Court of International Trade Hears Case Challenging Trump’s Section 122 Tariffs

On Friday, April 10th, the Court of International Trade (CIT) heard oral arguments in Burlap & Barrel v. Trump, a case challenging the Trump Administration’s use of Section 122 of the Trade Act of 1974 to impose tariffs. The case follows the Supreme Court’s recent decision in Learning Resources, Inc. v. Trump, which invalidated the Administration’s use of the International Emergency Economic Powers Act (IEEPA) to implement broad, global tariffs.

During the hearing, a three-judge panel considered arguments brought by a coalition of 24 state attorneys general and several private businesses. 

At the center of the dispute is the question of whether Section 122, which allows the President to impose temporary tariffs to address “fundamental international payments problems,” can legally be used to address trade deficits. The statute was originally enacted in the 1970s during a period of monetary instability when the U.S. dollar was tied to gold and foreign governments were exchanging dollars for gold at fixed rates, creating pressure on the U.S. balance of payments. Critics argue that those conditions no longer exist and that Section 122 was intended to address short-term currency and financial crises—not long-term trade imbalances.

Opponents further argue that the Administration’s reliance on Section 122 stretches the statute beyond its intended purpose, using it as a substitute for broad trade policy rather than as an emergency financial measure.

What This Means for the Premium Cigar Industry

When the Administration originally imposed tariffs under IEEPA, premium cigars from the Dominican Republic, Honduras, and Nicaragua were immediately impacted. Tariffs of 10% were applied to products from the Dominican Republic and Honduras, and 18% to products from Nicaragua, marking a significant departure from decades of duty-free trade under the Dominican Republic–Central America Free Trade Agreement (CAFTA-DR). These tariffs quickly increased costs for manufacturers, retailers, and consumers.

Following the Supreme Court’s decision invalidating the use of IEEPA, the Administration replaced those tariffs with a uniform 10% tariff under Section 122. While this change reduced the burden on Nicaraguan products relative to the prior 18% rate, it maintained new tariff costs across the board for other countries.

If the Court of International Trade ultimately rules against the Administration’s use of Section 122, tariffs on premium cigars and related accessories could potentially return to zero, restoring the pre-tariff framework that existed under CAFTA-DR.

What Happens Next

The CIT will now consider the arguments presented and determine whether to uphold or strike down the Section 122 tariffs. As currently structured, the Section 122 tariffs are set to expire on July 24th, unless Congress takes action to renew them, something that appears unlikely at this stage.

Some legal observers believe the court may be reluctant to overturn the tariffs, noting that judges may be inclined to defer to the executive branch given the limited time remaining before expiration. However, the outcome remains uncertain.

CRA will continue to monitor the case closely and provide updates as developments occur.