Quick Answer: The CIT ordered plaintiff-specific relief May 7 for Burlap & Barrel, Basic Fun, and Washington — but the Federal Circuit's May 12 administrative stay pauses even that. No automatic refunds for non-plaintiffs. Section 122 is still being collected at entry.

On May 7, 2026, the U.S. Court of International Trade ruled 2-1 that Proclamation 11012 — the 10% Section 122 surcharge in effect since February 24 — was unlawful. The court found the administration failed to identify the "balance of payments deficits" the statute requires. Five days later, on May 12, the Federal Circuit entered an administrative stay, pausing the CIT order while it considers the government's stay-pending-appeal motion. Most importers still pay 10% at entry under HTS 9903.03.01. The permanent injunction went only to three plaintiffs — Burlap & Barrel, Basic Fun, and the State of Washington. Twenty-three other state co-plaintiffs were dismissed for lack of standing. There is no automatic refund mechanism for non-plaintiffs. Section 122 still expires automatically July 24, 2026 unless Congress extends it. The practical move: preserve entry records, model the July 25 scenarios, do not delay shipments solely on the litigation. This article supersedes the March 2026 SCOTUS aftermath analysis for current Section 122 status.

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What the Court Actually Ruled

This is the second round in the same fight. The Supreme Court struck down IEEPA tariffs in February. The administration pivoted to Section 122 of the Trade Act of 1974 — a balance-of-payments authority capped at 15% for 150 days. Now the CIT has invalidated that pivot too.

The Court of International Trade consolidated two cases: State of Oregon v. United States and Burlap and Barrel, Inc. v. United States (Court Nos. 26-01472 & 26-01606). The 2-1 majority held that Proclamation 11012 reflected an overly expansive interpretation of Section 122.

The core reasoning: Section 122 authorizes tariffs to address "large and serious United States balance-of-payments deficits." The court read that phrase narrowly — Congress meant historical measures like liquidity or official settlements balances involving currency relationships, not modern current account metrics like trade deficits. The administration's proclamation cited a trade deficit, not the kind of payments crisis the statute contemplates. That mismatch was fatal.

Five days later, the U.S. Court of Appeals for the Federal Circuit entered an administrative stay suspending the CIT order while the court considers the government's motion for a longer stay pending appeal. This is not a ruling on the merits — it is a procedural pause holding the status quo while the appellate court reviews the stay motion. A longer stay through the full appeal is possible but not guaranteed.

The practical effect: CBP continues to collect Section 122 duties under HTS subheading 9903.03.01 at entry. Importers continue to pay. The CIT's permanent injunction is paused.

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Why Most Importers Still Pay 10%

This is the part the headlines miss. "Court strikes down Section 122" is technically accurate but operationally misleading.

The CIT issued a permanent injunction prohibiting collection of Section 122 duties — but only against three prevailing plaintiffs:

• Burlap & Barrel, Inc. (single-origin spice importer)
• Basic Fun, Inc. (toy importer)
• State of Washington

These three are eligible for refunds (with interest) of Section 122 duties already paid, and the government was ordered to stop collecting from them within five days. Twenty-three other state co-plaintiffs in Oregon v. United States were dismissed for lack of standing — the court found their alleged economic harms too speculative.

The May 12 Federal Circuit administrative stay suspended the injunction. So even the three plaintiffs' relief is currently on hold pending the appeal. For everyone else, nothing changed. Section 122 duties continue to be assessed and collected as before.

There is no CBP process that will automatically refund Section 122 duties to non-plaintiff importers if the Federal Circuit ultimately affirms the CIT. To preserve any future refund right, importers must file formal CBP protests (19 USC 1514) within 180 days of each entry's liquidation. The 180-day clock starts at liquidation, not at entry — so for ongoing 2026 entries, monitor liquidation dates and file protests as each entry liquidates. High-exposure importers may also want to evaluate direct CIT litigation rather than relying on the protest mechanism.

