Can Businesses Sue Over the New Section 122 Tariffs?

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President Trump signed a new tariff proclamation within hours of the Supreme Court striking down the IEEPA tariffs on February 20, 2026. He invoked a completely different statute before most importers had finished reading the opinion. As we covered in our earlier analysis of whether importers can repeat their IEEPA victory, the administration had a backup ready.

Short answer: yes, businesses can sue. The Court of International Trade has jurisdiction, the legal theories are real, and some importers have damages large enough to justify the fight. But the 150-day sunset on the Section 122 proclamation expires July 24, 2026, and the administration is already building replacement tariff authority under Sections 301 and 232. Whether suing is strategically sound depends almost entirely on what you import and how much you import. It also depends on whether a judgment arrives before the tariff expires or gets replaced by something harder to challenge.

Why Section 122 Is a Different Legal Animal Than IEEPA

The IEEPA tariffs fell because the Supreme Court found that Congress never clearly delegated tariff authority to the executive branch through that statute. The majority noted that IEEPA contains “no reference to tariffs, duties, or taxation” and that Congress had not authorized a transformative expansion of the President’s authority over tariff policy, including the power to impose revenue-raising tariffs. That reasoning, sometimes called the major questions doctrine, requires explicit congressional authorization for actions with vast economic significance.

Section 122 of the Trade Act of 1974 has that explicit authorization. Congress wrote it specifically to give presidents emergency tariff power, capped at 15 percent ad valorem, for up to 150 days, to address what the statute calls a “fundamental international payments problem.” The ceiling, the sunset, the triggering condition: Congress put all of it in the text. This is exactly the kind of clear delegation the Supreme Court said was missing from IEEPA.

But surviving the major questions doctrine is not the same as being safe from all challenge. Section 122 ties presidential authority to a factual finding: the President must determine that a “fundamental international payments problem” exists and that import restrictions are needed to address it. Whether that finding can be reviewed by courts is a genuinely open question. Whether a persistent goods trade deficit qualifies under the statute’s terms is equally unsettled.

It has been widely reported that Section 122 has never been used before, which means courts have had no occasion to interpret its language. The newness cuts both ways: the administration has no precedent confirming its authority, but challengers have no precedent establishing limits either.

There is also a revealing detail buried in the litigation history. During the IEEPA cases, the Trump administration’s own Justice Department argued at one point that Section 122 had “no application” to the situation because trade deficits are “conceptually distinct from balance-of-payments deficits.” The administration later dropped that argument at the Supreme Court. But the concession is in the record, a sign that even inside the government, lawyers recognized the statutory fit was imperfect.

Who Has Standing to Sue (and Who Is Probably Wasting Their Money)

Standing at the Court of International Trade is not automatic. The CIT has sole jurisdiction over tariff challenges, and the statute governing that jurisdiction, 28 U.S.C. § 1581, grants the clearest standing to the person who filed the protest when challenging a denied customs protest. In practice, that means the importer of record: the business named on the CBP entry documents as the legal importer of the goods.

If that describes your situation, your path is straightforward. You paid duties at the border, you file a protest with CBP asserting the duties are unlawful, CBP denies it (it will), and you sue at the CIT. Your damages are the duties you paid. For a company importing $100 million annually in goods subject to the 10 percent surcharge, the 150-day exposure is roughly $4.11 million, enough to justify serious litigation.

Downstream manufacturers face a harder path. Buying imported inputs from a distributor means you did not pay the tariff at the border. CBP collected it from your supplier, who passed the cost to you. You absorbed the price increase and suffered real economic harm.

But the CIT has historically been doubtful of standing for parties who were not the importer of record. The logic is that CBP made no decision directly affecting your legal status. There are exceptions, particularly under the catch-all jurisdictional provision at 28 U.S.C. § 1581(i), but they require more detailed proof and carry more litigation risk. Downstream manufacturers should consult a specialized trade attorney before filing anything.

Retailers should generally not bother. Two or three steps removed from the import event, with a weak standing argument and damages spread across a supply chain they do not control, retailers will likely hear from the CIT that their remedy lies with their supplier, not the government. That is not a path to recovery; it is a path to legal fees.

The Exceptions Map: Where the Real Legal Use Lives

The proclamation’s carve-outs may be the strongest litigation tool available, and they have nothing to do with standing as an importer. The White House fact sheet on the Section 122 tariff lists the exempted categories; the detailed rationale for each appears in the Presidential Proclamation itself.

