Appellate Court Raises More Uncertainty in Section 122 Tariff Litigation

On June 11, 2026, the US Court of Appeals for the Federal Circuit (CAFC) issued a stay of the injunction issued by the US Court of International Trade (CIT), which had prevented US Customs and Border Protection (CBP) from collecting duties pursuant to Section 122 of the Trade Act of 1974 from the State of Washington and two private importers. As a result, and as discussed further below, CBP will continue to collect these duties until July 24, 2026 (unless extended by Congress) and the outlook for refunds remains uncertain.   

On May 7, 2026, in State of Oregon, et al. v. United States and Burlap and Barrel, Inc. v. Trump, the CIT held that the Trump administration's imposition of a 10% tariff pursuant to Section 122, to address "fundamental international payment problems," was unlawful because the Government's interpretation of the statute was overly expansive. Specifically, the CIT held that Proclamation 11012's identification of a trade deficit, current account deficit, and net negative US international investment was not contemplated by the statute. The CIT explained that the statute's legislative history indicated that a "balance-of-payments deficit[ ]" can only be measured by liquidity, official settlements, or basic balance. The CIT also permanently enjoined the CBP's collection of duties from three importer plaintiffs. More detail about the CIT's opinion and tariffs at issue is available here. The Government appealed this decision to the CAFC on May 8, 2026.

Subsequently, on May 11, 2026, the Government moved for an administrative stay from the CIT of the enforcement of the judgement during its appeal. On May 20, 2026, the CIT denied the motion, explaining that the Government had failed to satisfy the four factors, identified by the US Supreme Court in Hilton v. Braunskill¸ for the CIT to stay the enforcement of a judgment.

Soon after, the Government sought a stay from the CAFC, which interpreted the four factors in a different manner. On June 11, 2026, the CAFC granted the Government's motion for a stay pending appeal, with the following rationale:

• Factor #1 – Likelihood of Success on the Merits
  • The CAFC concluded that the Government had made a sufficient showing that it is likely to succeed on the merits.
    • The appellate court explained that the CIT's interpretation – that "balance-of-payments deficit[ ]" is limited to deficits measured by liquidity, official settlements, or basic balance – "may be incorrect."
    • The CAFC explained that the legislative history cited by the Government "strongly call[s] into question" whether these methods, were the only methods Congress intended to measure balance-of-payments deficits.
    • The CAFC rejected the importers' argument that expanding the methods of measuring balance-of-payments deficits beyond those identified by the CIT would pose non-delegation concerns, explaining that Section 122 already contains the necessary guardrails required by the non-delegation doctrine.
  • Factor #2  - Irreparable Harm to the Government
    • The CAFC held that this factor favored issuing a stay, explaining that it disagreed with the importers that the CIT's injunction was limited in scope. 
    • Specifically, the CAFC agreed with the Government regarding the following:
      • Many more cases seeking refunds of Section 122 duties will follow.
      • A limited-in-scope injunction could still affect trade policy and the Government's negotiating positions.
      • The CIT's opinion could lead to the acceleration of imports to avoid Section 122 duties.
      • Compliance with the injunction would impose a burden on CBP by requiring the agency to reprogram its system to provide refunds.

• Factor #3 - Substantial Injury to Importers
  • The CAFC stated that this factor also favored the Government's motion, explaining that if the tariffs are ultimately found unlawful, refunds with interest would reduce any harm from the initial duty payments or any potential refund delays.
  • The CAFC also stated that non-monetary injuries from "operational disruptions, reputational harm, lost profits, and constraints on growth and innovation" are general concerns regarding paying the duties, regardless of whether the stay is granted.

• Factor #4 - Harm to Public Interest
  • The CAFC held that this factor is "neutral," explaining each party's perception of the impact on the public interest ultimately depends on the outcome of the appellate court's ruling regarding the lawfulness of the tariffs. Thus, the CAFC explained that this factor did not point in favor of granting or denying the motion.

Future Considerations

• Timeline of Appeal – The Government's initial brief is due to the CAFC in July, making it unlikely that this litigation is resolved prior to the July 24, 2026 expiration for the Section 122 duties. 
• Continued Collection of Section 122 Duties – Because the CIT's injunction, preventing the collection of Section 122 duties, is now stayed, CBP will continue to collect these duties on all importers until July 24, 2026. 
• Refund Opportunities – Although the CAFC explained that it did not "state a final conclusion as to the correctness of the CIT's judgment", the appellate court did explain that "the federal government has made a sufficient showing that it is likely to succeed on the merits."  Thus, the opportunity for refunds remains uncertain pending affirmance of the CIT's decision, as well as a possible appeal to the Supreme Court. 
  • If the CAFC sustains the CIT's initial opinion, however, importers should be prepared to consider filing a complaint at the CIT to seek refunds. 
  • Importers should continue to document and preserve their entry documentation, keep these entries organized for the applicable protest deadlines, and track the appeal process of these Section 122 duties.
• Potential Renewal of Section 122 Duties – On May 26, 2026, US Trade Representative Jamieson Greer provided insight into the Government's decision-making in a public address. According to Ambassador Greer, although Section 122 duties are temporary (i.e., expiring within 150 days), the statute does not foreclose the reauthorization of such tariffs under a renewed 150-day timeline. Thus, Ambassador Greer's comments could be interpreted to foreshadow the use of tariffs under Section 122 again in the future.   

Steptoe's International Trade team is closely monitoring this litigation.  If you need support evaluating what these developments mean for your business, our team is ready to help.