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The Per-Package Cost Reality

The 10% Section 122 surcharge does not exist in isolation. For China-origin goods, it stacks on top of Section 301 tariffs (7.5% or 25% depending on the product list). For dropshippers, the relevant question is what the combined rate does to a real product cost.

Normal MFN duties (typically 0-20% depending on HTS code) stack on top of these. For most dropshipped consumer goods, total combined duty lands between 22.5% and 40% of product cost.

Add MFN and you have your landed duty before shipping and processing fees. For a $30 China-sourced apparel item under List 4A, expect roughly $5.25 in Section 122 + 301 duties, plus another $1-2 in MFN — a working assumption of $6-8 in duties on a $30 product.

If the CIT ruling is eventually affirmed and applied broadly, the Section 122 layer (the first $1 / $3 / $5 / $10 column above) drops out. Section 301 stays. So a successful appeal would reduce China-origin combined duties to 7.5-25% rather than eliminating them.

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The July 24 Cliff

Section 122 expires automatically at 12:01 AM EDT on July 24, 2026 — the statutory 150-day cap. The President cannot extend it unilaterally. Only Congress can.

Scenario A — Congress extends or replaces Section 122. Planning stance: model but do not assume. As of mid-May, no significant tariff legislation has advanced. Bipartisan appetite is ambiguous; some legislators are pushing the Reclaim Trade Powers Act (H.R.2459, introduced but not advanced) to constrain presidential tariff authority rather than extend it.

Scenario B — Section 122 lapses cleanly. The 10% surcharge drops to zero on July 24. Non-China imports return to MFN-only rates. China-origin goods still pay Section 301 (7.5-25%). Planning stance: increasingly plausible given congressional inaction through mid-May.

Scenario C — Section 301 picks up slack via new investigations. USTR launched a 16-economy manufacturing-overcapacity probe on March 11 (hearings began May 5) and a 60-economy forced-labor probe on March 12 (hearings April 28). Either could produce new country-specific tariffs by Q4 2026. These would not require congressional approval. Planning stance: treat as a material risk to model in your post-July pricing, not a forecast — the notice-and-comment process takes months and timing is uncertain.

Scenario D — Section 232 expansion or new legislation. The administration could expand Section 232 (national security) coverage or propose new permanent tariff authority. Planning stance: slow-moving but plausible — Section 232 expansions have been issued before (e.g., April 2 copper proclamation) and can land without congressional action.

Between July 24 (Section 122 expiry) and whenever new Section 301 tariffs land (months later, per the notice-and-comment requirement), non-China imports may briefly face only normal MFN duties. Vietnam, India, Turkey-sourced goods could see a temporary cost dip.

Do not restructure sourcing around a possible gap. Sourcing transitions take months and the gap is speculative. But model it for budgeting.

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What To Do Now

Concrete actions, in priority order:

1. Preserve all entry and payment records. Every Section 122 entry since February 24 is a potential refund candidate if the Federal Circuit ultimately affirms broadly. Pull entry summaries and CBP invoices. Monitor liquidation dates for each entry — the 180-day protest clock starts at liquidation, not at entry.

2. Coordinate with your customs broker or trade counsel on protest strategy. For high-volume importers, talk to your licensed customs broker or international trade counsel about filing formal protests under 19 USC 1514 as entries liquidate, to preserve refund rights on Section 122 entries. Many brokers are already filing batch protests for clients. The cost-benefit tilts toward filing when annual Section 122 exposure exceeds a few thousand dollars. Very-high-exposure importers may also want to evaluate direct CIT litigation as a parallel track.

3. Model July 25 scenarios. Build three price models — Scenario A (Section 122 extended at 10% or 15%), Scenario B (clean lapse to Section 301 only), Scenario C (new Section 301 layer added). You do not need to act now. Have them ready for a July 1 decision review.

