On May 7, 2026, the U.S. Court of International Trade (CIT) ruled that the Section 122 tariffs imposed by the Trump administration under the Trade Act of 1974 are invalid. Previously, tariffs imposed by the Trump administration under the International Emergency Economic Powers Act (IEEPA)—including the “reciprocal tariffs” and the “fentanyl tariffs”—had been ruled unlawful by the U.S. Supreme Court on February 20, 2026. On March 4, 2026, Judge Eaton of the CIT issued an order requiring the refund of all IEEPA tariffs paid by importers.
So, what does the invalidation of the Section 122 tariffs mean? How does it relate to the IEEPA tariffs? Can importers who have paid Section 122 tariffs also apply for refunds?
I. The Launch and Termination of IEEPA Tariffs
In fact, the Section 122 tariffs served as a “backup plan” for the IEEPA tariffs. To understand the relationship between the two, we must first clarify the entire process of the IEEPA tariffs from initiation to termination.
The IEEPA tariffs were imposed by the Trump administration in 2025 under the International Emergency Economic Powers Act (IEEPA). IEEPA authorizes the President, after declaring a national emergency, to broadly regulate various economic transactions, and it is a core document of modern U.S. sanctions mechanisms. It originated from the Trading with the Enemy Act (TWEA), which was enacted after World War I to regulate transactions with hostile nations. The scope of TWEA was expanded in the 1930s, allowing the President to declare a national emergency during peacetime and simultaneously control domestic and international transactions.
In 1976 and 1977, the National Emergencies Act (NEA) and the International Emergency Economic Powers Act (IEEPA) were passed, imposing new restrictions on the President’s emergency powers, such as reporting and assessment requirements. Like TWEA, IEEPA has become an important tool for imposing economic sanctions since its enactment. Successive U.S. presidents have frequently used IEEPA to restrict various international transactions. The targets, frequency, and duration of emergencies have increased over time. As of September 1, 2025, presidents have declared 77 national emergencies invoking IEEPA.[^1]
On February 1, 2025, President Trump signed an executive order declaring that the extraordinary threat posed by illegal immigration and prohibited drugs such as fentanyl constituted a national emergency. Invoking IEEPA, he imposed a 25% tariff on imports from Canada and Mexico, a 10% tariff on energy resources from Canada, and a 10% tariff on imports from China (the “fentanyl tariff”). The tariff on Chinese products was subsequently increased to 20% by an executive order signed on March 3, 2025.[^2]
On April 2, 2025, Trump signed another executive order declaring that certain trade and economic practices of U.S. trading partners had created a national emergency. Again invoking IEEPA, he imposed a 10% “reciprocal tariff” on imports from all trading partners, with higher personalized “reciprocal tariffs” on imports from the 57 trading partners with the largest trade deficits with the U.S. The tariff on Chinese products was set at 34%.[^3]
On April 22, 2025, Learning Resources, Inc. sued the Trump administration in the U.S. District Court for the District of Columbia regarding the imposition of the IEEPA tariffs (Learning Resources, Inc. v. Trump). The district court ultimately ruled that IEEPA did not grant the President the power to impose tariffs. After refusing to transfer the case to the CIT, the court issued a preliminary injunction in favor of the plaintiff. Similarly, V.O.S. Selections, Inc. and other U.S. businesses filed suit against the Trump administration in the CIT challenging the IEEPA tariffs. The two cases were consolidated and argued before the U.S. Supreme Court on November 5, 2025. The Supreme Court ultimately ruled that IEEPA did not authorize the President to impose tariffs.[^4]
On February 20, 2026, the Supreme Court decided Learning Resources, Inc. et al. v. Trump by a 6-3 vote, holding that IEEPA did not grant the President tariff authority. The Court rejected the Trump administration’s argument that IEEPA delegated Congress’s tariff power to the President. The Court reasoned that Congress could not have delegated “a power of such immense significance” through ambiguous language.
