The Section 122 Trap: Why You're Still Paying an "Illegal" 10% Tariff

You are being robbed. Plain and simple. If you are an importer in the United States, you have likely seen a 10% "temporary surcharge" on almost every single entry since late February. This surcharge, invoked under a dusty 1974 law called Section 122, was supposed to be a "bridge" after the Supreme Court nuked previous tariff structures. It was supposed to be temporary. It was supposed to be legal.

On May 8, 2026, the U.S. Court of International Trade (CIT) officially called it. In a 2-1 split decision, the court ruled that the administration overstepped its bounds. The 10% surcharge is unlawful.1

So, why is your customs broker still sending you bills with that 10% line item? Why hasn’t your bank account been flooded with refunds? And why are your Q3 margins still looking like a crime scene? Welcome to the Section 122 trap. While the lawyers argue in Washington, you are the one keeping the lights on at the Treasury. It is time to stop playing defense and start figuring out how to get your cash back.

The Ghost of 1974: What is Section 122?

Before we get into the court drama, you need to understand the weapon being used against your bottom line. Section 122 of the Trade Act of 1974 is a relic. It was designed to allow the President to impose temporary import surcharges of up to 15% to deal with "large and serious" balance-of-payments deficits.2 In plain English: if the U.S. is spending way more than it is making globally, the President can hit the panic button and tax everything coming in for 150 days.

Before 2026, this authority had never been used. Not once. It was the "nuclear option" for a trade war that nobody wanted to start. But on February 20, 2026, following a Supreme Court decision that invalidated tariffs under the International Emergency Economic Powers Act (IEEPA), the administration reached into the attic and pulled out Section 122.3

Proclamation 11012 was issued, slapping a 10% ad valorem duty on nearly all merchandise entering the country.4 It was marketed as a "global surcharge" to protect the U.S. economy. In reality, it was a 10% tax on your inventory, your customers, and your growth.

The May 8th Ruling: A Victory with a Catch

When the CIT issued its ruling on May 8, 2026, in the consolidated case of State of Oregon et al. v. Trump, importers everywhere cheered. The court found that the administration had not met the very specific statutory criteria required to invoke Section 122. They didn’t prove the "balance-of-payments" crisis they claimed to be fixing.5

But the cheers were premature. In a move that only a lawyer could love, the court did NOT issue a nationwide injunction. Instead, they limited the relief to the specific plaintiffs in the case: Burlap & Barrel, Inc., Basic Fun, Inc., and the State of Washington.6

If your company's name isn't on that list, guess what? You are still paying. As of today, May 25, 2026, U.S. Customs and Border Protection (CBP) is still collecting the 10% from everyone else. Even worse, the government has already appealed the decision to the Federal Circuit, and a temporary stay has been issued.7 This means that for the moment, even the companies that "won" might still see the 10% surcharge on their entries until the appeal process plays out.

The Landed Cost Nightmare

Let's talk about why this matters beyond the legal jargon. If you are importing $5 million worth of goods from China or Europe this year, that "temporary" 10% is a $500,000 hole in your budget. That is $500,000 that could have been spent on marketing, R&D, or simply staying in the black.

For many ecommerce brands and manufacturers, a 10% hit to landed cost isn't something you can just "absorb." It forces you to raise prices, which kills your conversion rates, or cut corners, which kills your brand. And because this surcharge was applied globally, you can't even "pivot" to another country to avoid it. It is a universal tax on the movement of goods.

The worst part? Most importers are just sitting and waiting. They are waiting for a "blanket refund" or for the court to finally fix the mess. History tells us that "waiting" for the government to give you back your money is a losing strategy. By the time a final ruling comes down (if it ever does), your business might already be underwater.

How to Stop the Bleeding: Actionable Steps for Importers

You are not helpless. Even without a nationwide injunction, there are things you should be doing right now to protect your interests and position yourself for a refund. Here is the playbook:

• 1. File Protests Immediately: You cannot sit back and wait for the government to do the right thing. Work with your customs broker to file protests on every entry where the Section 122 duties are paid. This preserves your right to a refund if and when the court finally strikes down the tariff for everyone. If you don't protest, you might find yourself "out of time" when the refunds start flowing.

• 2. Audit Your Landed Cost Math: Stop treating the 10% as a "temporary annoyance." Factor it into your Q3 and Q4 pricing now. If the court ruling holds, you get a windfall. If it doesn't, you've protected your margins. Hope is not a financial strategy.

• 3. Talk to Your Freight Forwarder (The Right One): If your forwarder is just sending you the bill and shrugging, you have the wrong partner. You need a team that understands the intersection of logistics and trade law. At Cubic, we aren't just moving boxes; we are monitoring the CIT daily. We are helping our clients navigate the protest process so they aren't left behind.

• 4. Monitor the Federal Circuit Appeal: The government's appeal is the next big milestone. If the Federal Circuit upholds the CIT's ruling, the pressure for a nationwide refund will become unbearable for the administration. Keep your documents in order and your entries tracked.

• 5. Consider Joining a Mass Action: There are already law firms organizing mass actions for importers who weren't part of the original suit. If your volume is high enough, the legal fees might be a small price to pay for a shot at a massive refund.

The Cubic Perspective: Logistics is a Legal Game Now

The days of logistics being "just about the ship" are over. In 2026, the success of your import business depends as much on what happens in a D.C. courtroom as it does on what happens in the Port of Long Beach. The Section 122 trap is proof that the old way of shipping—manual, opaque, and reactive—is dead.

You need a partner that sees the whole board. Cubic was built for this exact type of chaos. We provide the visibility to see exactly how these tariffs are hitting your per-unit landed cost in real-time, and the operational expertise to help you fight back when the government oversteps. Don't let a "temporary" surcharge become a permanent stain on your balance sheet.