4. Do not delay shipments solely on the litigation or the July 24 expiration. Inventory carrying cost, demand timing, and customer commitments dominate the math. The expected tariff savings from a July 25 reversal are real but uncertain in both probability and magnitude. Delay only if your normal inventory cycle and customer promises already accommodate it.

5. Verify HTS classifications. Wrong codes mean wrong duty rates and wrong protest grounds. Especially check whether your shipments are entering under HTS 9903.03.01 (the Section 122 line item) and not being misclassified.

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Do I still pay Section 122 tariffs after the CIT ruling?

Yes, in nearly all cases. The Federal Circuit's May 12 administrative stay paused the CIT's order. CBP continues to collect Section 122 duties at entry under HTS 9903.03.01. Only three named plaintiffs (Burlap & Barrel, Basic Fun, and the State of Washington) ever had relief — and even theirs is currently paused pending the appeal.

Can I get a refund on Section 122 duties I have already paid?

Not automatically. There is no CBP refund mechanism for non-plaintiff importers. To preserve a potential refund right if the appellate court ultimately affirms broadly, you must file a formal CBP protest (19 USC 1514) within 180 days of each entry's liquidation (not entry date — liquidation typically happens later). Talk to your licensed customs broker or international trade counsel about whether the volume justifies filing, and consider direct CIT litigation if exposure is very large.

What is HTS 9903.03.01?

HTS subheading 9903.03.01 is the line item CBP uses to assess the 10% Section 122 surcharge. It applies to most products entering the U.S. since February 24, 2026. If you are reviewing entry summaries, this is the code that indicates Section 122 was charged. Misclassification under a different 9903.03.xx subheading is a real risk worth checking — wrong code, wrong protest grounds.

Does Section 122 stack with Section 301?

Yes. Section 122 is a flat 10% surcharge on top of all other applicable duties. For China-origin goods, that means Section 122 (10%) + Section 301 (7.5% or 25% by product list) + normal MFN duty. The combined rate for typical dropshipped goods lands between 22.5% and 40%. The Section 122 ruling, if eventually affirmed, would remove only the 10% layer — Section 301 stays.

Why did Burlap & Barrel and Basic Fun get relief but not other importers?

The CIT granted the permanent injunction only to plaintiffs with established Article III standing — direct, non-speculative economic injury from Section 122 collections. Burlap & Barrel and Basic Fun are direct importers paying the surcharge on every entry; Washington proved fiscal harm from its own state-level imports. The other 23 state co-plaintiffs were dismissed because their alleged harms (consumer prices, broader economic effects) were judged too indirect.

What happens to my costs if Section 122 expires on July 24?

Section 122 (10%) drops to zero automatically. Section 301 tariffs on China (7.5-25% by product list) remain. Non-China imports return to MFN-only rates. The administration could replace Section 122 with new Section 301 tariffs (those probes are already underway), Section 232 expansion, or new legislation — but those take months to implement. There may be a brief window where non-China imports face lower combined rates.

Should I delay shipments until after July 24?

Almost never on litigation or expiration alone. Inventory carrying cost, demand timing, customer commitments, and risk of stockout dominate the math. The expected savings from a July 25 cliff are real but uncertain — Congress could extend, the administration could replace, or the Federal Circuit could reverse the CIT before July 24. Delay only if your normal cycle and customer promises already accommodate it, not as a tariff-arbitrage play.

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• US Tariffs Hub — All tariff guides, cost calculators, action plans in one place
• US Tariff Reform 2026 Guide — Full Section 122 + Section 301 explainer with cost examples
• March 2026 SCOTUS Aftermath — Previous status update (superseded by this article for current Section 122 status)
• The Real Cost of Dropshipping in 2026 — Full landed cost breakdown
• Fulfillment Partner Checklist After De Minimis — Customs competence evaluation

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Last updated: May 20, 2026. This is a developing legal matter; check the US Tariffs Hub for the latest status before acting on any tariff exposure.

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