Section 122 Compliance Guide
On February 20, 2026 — the same day the Supreme Court invalidated IEEPA tariffs — President Trump invoked Section 122 of the Trade Act of 1974 to impose a replacement import surcharge. The surcharge is 10% ad valorem on most imports, effective February 24, 2026, with the Administration signaling intent to raise it to the statutory ceiling of 15%.
- Rate: 10% ad valorem (may increase to 15% statutory ceiling)
- Effective: February 24, 2026
- Expires: July 24, 2026 (150-day statutory limit) unless Congress extends
- Does NOT stack on top of Section 232 duties (steel, aluminum, automobiles)
- Extensive exclusions covering USMCA goods, agriculture, pharmaceuticals, energy, critical minerals, aerospace, and more
⏰ Statutory Sunset Date
Section 122 carries a hard 150-day time limit. Unless Congress acts to extend it, the surcharge expires automatically. The Administration is expected to transition to Section 232 and Section 301 actions before this date.
Key Facts at a Glance
What Is Section 122?
Section 122 of the Trade Act of 1974 (19 U.S.C. § 2132) gives the President authority to impose a temporary import surcharge of up to 15% ad valorem, for up to 150 days, to address “fundamental international payments problems” — including large and serious U.S. balance-of-payments deficits.
Unlike IEEPA, Section 122 explicitly authorizes surcharges “in the form of duties.” This is the critical legal distinction. The Administration justified the surcharge on the basis of a $1.2 trillion annual goods trade deficit and a deeply negative net international investment position.
Section 122 is a narrower but more legally defensible authority than IEEPA. Justice Kavanaugh’s dissent in Learning Resources explicitly flagged Section 122 as among the authorities the ruling would leave intact.
Legal reference: 19 U.S.C. § 2132. Full text at govregs.com.
Who Does Section 122 Apply To?
The surcharge applies broadly to most imports entering the United States on or after February 24, 2026. It is assessed as an additional ad valorem duty on top of existing MFN/NTR rates and any applicable Section 301 tariffs.
However, the scope is significantly narrower than the IEEPA tariffs due to three key limitations:
- Rate ceiling: 15% maximum (compared to IEEPA rates that ranged from 10% to over 100%)
- Time limit: 150 days (expires July 24, 2026)
- Extensive exclusions: Over 1,600 product categories are excluded across 14 major groups
⚠ The Non-Stacking Rule: Section 232 Products
Where Section 232 tariffs apply to an import, the Section 122 surcharge applies only to the non-232 portion. For products fully covered by Section 232 — steel, aluminum, and automobiles — no additional Section 122 duty is owed. This is a critical calculation for importers of metals and automotive products.
If your product has both a Section 232 component and a non-232 component, the surcharge applies only to the non-232 portion. Verify your HTS classifications carefully.
Exclusions and Carve-Outs
The following categories are excluded from the Section 122 surcharge, as listed in Annexes I and II to Proclamation No. 11,011. The full exclusion guide organized by everyday categories is available for download below.
Additional Exclusions
- USMCA goods: Goods of Canada or Mexico entered duty-free under USMCA (HTSUS General Note 11)
- CAFTA-DR textiles/apparel: Costa Rica, Dominican Republic, El Salvador, Guatemala, Honduras, Nicaragua
- Goods in transit: Products in transit prior to February 24, 2026, if entered for consumption before February 28, 2026
- Passenger vehicles, buses, certain trucks, and certain vehicle parts
Overlap with Section 232 and Section 301
| Scenario | Section 122 Applies? | Explanation |
|---|---|---|
| Product with no other special tariffs | YES — full 10% | Standard application of Section 122 surcharge on top of MFN rate. |
| Product subject to Section 301 (China) | YES — full 10% | Section 122 stacks on top of Section 301. Both apply. |
| Product fully covered by Section 232 | NO | Non-stacking rule. Section 232 products (steel, aluminum, auto) are excluded. |
| Product partially covered by Section 232 | YES — on non-232 portion only | Surcharge applies to the portion not covered by Section 232. |
| Product on Annex I or II exclusion list | NO | Specifically excluded by the Proclamation. No surcharge owed. |
| USMCA-qualifying goods (Canada/Mexico) | NO | Duty-free USMCA goods are excluded from the surcharge. |
Will Section 122 Hold Up in Court?
Section 122 is more legally defensible than the IEEPA tariffs for a simple reason: it explicitly authorizes the President to impose surcharges “in the form of duties.” Courts have historically applied deferential review to presidential tariff determinations under specifically delegated statutory authorities.
