The U.S. Court of International Trade blocks Trump’s import surcharges, citing misinterpretation of payments deficits.

Summary:

• The court granted summary judgment and issued a permanent injunction for The State of Washington, Burlap and Barrel, Inc., and Basic Fun, Inc., finding that the President’s Proclamation No. 11012, which imposed temporary import surcharges under Section 122 of the Trade Act of 1974, was unlawful.
• The claims of The State of Oregon and other non-importer State Plaintiffs were dismissed for lack of standing, as they failed to demonstrate direct or imminent injury from the tariffs.
• The court ruled that the President’s invocation of Section 122 was invalid because it relied on measures of balance-of-payments deficits (trade deficits and current account deficits) that did not align with the statutory meaning intended by Congress in 1974 (liquidity, official settlements, or basic balance deficits).

Source cit.uscourts.gov

Article:

U.S. Court of International Trade Invalidates Presidential Import Surcharges in Landmark Ruling

In a significant decision issued on May 7, 2026, the United States Court of International Trade (CIT) has granted summary judgment and imposed a permanent injunction against the implementation of Presidential Proclamation No. 11012. This Proclamation had levied a 10 percent ad valorem temporary import surcharge, citing fundamental international payments problems under Section 122 of the Trade Act of 1974.

The ruling came in two consolidated cases: The State of Oregon, et al. v. United States, et al. and Burlap and Barrel, Inc., et al. v. United States, et al. A three-judge panel, consisting of Judges Mark A. Barnett, Claire R. Kelly, and Timothy C. Stanceu (dissenting in part), heard arguments from various states and private importer plaintiffs.

Standing and Dismissals:
The court carefully addressed the issue of standing, granting it to “Importer Plaintiffs” including The State of Washington, Burlap and Barrel, Inc. (a New York-based spice and e-commerce company), and Basic Fun, Inc. (a Florida-based toy company). These plaintiffs successfully demonstrated imminent injury due to the direct payment of Section 122 duties. For example, Burlap and Barrel anticipated paying $60,000intariffs,andBasicFunexpectedapproximately$690,000. The State of Washington, through its public university, also proved it was a direct importer subject to these duties.

However, the claims from The State of Oregon and other non-importer State Plaintiffs were dismissed for lack of standing. The court found that these states failed to demonstrate actual indirect harm or imminent injury, distinguishing their speculative claims from the direct financial burden faced by the importers.

Core of the Dispute: Interpretation of “Balance-of-Payments Deficits”
The crux of the legal battle centered on the interpretation of “balance-of-payments deficits” as defined in Section 122 of the Trade Act of 1974. This section grants the President authority to impose temporary surcharges under specific economic conditions. The plaintiffs argued that the President’s Proclamation unlawfully redefined this statutory term, while the government contended that the President had the discretion to determine when such deficits existed based on current economic measures.

The court extensively reviewed the historical context and legislative history of Section 122, enacted in 1975. It concluded that Congress, at the time, understood “balance-of-payments deficits” to refer specifically to deficits in liquidity, official settlements, or basic balance. These were traditional measures within the Bretton Woods international monetary system, which was in flux when the legislation was debated.

Proclamation Found Ultra Vires:
Proclamation No. 11012, issued on February 20, 2026, justified the tariffs by citing large trade deficits, current account deficits, a negative net international investment position, and deficits in primary and secondary income. The court found that these measures, while relevant to the current economic landscape, are distinct from the specific definitions of “balance-of-payments deficits” that Congress intended when enacting Section 122.

The majority opinion stated that the President’s reliance on current account and trade deficits to justify the surcharges rendered the Proclamation ultra vires (beyond legal authority). Consequently, the tariffs imposed were deemed unauthorized by law.

Injunction and Scope of Relief:
The court issued a permanent injunction specifically for the importer plaintiffs who demonstrated standing (The State of Washington, Burlap and Barrel, Inc., and Basic Fun, Inc.). It declined to issue a universal injunction, emphasizing that the relief was tailored to those who had proven direct and imminent harm. The alternative motions for preliminary injunction were denied as moot.

Dissenting View:
Judge Stanceu dissented, disagreeing with the majority’s interpretation of Section 122 and its procedural handling of the summary judgment motions. He argued that the legislative history did not limit the term “balance-of-payments deficits” to only the three historical measurements identified by the majority. Judge Stanceu also contended that the President’s findings, based on official BEA statistics and various metrics, should not be invalidated, and that the court should not have decided the case on grounds not explicitly raised by the parties without proper notice and opportunity to respond.

This ruling underscores the judiciary’s role in interpreting the bounds of delegated executive power, particularly in matters of international trade and economic policy.

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