However, before the Supreme Court issued its final ruling, the Trump administration had made clear that tariffs would remain a cornerstone of its trade and “America First” policies. On January 9, 2026, National Economic Council Director Kevin Hassett remarked on the case: “Our expectation is that we will win; if we don’t, we have other tools to achieve the same effect.” In an interview with Fox Business, he also indicated that the administration had a backup plan ready to “restore the tariffs almost immediately” if the Supreme Court ruled against it. This hinted at the subsequent arrival of the Section 122 tariffs.
II. Implementation and Invalidation of Section 122 Tariffs
On the same day the Supreme Court declared the IEEPA tariffs invalid, President Trump issued Proclamation 11012, invoking Section 122 of the Trade Act of 1974 (19 U.S.C. § 2132) (hereinafter “Section 122”). The proclamation imposed a 10% tariff on most products imported into the United States (listing only certain excluded products, such as certain critical minerals and energy products) to address the “large and serious United States balance-of-payments deficit.” The tariff took effect at 12:01 a.m. Eastern Time on February 24, 2026, and is set to remain in force until July 24, 2026, unless the President announces its suspension, modification, or termination, or Congress authorizes an extension.[^5]
Section 122 authorizes the President, in the event of “fundamental international payments problems,” to impose temporary import surcharges of no more than 15% ad valorem and/or temporary import quotas to restrict imports. These temporary measures have a duration of 150 days, subject to congressional authorization and extension. Unlike IEEPA, Section 122 explicitly grants the President the power to take temporary tariff measures and does not require a “national emergency,” making it seemingly more defensible on its face. However, the heavy burden these tariffs place on domestic U.S. industries still sparked discontent.
On March 5, 2026, 22 U.S. states (along with the Democratic governors of Kentucky and Pennsylvania) filed a lawsuit in the CIT (Oregon v. Trump), challenging the legality of the President’s recent tariff actions. On March 9, 2026, two U.S. private companies, Burlap & Barrel, Inc. and Basic Fun, Inc., filed similar lawsuits in the CIT.[^6] On the afternoon of May 7, 2026, the CIT ruled, declaring the 10% global tariffs imposed by the Trump administration under Section 122 of the Trade Act of 1974 invalid.
In this case, although Section 122 explicitly grants the President the authority to impose tariffs, the invocation of this authority is subject to strict statutory conditions:
§2132. Balance-of-payments authority
Presidential proclamations of temporary import surcharges and temporary limitations on imports through quotas in situations of fundamental international payments problems
Whenever fundamental international payment problems require special import measures to restrict imports—
- to deal with large and serious United States balance-of-payments deficits,
- to prevent an imminent and significant depreciation of the dollar in foreign exchange markets, or
- to cooperate with other countries in correcting an international balance-of-payments disequilibrium,
The President shall proclaim, for a period not exceeding 150 days (unless such period is extended by Act of Congress)—
(A) a temporary import surcharge, not to exceed 15 percent ad valorem, in the form of duties (in addition to those already imposed, if any) on articles imported into the United States;
(B) temporary limitations through the use of quotas on the importation of articles into the United States; or
(C) both a temporary import surcharge described in subparagraph (A) and temporary limitations described in subparagraph (B).
\…[^7]
As the statutory text indicates, only when there are “fundamental international payments problems”—i.e., the U.S. has large and serious balance-of-payments deficits, the dollar is facing imminent and significant depreciation in foreign exchange markets, or the U.S. needs to cooperate with other countries to correct international payments imbalances—does the President have the authority to take import restriction measures. However, the statute does not further define what constitutes a “large and serious balance-of-payments deficit,” which was the core issue raised by the court in its decision. The court held that “balance-of-payments deficit” is a term based on an economic concept from 1974, not a modern economic indicator. In Proclamation 11012, the basis for imposing the Section 122 tariffs was the current account deficit and the trade deficit, but these indicators are not equivalent to a “balance-of-payments deficit” within the meaning of Section 122. Therefore, Proclamation 11012 constituted an overreach, and the Section 122 tariffs imposed thereunder were unlawful.[^8]
However, the court found that only the following parties (who have a direct financial interest in the Section 122 tariffs) had standing in this case: (1) importers who directly paid the tariffs (including Burlap & Barrel, Inc. and Basic Fun, Inc.); and (2) the State of Washington (as an importer). More than 20 other states that claimed “indirect economic injury” from costs passed on to in-state businesses and consumers were found to lack standing, and their claims were dismissed.
