Section 122 Tariff Explained: What You Need to Know

Section 122 of the Trade Act of 1974, codified at 19 USC 2132, grants the President authority to impose a temporary surcharge on imports when the United States is experiencing a "large and serious" balance-of-payments deficit. The authority is narrow and time-limited by statute: any surcharge imposed under Section 122 cannot exceed 15% ad valorem and cannot remain in effect for more than 150 days. The current Section 122 surcharge took effect February 24, 2026, four days after the Supreme Court struck down the administration's IEEPA tariff authority (International Emergency Economic Powers Act). With its primary trade tool invalidated by the Court, the administration invoked Section 122 as the most immediately available statutory authority. The invocation was announced by the President via social media at a 15% rate; the formal Federal Register notice (2026-03824, February 25, 2026) specified 10%, creating a legal ambiguity. CalcMyTariff.com uses 15% as the operational assumption. This marks only the second time Section 122 has ever been invoked. The first use was Richard Nixon's 10% surcharge in August 1971, imposed as part of the "Nixon Shock" that also suspended the gold convertibility of the dollar. Nixon's surcharge lasted four months before being lifted as part of the Smithsonian Agreement. The current surcharge's 150-day statutory limit means expiration falls on July 24, 2026, unless Congress acts to extend it or a new legal authority is established.

The Section 122 rate is 15% ad valorem — applied to the declared customs value of imported goods. This is applied as a percentage of the transaction value you paid to your supplier (or in some cases, the appraised value assigned by CBP if the transaction value is not acceptable). The legal ambiguity between the 15% announced rate and the 10% Federal Register rate has not been resolved by a court ruling as of the publication date of this guide. The administration has collected duties at 15%. Importers who paid 15% and believe the legally valid rate is 10% may have grounds to file protests with CBP to reclaim the difference, but this requires legal counsel and carries litigation risk. For planning purposes, use 15%. Ad valorem means the duty scales with the value of your shipment. A $1,000 shipment pays $150 in S122 duties. A $100,000 shipment pays $15,000. A $1,000,000 shipment pays $150,000. This proportional structure makes high-value shipments particularly sensitive to the S122 rate — and makes the expiration date (July 24, 2026) a significant event for importers of high-value goods like industrial machinery, capital equipment, electronics, and vehicles. Combined with MPF (0.3464%), a $100,000 shipment not subject to any other tariff surcharge pays $15,346.40 in duties and fees just from S122 plus MPF. If the goods also carry a 5% MFN rate, the total reaches $20,346.40. This illustrates why S122 is the dominant component of the tariff burden for most non-China, non-S232 shipments in 2026.

The Section 122 regulations specify several categories of goods that are exempt from the surcharge. Understanding these exemptions is essential for accurate tariff calculations. USMCA-compliant goods from Canada and Mexico are fully exempt. If your goods meet the rules of origin under USMCA — sufficient North American content, appropriate tariff shift, and a valid certificate of origin — they pay 0% under USMCA and the S122 surcharge does not apply. This is the single most commercially significant exemption. Section 232 products are excluded. Goods already subject to Section 232 national security tariffs (steel, aluminum, copper, lumber, passenger vehicles, auto parts, and semiconductors) do not also pay the S122 rate. The two surcharges are mutually exclusive for these product categories. A steel manufacturer importing hot-rolled steel at 50% S232 does not pay an additional 15% S122. Additional exemptions: critical minerals (cobalt, lithium, rare earths, and others under HTS Chapters 26xx), pharmaceuticals and pharmaceutical ingredients, certain agricultural goods (grains, oilseeds, and their derivatives — roughly the categories covered by the CAFTA-DR agricultural provisions), certain electronics (specific HTS subheadings designated by CBP), certain aerospace products, and passenger vehicles and parts (which are separately covered by S232). If your product falls into one of these exempt categories, your tariff calculation excludes the S122 tier. You still pay MFN duty, any applicable S301 (China only), MPF, and HMF. The exemptions reduce but do not eliminate the tariff burden.

The 150-day statutory cap is the most important characteristic of Section 122 for import planning purposes. No matter what the administration intends or what bilateral deals are in place, Section 122 expires automatically on July 24, 2026, absent an act of Congress. Congress could extend Section 122 beyond 150 days, but this would require legislation — a difficult political lift given the current Congressional dynamics. Alternatively, the administration could attempt to invoke a different legal authority after the S122 expiration. Candidates include the International Trade in Arms Regulations (ITAR) framework for certain goods, Section 201 safeguard actions for specific industries, or a Congressional grant of new trade authority. As of March 2026, none of these alternatives are actively advancing through Congress. The most likely scenario remains expiration on July 24, 2026. Bilateral deals negotiated before the IEEPA ruling (with EU, Japan, South Korea, Taiwan, India, Vietnam, and others) may survive as voluntary commitments from the foreign parties, but their legal enforcement mechanism is unclear after the IEEPA ruling. For importers, the 150-day limit creates a concrete planning horizon. Goods with long lead times (ocean freight from Asia is typically 30-45 days) should account for the possibility that shipments ordered today may arrive after the expiration date. A June order from Vietnam with 45-day transit time arrives July 15 — still subject to S122. A July order may arrive in August — potentially post-expiration.

