In February, after the Supreme Court struck down tariffs issued by President Trump under the International Emergency Economic Powers Act of 1977 (IEEPA), the President issued a new, broad, globally applicable 10% tariff under Section 122 of the Trade Act of 1974 (Section 122 Tariffs) — acting as a temporary replacement for the IEEPA tariffs until more long-term tariffs could potentially be imposed under different laws. Soon after, in a case filed by Burlap and Barrel, Inc. in the Court of International Trade (CIT), the Section 122 Tariffs were also challenged as being illegally issued.
On Thursday, May 7, the CIT ruled that the Section 122 Tariffs are not legal under the Trade Act of 1974. The CIT held that Section 122 allows for tariffs only when certain economic conditions are met, and found that the proclamation issued by the President issuing the Section 122 Tariffs failed to include the conditions required under Section 122 of the Trade Act of 1974 to allow for such tariffs.
As a remedy, the CIT issued a permanent injunction and ordered refunds for the private plaintiffs in this particular case who were importers of record and had paid Section 122 Tariffs. The CIT declined to issue a broader, universal injunction and found that there was no appropriate request for such an injunction.
Much like it did with the previous rulings on the IEEPA tariffs, it is likely that the administration will appeal this ruling to the Federal Circuit and potentially to the Supreme Court thereafter. Further, it is now unclear what may happen regarding refunds for other importers who have paid the Section 122 Tariffs. Given how recently the Section 122 Tariffs were imposed, it is likely that most such tariffs remain unliquidated and may be subject to challenge as part of the liquidation process without the need for litigation or other action.
Our supply chain, trade and automotive lawyers are actively monitoring these developments and are available to assist clients in navigating these tariff changes and potential refund opportunities.
