Section 122 sunset plus 25: what actually changed

Section 122 tariffs sunset at 12:01 AM EDT on July 24 2026, ending the 150-day statutory window that began February 24 2026. 25 days later, this is the retrospective on what actually changed on entry filings, what did not change, and how the replacement Section 301 forced-labor regime stacks with everything else.

Short answer: the S122 layer is gone, replaced by S301 forced-labor tier at 10 to 12.5 percent on roughly 80 country partners. The stack got structurally different, not universally cheaper or more expensive. The delta depends on origin and HTSUS.

What Section 122 did while it was alive

Section 122 was a temporary 10 percent ad valorem duty layer activated at HTSUS Chapter 99 heading 9903.03.01 under Presidential Proclamation 11012, issued February 24 2026 under authority of 19 USC 2132 (Trade Act of 1974 Section 122 balance-of-payments authority). The statute caps that tariff at 150 days without Congressional extension. The 150-day window ran through 12:01 AM EDT July 24 2026.

Live HTS 9903.03.01 language throughout the surviving window read: The duty provided in the applicable subheading plus 10 percent. The layer applied near-globally with an exemption list covering FTA partners and low-development countries. Stacking with Section 232 and Section 301 List 1-4A was additive on the same entry line.

The 150-day expiration was hard-coded. No Congressional extension was pursued. The layer sunset automatically.

What replaced it on July 24

USTR announced Section 301 forced-labor tier duties as the replacement regime, effective 12:01 AM EDT July 24 2026 (same instant as the S122 sunset). The determination came out of USTR's June 2 2026 investigation memo and the July 7 2026 public hearing.

Activation is at HTSUS Chapter 99 headings 9903.05.37 through 9903.06.14. Covered countries: roughly 80 partners identified as having insufficient forced-labor enforcement in specific sectors (textile, apparel, cotton, seafood, silica-based products, tomato-based products, cocoa in some determinations).

Tier structure:

Tier A at 12.5 percent covers country partners USTR identified with documented sector-specific enforcement gaps. China is default tier A. India, Malaysia, Bangladesh, and several Central Asian and African partners are tier A for specific sectors.

Tier B at 10 percent covers country partners with broader enforcement deficiencies but without sector-specific documentation. Vietnam, Cambodia, Indonesia, Turkey, and several others land in tier B by default.

Tier assignment logic sits in CBP CSMS 69326983 which drops the country-by-country list.

Four structural differences from Section 122

1. Statutory authority. S122 was under 19 USC 2132 balance-of-payments authority with a hard 150-day statutory cap. S301 forced-labor is under 19 USC 2411 unfair trade practices authority with no statutory expiration. Duration is at USTR discretion, subject to periodic review. Practically, the S301 forced-labor layer is a durable feature of the stack, not a temporary shock.

2. Country scope. S122 was near-global with an exemption list. If a country was not on the exemption list, the 10 percent applied. S301 forced-labor is opposite: importers check origin against the covered-country list, and if the country is not on the list, no S301 forced-labor layer applies. This flips the default from opt-out to opt-in.

3. Rate structure. S122 was flat 10 percent. S301 forced-labor is tiered (10 percent tier B or 12.5 percent tier A). The tier split is driven by USTR's sector-specific gap documentation. Substantial transformation analysis under 19 CFR 134.35 or 19 CFR 102.21 for textiles can shift tier assignment if country of origin changes.

4. Stacking behavior with Section 232. S122 stacked additively with S232 on the same entry line (both layers applied). S301 forced-labor does not stack with S232 on the same entry line per the July 24 rule: on a covered steel, aluminum, or copper derivative, the 232 layer applies and the S301 forced-labor layer does not apply on top. This anti-stacking rule is a meaningful working-capital saver for derivative-heavy importers from covered origins.

USMCA carve-out mechanics

USMCA-qualifying Canadian and Mexican goods have Section 232 applied only to the non-US content share of the finished good. Formula: 232 rate x (1 minus US content share by value) = effective 232 rate on invoice.

Example: USMCA-qualifying Canadian finished aluminum extrusion with 60 percent US-smelt aluminum by value and 40 percent Canadian-smelt aluminum. 232 layer applies to 40 percent share. 50 percent x 0.40 = 20 percent effective 232 rate on the invoice. The Canadian smelt is not US smelt so it still counts as covered content, but it is the non-US share that pays the 232 layer.

If the Canadian-smelt aluminum share falls to zero (all US-smelt), the 232 effective rate is zero. If the Canadian-smelt share is 100 percent, the 232 effective rate is 50 percent same as any other origin.

Section 301 forced-labor does not have a USMCA carve-out because Canada and Mexico are not on the covered-country list. USMCA-qualifying Canadian and Mexican goods pay zero S301 forced-labor tier by default.

Note that Section 338 Canada (effective Aug 19 2026 at 9903.03.12 alcohol, 9903.03.13 dairy, 9903.03.14 wood/vehicle) is a separate regime with a flat 50 percent applied on the full invoice value, no metal-content share, no USMCA carve-out. Canadian lanes on covered categories jumped hard on Aug 19.

