Section 122 Tariff Refund: The Next Wave After IEEPA?

The Supreme Court struck down IEEPA tariffs on February 20, 2026. Within hours, President Trump signed a proclamation imposing a 10% import surcharge under a different law: Section 122 of the Trade Act of 1974.

That law has never been used. Not once. In 52 years.

Two lawsuits are now challenging the Section 122 tariffs in the Court of International Trade. Oral arguments take place tomorrow, April 10, before the same three-judge panel that handled the IEEPA litigation. A ruling could come within weeks.

If the court strikes down Section 122, importers face a second round of refund claims on top of the IEEPA recovery already underway. Here is what Section 122 actually says, why the legal arguments against it may be even stronger than IEEPA, and what you should be doing right now.

What Is Section 122 of the Trade Act?

Section 122 of the Trade Act of 1974 authorizes the President to impose temporary import surcharges of up to 15% to address a specific kind of economic crisis: a large and serious United States balance-of-payments deficit.

The law was written during the Bretton Woods era, when countries operated under fixed exchange rates and could literally run out of dollar reserves. Under that system, a balance-of-payments crisis was a real, measurable emergency.

The modern economy does not work that way. Since the early 1970s, the United States has operated under a floating exchange rate system, where currency values adjust automatically. The type of crisis Section 122 was designed for is, by most economists' assessments, structurally impossible under today's monetary framework.

No president has ever invoked Section 122 to impose tariffs. There is no case law interpreting its scope. There is no precedent for what Trump did on February 20.

What Did Trump Actually Do?

The proclamation imposed a 10% ad valorem surcharge on nearly all imports, effective February 24, 2026. The stated justification was the U.S. trade deficit with the rest of the world.

The surcharge applies globally with notable exemptions: goods already subject to Section 232 tariffs (steel, aluminum), USMCA-qualifying goods from Canada and Mexico, CAFTA-DR textiles, critical minerals, energy products, pharmaceuticals, certain electronics, vehicles and parts, aerospace products, and 1,655 additional product entries listed in an annex.

Section 122 tariffs expire automatically after 150 days, which means July 24, 2026, unless Congress passes legislation to extend them.

Who Is Challenging Section 122?

Two lawsuits are before the CIT:

State of Oregon v. Trump, filed March 5, 2026, by a coalition of 24 attorneys general and governors led by New York AG Letitia James and California AG Rob Bonta. The states filed motions for both summary judgment and a preliminary injunction.

Burlap and Barrel, Inc. v. Trump, filed March 9, 2026, by the Liberty Justice Center on behalf of a single-origin spice importer and a toy company (the makers of Care Bears and Tonka trucks). Both companies are absorbing the 10% surcharge on imported goods.

Both cases are before the same three-judge panel: Judges Mark Barnett (Chief Judge), Claire Kelly, and Timothy Stanceu.

The Five Arguments Against Section 122

The challengers are pressing five distinct lines of attack. All of them are strong.

1. The United States Does Not Have a Balance-of-Payments Deficit

This is the core argument and it may be a factual slam dunk.

Section 122 requires a "large and serious United States balance-of-payments deficit." The administration is treating the U.S. trade deficit as a balance-of-payments deficit. These are not the same thing.

A trade deficit means imports exceed exports in goods and services. A balance-of-payments deficit is a broader macroeconomic measure that includes the capital account, meaning foreign investment flows into the United States.

The U.S. runs trade deficits. It also receives massive capital inflows. Foreign investors buy U.S. treasuries, equities, and real estate. Those capital inflows roughly offset the trade deficit, resulting in a balance of payments that is near zero.

Economists nearly universally agree: the United States does not have a balance-of-payments deficit in the sense Section 122 requires.

The government's own lawyers may have made this argument harder for themselves. During the IEEPA litigation, the administration argued that trade deficits are "conceptually distinct" from balance-of-payments deficits. That concession is now being used against them.

2. The Exemptions Violate the Nondiscrimination Requirement

Section 122 mandates "broad and uniform application with respect to product coverage" and tariffs that are "applied consistently with the principle of nondiscriminatory treatment."

The proclamation exempts USMCA goods, CAFTA-DR textiles, energy products, pharmaceuticals, electronics, vehicles, and 1,655 additional product categories. These exemptions are political, not economic. If the United States truly faced a balance-of-payments emergency, you would not exempt entire sectors of imports.

The argument: you cannot claim a global emergency while carving out exceptions for politically sensitive products. The exemptions themselves undermine the stated justification.

