On May 7th, the United States Court of International Trade (CIT) ruled that President Donald Trump unlawfully relied on Section 122 of the Trade Act of 1974 to impose a 10% global tariff after the Supreme Court invalidated the administration’s earlier tariffs issued under the International Emergency Economic Powers Act (IEEPA) in February. The majority concluded that, even accepting the President’s tariff proclamation at face value, the administration failed to identify the type of balance-of-payments deficit required under Section 122 as enacted in 1974. Instead, the President cited factors such as a large trade deficit, a current account deficit, a negative net international investment position, and deficits in primary and secondary income balances, which the court found did not constitute a “balance-of-payments” deficit within the meaning of the statute.

The majority declined to issue a nationwide injunction against the Section 122 tariffs, reasoning that the possibility of increased costs to a single plaintiff did not justify universal relief. Instead, the court granted a permanent injunction only for the named plaintiffs that were importers, including the State of Washington in its role as an importer. The judgment ordered the government to stop applying the Section 122 tariffs to those plaintiffs within five (5) days and required refunds, with interest, of all Section 122 tariffs they had paid. The majority also explained that injunctive relief was warranted because prior experience with refunds of the IEEPA tariffs demonstrated that substantial delays could occur between a ruling that tariffs are unlawful and the actual issuance of refunds.

The court also determined that 23 of the 24 states challenging the tariffs lacked standing because they did not directly import goods subject to the duties, and therefore dismissed their claims. As a result, although the court concluded that the Section 122 proclamation exceeded the President’s authority, the injunction applied only to the State of Washington and the private importers Burlap and Barrel and Basic Fun.

As for the remedy, the court issued a permanent injunction only for the two (2) private importers and the State of Washington in its role as an importer. The majority explained that it did not need to decide whether the Court of International Trade has the authority to issue a universal injunction in light of the Supreme Court’s decision in Trump v. CASA, which significantly limited federal courts’ ability to grant such broad relief, because the court concluded that universal relief was not warranted in this case.

No immediate action is necessary at this time. However, we are closely monitoring developments, and there may be opportunities to seek injunctive relief or preserve potential refunds through protests or other administrative measures. 

We will continue to monitor the situation closely and provide updates as developments arise. If you have any further questions or need additional support, please reach out to your RIM Representative.