Worked before/after examples

China lane, 500k CIF, HTS 6109.10.00 (cotton T-shirts).

Pre-July 24: MFN 16.5 percent (82,500) plus S122 10 percent (50,000) plus S301 List 4A 7.5 percent (37,500) plus MPF cap (634.62) plus HMF (625) = 171,260 USD (34 percent effective on CIF).

Post-July 24: MFN 16.5 percent (82,500) plus S301 forced-labor tier A 12.5 percent (62,500) plus S301 List 4A 7.5 percent (37,500) plus MPF (634.62) plus HMF (625) = 183,760 USD (37 percent effective on CIF).

Delta: +12,500 USD, or +2.5 percent effective rate.

UK lane, 200k CIF, HTS 7208 (flat-rolled steel).

Pre-July 24: MFN 0 percent plus S122 10 percent (20,000) plus S232 UK-specific at 25 percent under EPD (50,000, note S122 stacked with S232) plus MPF (634.62) plus HMF (250) = 70,885 USD (35 percent effective on CIF).

Post-July 24: MFN 0 percent plus S232 UK-specific at 25 percent (50,000, S301 forced-labor does not apply and does not stack with S232) plus MPF (634.62) plus HMF (250) = 50,885 USD (25 percent effective on CIF).

Delta: -20,000 USD, or -10 percent effective rate. UK lane got cheaper post-sunset because S122 disappeared and no S301 forced-labor replacement applies (UK not on covered list).

Canada lane, 300k CIF, USMCA-qualifying, HTS 4412.39.10 (plywood).

Pre-July 24 (also pre-S338 Aug 19): MFN under USMCA 0 percent plus S122 10 percent (30,000) plus MPF cap (634.62) plus HMF (375) = 31,010 USD (10.3 percent effective on CIF).

Post-July 24, pre-Aug 19: MFN 0 percent plus S122 gone plus S301 forced-labor not applicable (Canada not on covered list) plus MPF plus HMF = 1,010 USD (0.3 percent effective). Delta: -30,000 USD.

Post-Aug 19 (S338 Canada cliff): MFN 0 percent plus S338 at 9903.03.14 flat 50 percent on invoice (150,000) plus MPF plus HMF = 151,010 USD (50 percent effective on CIF). Delta versus pre-July 24: +120,000 USD, driven by S338 cliff not by S122 sunset.

The Canada lane story is not S122 sunset. It is S338 Aug 19. Any lane that includes covered Canadian categories flipped hard on Aug 19.

Six operator updates for ERP and broker instructions

1. Remove S122 rule. Effective July 24 12:01 AM EDT. Any entry summary with an activation date on or after this instant should not include a S122 layer at 9903.03.01. Retroactive filings for entries with unlading date before July 24 do still apply S122.

2. Add S301 forced-labor tier lookup. Country of origin lookup against CBP CSMS 69326983 tier list. Tier A default 12.5 percent for China. Tier B default 10 percent for other covered origins. Non-covered origin: zero.

3. Confirm S232 anti-stacking with S301 forced-labor. On a covered steel, aluminum, or copper derivative from a covered origin, the S232 layer applies and the S301 forced-labor layer does NOT apply on top. Do not double-count.

4. Reconfirm USMCA carve-out on S232. For USMCA-qualifying Canadian and Mexican goods, 232 applies to non-US content share only. Formula: 232 rate x (1 minus US content share by value).

5. Add S338 Canada 50 percent flat rule. Effective Aug 19 2026 for the three category codes: 9903.03.12 alcohol, 9903.03.13 dairy, 9903.03.14 wood/vehicle. Flat 50 percent on invoice. No metal-content share. No USMCA carve-out. Stacks additively with MFN.

6. Update PO templates. Require substantial transformation memos for tier B versus tier A determination under S301 forced-labor. Require USMCA claim documentation for Canadian goods with US-content share breakdown for the S232 carve-out.

For readers who want to walk the pre-versus-post-sunset stack side by side on their own commodities, our what is Section 122 post-sunset explainer covers the transitional filing scenarios in more detail.

What this looks like at the aggregate

25 days into the post-sunset window, the operational picture is settled but noisy. China lanes saw a small effective-rate increase driven by tier A defaulting on entries without substantial transformation memos. UK lanes saw a decrease where S232 was not in play and an unchanged stack where S232 was already the operative layer. USMCA-qualifying Canadian and Mexican lanes saw a decrease from S122 sunset, then a hard reversal from S338 Aug 19 on covered categories.

The right response is not to celebrate or panic on aggregate. It is to walk the stack on every lane, update the ERP rules per the six updates above, and get substantial transformation memos and USMCA carve-out documentation on file at entry filing. The S301 forced-labor tier is durable and not going away. The 232 anti-stacking rule saves working capital where it applies. The S338 Canada cliff is a separate story.