3. The 150-Day Limit Cannot Be Circumvented

Section 122 tariffs expire after 150 days. Extension requires an Act of Congress. The challengers argue that the administration's interpretation would allow the President to serially declare new balance-of-payments crises every 150 days, effectively creating permanent tariffs without Congressional involvement.

This would circumvent the statute's explicit temporal constraint. Congress deliberately chose a short time limit. Interpreting Section 122 to allow rolling declarations would render that limit meaningless.

4. The Major Questions Doctrine Applies

In its own IEEPA ruling, the Supreme Court stated: "There is no exception to the major questions doctrine for emergency statutes. Nor does the fact that tariffs implicate foreign affairs render the doctrine inapplicable."

If Section 122's scope is ambiguous, the major questions doctrine requires resolving it against executive authority. A 10% tariff on most global imports generates tens of billions in revenue and has enormous economic consequences. That is the textbook definition of a major question that requires clear Congressional authorization.

5. The Nondelegation Doctrine Limits the President's Power

An amicus brief filed April 7 by legal scholars argues that if Section 122 grants the power the administration claims, it would violate constitutional limits on delegating Congress's taxing authority. Congress cannot hand off the power to tax all imports at will with no meaningful constraint on the President's determination of preconditions.

Section 122 Tariff Refund: What Happens If It's Struck Down?

If the CIT strikes down the Section 122 tariffs, every importer who paid the 10% surcharge from February 24 onward has a potential refund claim.

The money at stake is significant. Estimates suggest $25 to $30 billion in Section 122 duties would be collected over the full 150-day period. Roughly $7 to $9 billion has been collected through early April.

There is no established refund mechanism. Unlike IEEPA, where CBP is building the CAPE portal, there is no equivalent system for Section 122 refunds. The same three-pathway approach would likely apply: Post Summary Corrections for unliquidated entries, formal protests for liquidated entries, and CIT litigation to preserve rights. But none of this infrastructure exists yet.

This favors attorney-led recovery. The absence of a defined process means more legal complexity per claim. Importers who try to navigate this without counsel will face significant procedural uncertainty.

Individual claims will be smaller. Section 122 is a flat 10% surcharge for roughly five months, compared to IEEPA's 10 to 145% for approximately ten months. But the affected universe of importers is essentially the same.

Will Congress Extend Section 122?

Almost certainly not. Senate Democrats have publicly stated they will block any extension. Republicans would need 60 votes. Multiple Republican members from swing districts are already uneasy about tariff policy.

The administration's real strategy is not extension. Section 122 is a bridge. USTR Jamieson Greer initiated expedited Section 301 investigations on March 11 targeting China, the EU, and 14 other countries. Section 301 tariffs are considered more legally durable. The likely scenario: Section 122 expires in July, and by then the administration hopes to have replacement tariffs under Section 301 or Section 232.

But that does not make Section 122 refunds any less real. If the tariffs are struck down as unauthorized, every dollar collected was collected without legal authority and is refundable.

What Should Importers Do Right Now?

Even before a ruling comes down, importers should be taking steps to preserve their rights:

Track every entry subject to the Section 122 surcharge. Pull your ACE data for imports from February 24, 2026 forward. Identify which entries include the 10% surcharge.

Monitor liquidation dates. Once an entry is liquidated, the 180-day protest clock starts. If a ruling comes down after your protest window closes, you lose that pathway permanently.

Coordinate with your IEEPA recovery. If you are already pursuing IEEPA refunds, your attorney should be tracking Section 122 exposure in parallel. The same entries may be affected by both sets of tariffs across different time periods.

Watch for the ruling. If the IEEPA timeline is any guide, a CIT decision could come within weeks of oral arguments. When it drops, the window to act will be short and the firms that prepared in advance will move fastest.

The Bottom Line

Section 122 was a statute designed for an economic emergency that no longer exists under modern monetary policy. No president has ever used it. The legal arguments against it are arguably stronger than the arguments that already took down IEEPA tariffs in a 6-3 Supreme Court decision.

The importers who track their Section 122 exposure now, while the case is being decided, will be positioned to recover when the ruling comes. The importers who wait will be starting from scratch.

IEEPA was round one. Section 122 may be round two. The playbook is the same: file early, file across every available pathway, and do not assume the government will make this easy.

This article is for informational purposes only and does not constitute legal advice. Section 122 litigation is ongoing and outcomes are uncertain. Consult a qualified trade attorney for guidance specific to your situation.