Although the court found the Section 122 tariffs unlawful, unlike the IEEPA tariff case, the court limited the scope of relief to the parties involved in the litigation and refused to issue a universal injunction. In other words, only the parties that filed suit are eligible to apply for a refund. For other importers who are not plaintiffs in this case, the Section 122 tariffs remain in effect under the current judicial posture.
III. Guidance and Recommendations for Corporate Refunds
For Chinese companies, to determine whether they can apply for a refund, they first need to identify which category of tariffs they paid.
1. IEEPA Tariffs
Refunds of IEEPA tariffs are being implemented in phases. Phase I was officially launched on April 20, 2026, primarily using the CAPE tool developed by U.S. Customs and Border Protection (CBP). The Phase I refund applies to a relatively limited scope, mainly specific unliquidated entries and entries liquidated within 80 days. CBP specifically states that only two types of entities may use the CAPE tool to request refunds: the Importer of Record (IOR) or a licensed U.S. customs broker.
The specific refund process is as follows:
(1) Register an ACE Account
If a company has a U.S. affiliate that acted as the importer of record (registered on Form 5106) at the time of import, that entity must register an ACE account to proceed with the refund process.
(2) Set up Automated Clearing House (ACH) and register U.S. bank account information in the ACE system
On March 25, 2025, President Trump signed an executive order to modernize federal payments, requiring all federal outlays and income to be made electronically. On January 2, 2026, CBP issued an interim final rule announcing that all refunds would be made electronically, effective February 6, 2026. Therefore, setting up ACH in the ACE system and registering U.S. bank account information is a necessary prerequisite to receiving an online refund.
(3) Submit a refund application through the CAPE module in the ACE system
The refund applicant must download the template file in the CAPE module. When filling out the template file, note that macros must be enabled in Excel to automatically generate a CSV format file upon saving. CAPE filing documents must be submitted through the ACE system in CSV format.
After submission, applicants should continuously track the filing status to confirm that the file has been successfully uploaded. When a refund application is confirmed as valid, a notice stating “Application Accepted” will be received in the CAPE system. If an application failure or error message is received, the applicant should check for any errors in the filing document and resubmit after correction.
For valid entry numbers, the ACE system will first delete the Chapter 99 Harmonized Tariff Schedule (HTSUS) numbers and duties related to IEEPA tariffs from the entry summary, then generate a new summary and recalculate the duties owed. After CBP review and completion of liquidation or reliquidation, the refund will be directly deposited into the bank account registered in the ACE system.
Refunds are generally issued within 60 to 90 days after the application is confirmed valid, including 45 days of CBP review time and additional processing time by the U.S. Treasury. However, as noted, for entries that have been extended, suspended, are under review, or are warehouse entries, their liquidation status will remain unchanged, and refunds will be reviewed and issued upon final liquidation.
However, it is important to note that at this stage, using CAPE to apply for IEEPA tariff refunds still carries considerable uncertainty regarding review and refund. First, according to CBP’s official statements, all submitted entries are subject to CBP compliance review, and refunds are not automatically issued upon submission. The “60 to 90 days for refund issuance” assumes no further compliance issues requiring additional review; if CBP deems further compliance review necessary, this timeline may be extended.
Second, the current IEEPA tariff refund process not only involves the refund application itself but also carries heightened customs compliance requirements. When formally submitting a refund application, the applicant must simultaneously check relevant declarations, confirming that “(1) the country of origin, entry type, HTSUS classification, and valuation for each entry number provided in the filing information are true and accurate; (2) the importation of the goods did not violate any applicable U.S. law, order, or rule.” Material misstatements or omissions may subject the relevant parties to criminal liability and civil penalties. Applicants should raise their compliance awareness and carefully verify the relevant filing information.