However, potential legal challenges remain:
- Historical design argument: Critics argue Section 122 was designed for fixed exchange-rate crises (like the 1971 Nixon shock), not chronic trade deficits under floating exchange rates.
- Predicate scrutiny: Courts may examine whether “fundamental international payments problems” is genuinely met by the current trade deficit or whether the Administration is stretching the statutory language.
- Rate increase formalization: The stated intent to raise the rate to 15% must still be formalized through a new Proclamation.
The bottom line: Section 122 tariffs are substantially more likely to survive judicial review than the IEEPA tariffs. Importers should plan for compliance rather than expecting a court-ordered reversal, while monitoring any legal challenges that develop.
What Comes After Section 122?
The Administration has made clear that Section 122 is a bridge, not a destination. U.S. Trade Representative Greer has signaled accelerated new investigations under two longer-term authorities:
Section 301 Investigations
New Section 301 investigations are expected to cover most major trading partners across industrial overcapacity, forced labor, pharmaceutical pricing, digital services taxes, and other issues. These involve formal investigative records and public comment processes. Early participation by importers builds standing for potential future litigation.
Section 232 Investigations
Section 232 investigations on additional product categories are continuing. These could expand the universe of products subject to national security tariffs beyond the current steel, aluminum, and automotive scope.
Compliance Checklist
Section 122 Compliance — Action Items
- Audit your entry universe for imports on or after February 24, 2026
- Map HTS classifications against the Annex I and II exclusion lists
- Verify whether Section 232 non-stacking applies to any of your products
- Track Section 122 entries separately in your customs records
- Document any exclusion claims with country-of-origin certificates and HTS evidence
- Update landed cost models for the 10–15% surcharge impact
- Verify USMCA qualification for Canada/Mexico goods
- Monitor the July 24, 2026 sunset date and prepare for transition
- Watch USTR and Commerce Federal Register notices for new Section 301 and 232 investigations
- Prepare for potential audits — CBP may scrutinize exclusion claims
Documentation Requirements
Maintain the following records for Section 122 compliance and potential audits:
- Country of origin documentation — essential for USMCA and CAFTA-DR exclusions
- Commercial invoices showing product descriptions matching exclusion categories
- Certificates of origin (USMCA Certificate for Canada/Mexico goods)
- Supplier certifications confirming product specifications and origin
- HTS classification evidence supporting any claimed exclusions
- Entry summaries showing the Section 122 surcharge line item
Frequently Asked Questions
Is my product subject to Section 122?
If your product is not on the Annex I or II exclusion list, not fully covered by Section 232, and not a USMCA-qualifying good from Canada or Mexico, then yes — the 10% surcharge applies to imports on or after February 24, 2026. Download our exclusion guide below and search for your product category.
Can Section 122 duties be challenged in court?
Possible but less likely to succeed than the IEEPA challenges. Section 122 explicitly authorizes surcharges “in the form of duties,” making it a stronger statutory foundation. Courts apply deferential review to presidential tariff determinations under delegated authorities. However, challenges to the “fundamental international payments problems” predicate are being explored.
What happens to duties already paid under Section 122?
Section 122 duties are currently lawful and not recoverable absent a successful legal challenge. This is fundamentally different from IEEPA tariffs, which were ruled unlawful. If Section 122 is challenged and struck down in the future, a refund pathway would open — but that is speculative at this point.
What happens when Section 122 expires on July 24, 2026?
The surcharge automatically terminates unless Congress acts to extend it. The Administration is expected to have Section 301 and/or Section 232 actions in place as replacement measures by that date. Importers should plan for a transition, not an end, to tariff exposure.
Do I have to pay Section 122 duties?
Yes, unless your product qualifies for an exclusion. The surcharge is a lawful duty under current law and must be deposited at the time of entry. Non-payment results in standard CBP enforcement including liquidated damages and potential penalties.
How do I request an exclusion?
You do not “request” an exclusion in the same way as Section 301 exclusion petitions. The Annex I and II exclusion lists are defined in the Proclamation. If your product falls within a listed category, the exclusion applies automatically based on your HTS classification. The key is ensuring your HTS classification is correct and that you have documentation to support it if CBP audits.
Downloadable Resources
Official Sources
- Presidential Proclamation (Feb. 20, 2026)
- Federal Register (Feb. 25, 2026)
- Legal reference: 19 U.S.C. § 2132. Full text at govregs.com
Get a Free Section 122 Audit
Not sure whether your products are subject to the surcharge or qualify for exclusions? We can map your HTS classifications, verify non-stacking eligibility, and update your landed cost models.