace for everything that follows.
4. Track your entry liquidation status. As with IEEPA refunds, the timing and liquidation status of your entries could directly affect your ability to recover Section 122 duties. Know which of your entries are still unliquidated.
5. Work with Flexport’s Trade Advisory team. The intersection of ongoing IEEPA refunds, potential Section 122 refunds, and incoming Section 232 and 301 tariffs has resulted in new complexities. Flexport’s Trade Advisory team can help you navigate any overlapping timelines, filing requirements, and refund processes.

Given the Federal Circuit’s temporary stay, nothing changes on the ground for any importer. Duties are still being collected across the board, refunds are not automatic, and the appeal process could stretch for months. Importers who move now to evaluate their positions, take action where appropriate, and keep close tabs on their entry data will be best prepared to recover what they’re owed if Section 122 tariffs are ultimately struck down for good.