The proclamation exempts critical minerals, energy products, pharmaceuticals and pharmaceutical ingredients, certain agricultural goods including beef, tomatoes, and oranges, passenger vehicles and certain parts, aerospace products, and goods qualifying for USMCA preferential treatment from Canada and Mexico. Each exception required a justification. Each justification creates an administrative record. Challengers can use that record to argue the administration’s own reasoning weakens its claim of a “fundamental international payments problem.”

Consider the pharmaceutical exception. The administration determined that tariffing drug inputs would harm U.S. Manufacturers and drug availability more than it would help the balance of payments. Fine. But if that logic applies to pharmaceuticals, why not to automotive parts, or semiconductors, or any other input-dependent sector? The administration’s line-drawing suggests that some imports do not threaten the balance of payments after all. A challenger could argue: you have admitted, through your own exceptions, that this is not a genuine emergency response. It is a policy choice dressed as one.

The USMCA exception is even more revealing. Section 122 is supposed to address a U.S. Balance-of-payments problem. If goods from Canada and Mexico do not contribute to that problem, the administration needs to explain why goods from Germany or Japan in the same product category necessarily do. Once it states that reason, challengers can test whether the reason is genuine or pretextual. Whether the Administrative Procedure Act’s “arbitrary and capricious” standard even applies is contested — courts have held that final presidential actions under trade statutes can be exempt from APA review. But if a court reaches the merits, the administration’s line-drawing would need a reasoned explanation, and the exceptions record invites that scrutiny.

The Section 122 regime, with its explicit policy exceptions, creates a fuller record that invites closer scrutiny.

A well-prepared challenger would file Freedom of Information Act requests for the internal memos and economic analyses behind each exception. The goal would be to find evidence that the exceptions reflect political preferences rather than genuine economic necessity. Our earlier examination of what Congress intended when it wrote Section 122 provides useful context for how courts might evaluate those arguments.

What You Can Recover

Suppose you win. What does the CIT give you?

For entries that have liquidated (CBP has finalized the duty computation), the court can order CBP to refund the unlawful duties plus interest. Standard Tariff Act relief. For entries that have not yet liquidated, which for goods imported after roughly November 2025 is most of them, the CIT can enjoin CBP from liquidating at the illegal rate. That is a cleaner remedy and a stronger litigation position. Tracking which entries have liquidated and which are still pending is the difference between a straightforward refund claim and a more complex challenge to a final determination.

There is a complication worth flagging: the pass-through problem. When you pay the tariff at the border and sell the goods to a distributor at a price that includes the tariff cost, the distributor sells them to a retailer, who sells them to consumers. The tariff burden is now spread across the supply chain.

If the CIT orders CBP to refund duties to the original importer, does that money have to flow downstream? Can the importer keep it? The law does not give a clear answer. Standard trade law presumes refunds go to the importer of record. Fairness might suggest otherwise. This uncertainty in damages valuation is something every importer should factor into its litigation calculus.

The Yale Budget Lab estimates the Section 122 tariff at 10 percent will cost the average U.S. household between $600 and $800 if it expires as scheduled, or between $1,000 and $1,200 if extended or made permanent. For an individual importer, the math is simpler: annual import volume times 10 percent, times 150 days, divided by 365.

A company importing $50 million annually in affected goods faces roughly $2.05 million in 150-day exposure. That is enough to justify substantial legal costs. A company importing $5 million annually faces about $205,000 in exposure. At that level, unless the company can join a coordinated industry challenge, the economics probably do not work.

The Preliminary Injunction Problem

A business that wants to stop paying the surcharge while it litigates needs a preliminary injunction.

The standard four-part test for a preliminary injunction requires showing likelihood of success on the merits, likelihood of irreparable harm, favorable balance of equities, and public interest alignment.

But a CIT judge evaluating a Section 122 injunction request faces a specific counterargument. Congress designed this authority with a 150-day limit precisely because it is temporary emergency power. Granting an injunction that prevents the government from using that authority for its full authorized period arguably disrespects Congress’s design. The public interest in allowing the executive to exercise authority Congress explicitly granted cuts against the injunction.

Preliminary injunctions in tariff cases are rare under normal circumstances. They are rarer still when the underlying statute has a congressional sunset built in.

A narrower injunction strategy has better odds: seek an order preventing CBP from liquidating specific unliquidated entries at the Section 122 rate while the case is pending. This does not block the surcharge broadly; it freezes the finalization of specific duty assessments. The legal theory is cleaner, the scope is limited, and the CIT is more likely to grant it. But even this is not guaranteed.

The practical upshot: plan for a refund after judgment, not a halt to payments while you litigate. Budget accordingly.

Filing Timeline: The Case For and Against Acting Now

File now or wait?