Furthermore, although the injunction on which IEEPA tariff refunds are based applies on its face to both parties and non-parties to the litigation, the CIT may lack the authority to order refunds for non-parties. Therefore, the Trump administration is likely to appeal this injunction, and the outcome of this case has not yet been finalized.
Therefore, it is recommended that all parties seeking IEEPA tariff refunds simultaneously file suit in the CIT while also operating the CAPE system.
2. Section 122 Tariffs
Different from the IEEPA case, where the Supreme Court had already ruled that the imposition of such IEEPA duties was unconstitutional, the CIT has ruled that the Section 122 duties were imposed inconsistently with the authorizing statute. Therefore, the CIT has limited the remedy to filing a lawsuit in the CIT.
Companies should first self-assess whether they have standing to sue and whether they can assert claims similar to those of the prevailing plaintiffs. If they determine they meet the conditions for filing suit, companies are advised to prepare for refund litigation to secure refund eligibility. At the same time, because the Trump administration may appeal the case, companies should continue to monitor subsequent developments.
IV. Conclusion
In summary, with respect to IEEPA tariffs, given the considerable uncertainty surrounding the review standards, processing timelines, and subsequent compliance reviews for CAPE refunds, affected companies should consider filing suit in the CIT to more reliably preserve their refund rights and seek judicial relief. With respect to Section 122 tariffs, because the CIT did not issue a nationwide injunction, companies wishing to challenge the validity of those tariffs and seek subsequent refunds generally must still file their own lawsuits to be within the scope of judicial relief, ensuring their rights are not compromised by procedural limitations. Therefore, from the perspective of rights preservation and enforceability of subsequent refunds, affected companies should carefully evaluate both the administrative refund path and the judicial relief path, and give due weight to the important role of litigation in the overall refund process.
Beyond IEEPA and Section 122 tariffs, tariffs imposed following investigations under Sections 301 and 232 of the Trade Act of 1974 have not yet been enjoined by any court. Both provisions explicitly authorize the President to impose tariffs or adjust imports, meeting the “clear authorization” standard required by the Supreme Court in Learning Resources, Inc. v. Trump. Moreover, they have withstood substantial judicial scrutiny historically. For example, in HMTX Industries LLC v. United States, the court upheld the legality of USTR’s Section 301 tariffs on Chinese imports. Thus, these two provisions may be more “litigation-resistant” tariff tools, and the U.S. government is highly likely to introduce new tariff measures based on them.
For businesses, this means that tariffs, as a core tool of “America First” policy, will not disappear simply because of a judicial ruling. Assessing supply chain risks for products subject to Section 301 and Section 232 investigations is as important as preparing for IEEPA and Section 122 tariff refunds.
[^1]: https://www.congress.gov/crs-product/R45618
[^2]: https://wto.chinalaw.org.cn/portal/article/index.html?id=288&cid=4
[^3]: Ibid.
[^4]: https://hulr.org/scotus-feed/learning-resources-inc-v-trump-justice-jackson
[^5]: https://www.presidency.ucsb.edu/documents/proclamation-11012-imposing-temporary-import-surcharge-address-fundamental-international?utm_source=chatgpt.com
[^6]: https://taxprofblog.aals.org/2026/03/11/section-122-tariffs-challenged-in-the-court-of-international-trade/#456c7d35-7061-405c-bf84-8834de9633f3-link
[^7]: https://chatgpt.com/c/69fef421-05bc-83ea-849a-664779b7647e
[^8]: https://www.currentfederaltaxdevelopments.com/blog/2026/5/8/temporary-import-surcharges-and-executive-authority-a-review-of-the-court-of-international-trades-ruling#comments-69fdeb081548800aa0947a60=
