What Changed
Effective February 24, 2026The Section 122 proclamation effective February 24, 2026 explicitly confirmed that USMCA-qualifying goods from Canada and Mexico are exempt from the Section 122 surcharge. The Federal Register notice (2026-03824) listed USMCA compliance among the enumerated exemptions. This means goods that qualify under USMCA rules of origin — including automotive goods with 75%+ North American content — continue to enter the US duty-free under USMCA.
Rate Changes
| Item | Before | After |
|---|---|---|
| USMCA-qualifying goods (Canada/Mexico) | 0% | 0% (confirmed exempt from S122) |
Who's Affected
US importers sourcing from Canada and Mexico who have established USMCA-qualifying supply chains. This is highly favorable for nearshoring and reshoring strategies — companies that moved production to Mexico or Canada to qualify for USMCA treatment continue to benefit from 0% tariffs even under the new Section 122 regime.
Analysis
USMCA Exemption from Section 122 Confirmed (effective 2026-02-24). The Section 122 proclamation effective February 24, 2026 explicitly confirmed that USMCA-qualifying goods from Canada and Mexico are exempt from the Section 122 surcharge. Section 122 of the Trade Act of 1974 grants the President limited authority to impose import surcharges for up to 150 days when the US balance of payments is in serious deficit. The authority has rarely been used in modern trade policy — its invocation in February 2026 came directly in response to the Supreme Court striking down IEEPA tariff authority on February 20, 2026, leaving the administration without a legal mechanism to maintain its tariff program. The proclamation imposes a uniform global surcharge on most US imports, with explicit exemptions for USMCA-qualifying goods from Canada and Mexico and for products already covered by Section 232 national security tariffs. The 150-day limit is statutory and cannot be extended without Congressional action, meaning the surcharge is scheduled to expire on July 24, 2026. The economic impact is significant: the US imported approximately $3.1 trillion in goods in 2024, and a 15% surcharge on even a portion of that trade represents tens of billions of dollars in additional duties. Importers are advised to review their supply chains for USMCA qualification opportunities, which provide the most straightforward path to avoiding the Section 122 surcharge on Canadian and Mexican sourcing. The combination of Section 122, Section 232 rates on steel and aluminum, and Section 301 tariffs on Chinese goods means the effective tariff rate for many importers is now substantially higher than at any point since 1947.
Impact & Next Steps
Importers can minimize Section 122 exposure by: (1) verifying USMCA qualification for Canadian and Mexican sourcing, as USMCA-qualifying goods are fully exempt; (2) confirming whether your product categories fall under Section 232 coverage, which also provides S122 exemption; (3) modeling the cost impact of the Section 122 expiration on July 24, 2026 — if the surcharge is not renewed, landed costs will decrease significantly. Customs brokers recommend reviewing Bills of Lading and entry documentation carefully to ensure S122 exemptions are claimed where applicable.