Section 122 occupies the middle tier of the tariff stacking formula: MFN + max(S122, S232, Bilateral) + S301. For most non-S232, non-China goods, the S122 component dominates the tariff burden. MFN rates for most manufactured goods average 3-5%, while S122 adds 15%. The combined rate for a typical consumer product from India would be: MFN ~5% + S122 15% = 20% tariff, plus India's bilateral deal rate of 18% replacing S122 (since India has a bilateral deal that exceeds the S122 base rate of 15%, the bilateral rate of 18% applies as the "max" of the middle tier). For China, S301 adds on top. A $10,000 shipment of Chinese consumer goods (List 4A, 7.5% S301 rate): MFN ~5% ($500) + S122 15% ($1,500) + S301 7.5% ($750) = $2,750 in duties, plus MPF $34.64 = $2,784.64 total. The total effective rate is 27.8%. For List 3 goods at 25% S301: $500 + $1,500 + $2,500 = $4,500, plus MPF = 45.3% effective rate. S122 does not apply to S232 products. A $10,000 shipment of steel from Germany: S232 50% ($5,000) + MFN ~0% (steel MFN rate is low) = $5,000, plus MPF $34.64. The S122 15% does not apply because steel is an S232-covered product. For USMCA goods, the S122 rate drops out entirely. A $10,000 shipment of qualifying electronics from Mexico: 0% total tariff, plus MPF $34.64. This is the clearest illustration of why USMCA compliance has become so commercially valuable in 2026.

Understanding the dollar impact of Section 122 requires working through specific shipment scenarios with actual rates. Scenario 1: $10,000 consumer electronics from Vietnam (bilateral deal 18%). MFN rate for electronics: approximately 3.4%. Bilateral deal rate (replaces S122): 18%. S301: does not apply (Vietnam is not China). Total tariff: MFN 3.4% ($340) + bilateral 18% ($1,800) = $2,140. MPF: 0.3464% of $10,000 = $34.64. Total import costs: $2,174.64 on a $10,000 shipment. Effective all-in rate: 21.7%. Scenario 2: $10,000 apparel from India (bilateral deal 18%). MFN rate for apparel: approximately 12%. Bilateral rate (replaces S122): 18%. S301: does not apply. Total tariff: MFN 12% ($1,200) + bilateral 18% ($1,800) = $3,000. MPF: $34.64. Total: $3,034.64. Effective rate: 30.3%. Scenario 3: $10,000 furniture from China (List 3, S301 25%). MFN rate for furniture: approximately 5%. S122: 15% ($1,500). S301: 25% ($2,500). Total: MFN $500 + S122 $1,500 + S301 $2,500 = $4,500. MPF: $34.64. Total: $4,534.64. Effective rate: 45.3%. After Section 122 expires July 24, 2026: Scenario 1 drops to approximately 3.4% + bilateral (uncertain post-S122) = potentially as low as 3.4% MFN. Scenario 3 drops to 5% MFN + 25% S301 = 30% — a significant reduction but not elimination of China's tariff burden.

The only prior use of Section 122 provides useful context for what happens next. On August 15, 1971, President Nixon imposed a 10% import surcharge under the same statutory authority, simultaneously suspending the convertibility of the dollar to gold (ending the Bretton Woods system) and imposing a 90-day wage and price freeze. Nixon's surcharge was intended as a negotiating tool to force US trading partners to revalue their currencies upward against the dollar. The Nixon surcharge lasted 122 days. It was lifted on December 23, 1971, as part of the Smithsonian Agreement, in which the major trading nations agreed to a new set of fixed exchange rates with a wider band of permitted fluctuation. The immediate effect of the surcharge's removal was a reduction in import prices and an easing of cost pressure on US manufacturers that used imported inputs. The parallel to 2026 is instructive. Like Nixon's surcharge, the current Section 122 invocation appears designed as a lever in broader trade negotiations, not as a permanent tariff policy. The bilateral deals struck with EU, Japan, South Korea, Taiwan, India, Vietnam, and others during the IEEPA period suggest the administration was pursuing a framework of country-specific agreements. The Section 122 invocation, with its statutory 150-day limit, creates a built-in deadline that concentrates negotiating pressure. The difference: Nixon had 10% authority; the current administration claims 15%. Nixon had a clear monetary objective (currency revaluation); the current administration's objectives are more diffuse (manufacturing reshoring, trade balance, revenue generation). This complexity may make a clean negotiated resolution like Smithsonian less likely.