The case for filing now: every day of tariff exposure is real money. The 150-day clock is running. The CIT has shown it can move quickly on tariff cases when it needs to. A case filed in late February or early March could realistically reach a ruling on the merits before July 24, if the CIT prioritizes it. Waiting until April compresses the timeline into something unworkable.

The case for waiting: the administration has publicly indicated that Section 122 is a bridge, not a destination. USTR Ambassador Greer has announced the launch of Section 301 investigations against most major trading partners. Section 301 allows tariffs up to 100 percent in some cases and carries no 150-day sunset, though it requires USTR investigations and public comment periods before tariffs take effect.

Reports suggest the administration intends to have Section 232 investigations on additional products completed before July 24, ready to substitute for the expiring Section 122 authority. If that happens, a Section 122 victory becomes mostly symbolic. It would mean a refund for five months of duties, followed immediately by a different tariff regime that requires a new legal challenge from scratch.

One middle path: file a CIT case now to hold your place in the litigation queue, but request a scheduling order that gives the parties time to assess whether the tariff field is about to shift. Some CIT judges will grant a stay of briefing if both parties agree. This costs less than full litigation while keeping options open. Not a perfect solution, but better than either burning resources on a case that becomes moot or missing the window entirely.

How Congressional Action on the 150-Day Sunset Affects Pending Cases

The 150-day clock expires July 24, 2026, unless Congress votes to extend it. That vote, if it happens, creates a fork in the litigation road worth tracking now. Analysts at the Peterson Institute on what the ruling changes have described Section 122 as a procedural bridge to Sections 301 and 232, while cautioning that those statutes carry significant limitations and cannot fully replicate IEEPA tariff authority. How much ground the successor regimes can cover depends on how quickly they are put in place.

Congressional extension of Section 122 would leave a pending CIT case on its existing timeline. The extension represents continued use of the same statutory authority, not a new tariff regime. The administration might argue otherwise, claiming the extension creates a fresh authorization that should restart the litigation clock. The CIT would likely turn down that theory.

If Congress lets Section 122 expire without extension, a pending case does not automatically become moot. The CIT has held in similar situations that cases seeking refunds of duties paid during a tariff’s existence survive the tariff’s expiration. The reasoning is that the importer is seeking compensation for past harm, not an injunction against future conduct. The case proceeds to judgment, and a favorable ruling orders a refund for the 150-day period. The scope is limited, but the case is not dead.

If the administration replaces Section 122 with Section 301 or Section 232 tariffs before July 24, the strategic picture shifts entirely. The new regime brings different statutory authority, different triggering conditions, and potentially higher rates. The Section 122 case covers only the period from February 24 to the replacement date, and a separate challenge to the successor regime may be necessary.

Watch the congressional vote closely — it is the single most important factor in the Section 122 litigation calculus.

A Decision Framework for Importers

First: are you the importer of record on the entries subject to the surcharge? Clear standing follows from that status. Without it, a trade attorney needs to evaluate whether your supply chain position creates a recognized interest under the CIT’s broader jurisdictional provisions.

Second: what is your 150-day tariff exposure? Multiply your annual import volume in affected goods by 10 percent, then multiply by 150/365 (≈0.411). Above $500,000, the litigation economics are potentially favorable. Below $200,000, they almost are not, unless you can coordinate with other importers.

Third: do most of your entries fall within the excepted categories? Companies importing pharmaceuticals, energy products, USMCA-eligible goods, or aerospace components may owe no Section 122 duty at all. Being in an excepted category but believing the exception was applied incorrectly to your goods is a narrower and potentially stronger challenge than attacking the whole tariff.

Fourth: are most of your affected entries unliquidated? Steady importing since February 24 means most entries made after roughly November 2025 are probably still unliquidated, a cleaner remedy and a stronger litigation posture.

Fifth: is the administration likely to impose successor tariffs on your goods under Section 301 or Section 232 before July 24? Industries that are likely targets for those investigations should weigh the chance that a Section 122 victory becomes hollow before factoring it into the decision.

Sixth: are other importers in your industry considering coordinated litigation through a trade association? Shared legal costs change the economics dramatically for mid-size companies that cannot justify the expense alone.

The legal theories for challenging Section 122 are less settled than standard CIT procedure, because the statute has never been litigated. That newness cuts both ways. The administration cannot point to precedent confirming its authority, but challengers are operating without a roadmap either. The companies that succeed will be the ones that file early, pick their legal theories carefully, and stay flexible as the tariff field shifts around them.

The July 24 deadline is not just a sunset. It is a hard deadline. Importers who want to litigate Section 122 have roughly eight to ten weeks to file before the timeline becomes genuinely unworkable. After that, the question shifts from “can we win?” to “is there anything left to win?”

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