Section 122 Tariffs Struck Down: What China Importers Must Do Now

Last Thursday morning, I got a call from a client in Shenzhen. He had just seen the news that the Court of International Trade struck down the 10% Section 122 tariffs. His question was simple: "Do I stop paying?"

The answer, as I explained to him, is not that simple.

If you source from China and have been paying the 10% surcharge since February 24, you need to understand exactly what this ruling means — and more importantly, what it doesn't. I've been navigating US-China trade disputes for fifteen years, and this one has more caveats than any I've seen.

What the CIT Actually Ruled — In Plain English

On May 7, 2026, a three-judge panel of the U.S. Court of International Trade ruled 2-1 that President Trump exceeded his authority when he imposed a 10% global tariff under Section 122 of the Trade Act of 1974. The court found that Proclamation 11012 failed to identify a genuine balance-of-payments deficit — the specific legal trigger Section 122 requires.

Judge Timothy Stanceu dissented. He argued that the economic indicators the administration cited could reasonably support a balance-of-payments finding. That dissent matters because it gives the government a stronger argument on appeal.

Here's the critical detail that most news coverage gets wrong: the court did not issue a nationwide injunction. The ruling only applies to the named plaintiffs, which include the State of Washington as an importer. For everyone else — and that means virtually every business sourcing from China — the 10% Section 122 tariffs continue to apply at the border.

I had another client, a furniture importer in Guangzhou, who read the headline and immediately told his freight forwarder to stop paying. I had to call him back within the hour. "You're not a named plaintiff," I told him. "CBP will still collect at entry, and if you don't pay, your goods don't clear."

The bottom line: unless you filed a lawsuit as a named plaintiff, keep paying. Stopping now means cargo holds, demurrage charges, and potential seizure.

The $25 Billion Refund Question

Since February 24, importers have paid an estimated $25 billion in Section 122 duties. That's 72 days of collections. If the ruling survives appeal, the question everyone is asking is: how do I get my money back?

Based on how the IEEPA tariff refunds worked — and I helped clients file those claims — here's what to expect. Refunds would likely flow through the CAPE (Commercial Automated Protest Environment) system. But here's the catch: CAPE is unforgiving. Every entry needs to have accurate data, correct importer-of-record information, and clean liquidation status. A single mismatch can kill your claim.

I had a client who missed the IEEPA refund window because their customs broker coded the importer-of-record as a shell entity rather than the actual operating company. That mistake cost them roughly $47,000 in recoverable duties. Don't let that be you.

Here's what you should be doing right now to prepare for a potential refund process:

• Pull a clean report of every entry that paid Section 122 duty between February 24 and the date of the ruling — by tracking number, by HTS code, by liquidation status.

• Verify that your EIN and importer-of-record in ACE are aligned. If they don't match, fix it now.

• Check which entries have already liquidated. Those have 180-day protest windows that start ticking from liquidation date, not from the court ruling.

• Flag any entries tied to drawback claims, reconciliation flags, or active protests — CAPE rejects those categories outright.

• Talk to your customs broker about CAPE readiness now, not when the process opens.

What This Ruling Means for Your China Supply Chain

If you're sourcing from China, the Section 122 ruling is only one piece of the puzzle. The 25% Section 301 tariffs on thousands of Chinese goods remain untouched by this decision. So do the Section 232 steel and aluminum tariffs. Your total landed cost calculation is still complex.

A client of mine in Shanghai runs a trading desk that handles about $12 million annually in consumer electronics from Shenzhen to the US. When I broke down their cost structure last month, the Section 122 10% was actually the smallest of their tariff burdens. Section 301 at 25% was the killer. The Section 122 ruling changes their math on margins, but it doesn't solve their core tariff problem.

What this ruling does is create a window. If the government appeals — which is all but certain — and loses, you could see a 10% reduction in your China import costs. That's meaningful. On a $100,000 container, that's $10,000 back in your pocket. But it won't happen overnight, and it won't happen automatically.

