Tariff Rules Face Court Test

A fight over a 10% tariff is now happening on two clocks at once: one in a courtroom in Manhattan, and one in the United States Customs computer system that starts taking refund claims on April 20. On Friday, April 10, a three-judge panel at the United States Court of International Trade heard challenges from 24 mostly Democratic-led states and two small businesses that want the tariff blocked. The tariff has been in effect since February 24. This is not the same legal theory the administration used for its earlier tariffs. After the Supreme Court struck down many tariffs imposed under the International Emergency Economic Powers Act on February 20, the White House switched to Section 122 of the Trade Act of 1974 the same day. Section 122 is a narrow backup lever, not a blank check. The law lets a president impose a temporary import surcharge of up to 15% for up to 150 days to deal with a “large and serious” balance-of-payments deficit or an imminent drop in the dollar. The whole case turns on one old phrase: “balance of payments.” The states say that phrase was written for 1970s-style currency stress and gold-era monetary problems, while the administration says today’s long-running trade deficit is close enough. The judges sounded uneasy with that translation job. Judge Timothy Stanceu said, “We’re not quite sure how to translate 1974 into 2026,” after nearly three hours of argument over whether the statute still fits the modern economy. There is also a hard time limit built into the law. Even if the administration wins this round, the current Section 122 tariff is set to expire in July unless Congress extends it, because the statute caps this kind of surcharge at 150 days. While that legal fight is still unresolved, Customs and Border Protection has moved to the money. The agency says Phase 1 of its Consolidated Administration and Processing of Entries system, called CAPE, will open on April 20, 2026 for International Emergency Economic Powers Act duty refunds. Phase 1 is narrow by design. It covers certain entries that have not been finally liquidated yet and certain entries that were liquidated within the last 80 days, and claims have to be filed through the Automated Commercial Environment portal with a comma-separated values file rather than through the usual broker interface. Only the importer of record, or the customs broker that filed on that importer’s behalf, can submit the declaration. Each file can list up to 9,999 entries, and Customs says accepted claims will remove the International Emergency Economic Powers Act tariff line and then group refunds with interest. So companies are dealing with two separate questions at once. One is whether the newer 10% tariff survives the court test under Section 122, and the other is how fast they can recover cash tied up in the older International Emergency Economic Powers Act tariffs through the April 20 refund process.