Here's what I'm telling my clients: don't restructure your supply chain based on this ruling. The government will appeal, and the legal process could take months. Instead, use this as an opportunity to get your documentation in order, so that if refunds do materialize, you're first in line.

The Section 301 Wildcard — Why This Isn't Over

The most important thing to understand about this ruling is what it doesn't touch. The administration still has Section 301 authority, which gives them broad power to impose tariffs based on unfair trade practice investigations. Expect to see a pivot toward Section 301 actions.

Multiple trade lawyers I've spoken with expect the administration to launch new Section 301 investigations into Chinese industrial policy, particularly around EV batteries, rare earth processing, and advanced manufacturing. If that happens, the 10% Section 122 savings could be offset by new 301 duties.

A contact at a major customs law firm told me last Friday: "The legal playbook is now clear. If they can't use IEEPA or Section 122 for broad tariffs, they'll use Section 301 for targeted ones. That's harder to challenge in court because the procedural requirements are already baked in."

Your 7-Day Action Plan for Section 122 Tariffs

Based on what I've seen in similar situations — from the IEEPA ruling to Section 301 exclusions — here's your practical checklist for the next week:

Day 1-2: Audit your Section 122 entries. Pull every entry from February 24 forward. Make sure you have a complete record of what was paid, when, and under which HTS codes.

Day 3-4: Talk to your customs broker. Ask them specifically: "Are you ready for a CAPE Phase 10 submission? What documentation will I need?" If they don't know what you're talking about, find a broker who does.

Day 5: File protective protests for entries that are approaching liquidation. The 180-day window is real. Don't wait for the appeal to play out.

Day 6-7: Review your supply contracts. Some suppliers have been adjusting pricing based on the Section 122 surcharge. If the tariff falls away, you need to know how your contracts handle that. I've seen suppliers pocket the difference when tariffs drop and buyers don't push back.

One last thing: if you have inventory in transit from China right now, check whether your Incoterms put the duty liability on you or the supplier. Under DDP, the supplier pays — and they may have already factored Section 122 into your pricing. Under FOB or CIF, you pay at the border. Know which one applies.

Frequently Asked Questions

Do I need to stop paying Section 122 tariffs now?

No. Unless you are a named plaintiff in the lawsuit (which includes the State of Washington), the tariffs remain in effect at the border. CBP will continue collecting. If you stop paying, your goods won't clear customs.

How much have importers paid in Section 122 tariffs?

Estimates range from $20-25 billion since the tariffs took effect on February 24, 2026. That's over 72 days of collections at the 10% rate.

What happens if the government appeals?

The government is expected to appeal to the Federal Circuit and request a stay pending appeal. A stay would pause the ruling entirely, including the injunction for named plaintiffs. The Supreme Court could also become involved, given the significance of the tariff authority question.

Will I get a refund if the ruling holds?

If the ruling survives appeal, refunds would likely flow through the CAPE system, similar to the IEEPA tariff refunds. But there will be significant delays, and the process will require clean, accurate entry documentation. File protective protests now to preserve your rights.

Does this affect Section 301 tariffs on China?

No. The 25% Section 301 tariffs on Chinese goods remain fully in effect. This ruling only applies to the 10% Section 122 global surcharge. Your total landed cost from China still includes Section 301 duties.

Should I change my China sourcing strategy because of this ruling?

Not yet. Wait for the appeal outcome before making structural changes. What you should do now is get your documentation ready and file protective protests. If the ruling holds, you'll be positioned to recover duties. If it's overturned, you haven't lost anything by being prepared.

Navigating the Section 122 tariff situation requires more than monitoring court rulings. You need someone who understands how these decisions impact your actual supply chain — from factory negotiations in Shenzhen to customs clearance at the port of entry.

At China Cart Bridge, we help importers navigate US-China tariff complexities every day. We review your landed cost structure, audit your entry documentation, and ensure you're positioned to recover every dollar you're entitled to. Contact us for a tariff impact assessment tailored to your supply chain.