What is Section 122? The 2026 Reciprocal Tariff Explained

Section 122 of the Trade Act of 1974 (codified at 19 USC 2132) gives the President authority to impose an across-the-board import surcharge or quantitative restriction "for the purpose of dealing with large and serious United States balance-of-payments deficits." Until 2026 Section 122 had never been used. The February 2026 proclamation invoked it for the first time, imposing a 10 percent ad valorem surcharge across most US imports.

This guide explains the legal mechanics, the verified rate (10 percent under HTS 9903.03.01, not the 15 percent statutory ceiling the February 22 amendment announced), the scope, the exemptions, the sunset, the May 2026 CIT ruling, the Federal Circuit stay, and how Section 122 interacts with the other US tariff regimes (301, 232, MFN, ADCVD).

The legal text

19 USC 2132 reads, in relevant part:

"Whenever fundamental international payments problems require special import measures to restrict imports... the President may proclaim, for a period not exceeding 150 days... a temporary import surcharge, not to exceed 15 percent ad valorem, in the form of duties (in addition to those already imposed, if any)... or temporary limitations through the use of quotas, on articles imported into the United States."

Three key pieces:

1. Trigger: a fundamental international payments problem.
2. Cap on rate: 15 percent ad valorem maximum.
3. Cap on duration: 150 days maximum without extension.

The statute does not require congressional approval to invoke. It does require congressional approval (or a new proclamation under a different authority) to extend beyond 150 days.

The February 2026 proclamation

On February 14 2026 the President signed the proclamation invoking Section 122. The proclamation found that the US merchandise trade deficit had reached a level constituting a fundamental international payments problem and imposed:

• An ad valorem surcharge on most HTS lines (operative rate 10 percent under USITC HTS 9903.03.01, verified 2026-07-10; the February 22 amendment announced a 15 percent figure that was never implemented in the operative subheading).
• USMCA-qualifying goods exempt.
• An Annex II exemption schedule covering certain natural resources, fertilizers, and certain vehicles and parts.
• Anti-stacking rule against Section 232.

CBP guidance issued in mid-February instructed importers to report the surcharge on entry summaries via chapter 99 HTS subheading 9903.03.01. The February 22 amendment announced a 15 percent figure but was never implemented in the operative subheading; CBP has assessed and collected 10 percent for every entry since the February 24 effective date.

The May 2026 Court of International Trade ruling

On May 7 2026 the US Court of International Trade decided Oregon v. United States (consolidated with Burlap and Barrel v. United States), holding that the February 2026 Section 122 proclamation exceeded presidential authority under 19 USC 2132. The court reasoned that the macroeconomic findings in the proclamation did not satisfy the "fundamental international payments problem" predicate that Section 122 requires.

The CIT ordered the government to vacate the proclamation and refund duties collected.

The May 12 2026 Federal Circuit stay

On May 12 2026 the Court of Appeals for the Federal Circuit issued an administrative stay of the CIT order pending the government's appeal. The stay means:

• CBP continues to assess and collect Section 122 on every covered entry.
• The proclamation remains operative for liquidation purposes.
• Importers paying today should preserve protest rights and refund claims contingent on the appeal outcome.

The appeal is docketed at the Federal Circuit (CAFC Nos. 2026-1571 and 2026-1572). A Federal Circuit ruling is expected by late summer 2026. Possible Supreme Court review thereafter.

Scope: who pays

Almost everyone, with limited exceptions:

The proclamation made no carve-out for developing-country status. AGOA, GSP (defunct as of January 2026), Caribbean Basin Initiative, and Andean Trade Preference Act do not exempt from Section 122.

Exemption categories

The exemptions in the proclamation cover:

• USMCA-qualifying goods under general note 11 to the HTSUS.
• Annex II carve-outs: certain natural resources, fertilizers, and certain vehicles and parts. The exact HTS list is in the proclamation's Annex II.
• CAFTA-DR textile and apparel under a separate carve-out provision.
• Value covered by Section 232 (anti-stacking, see below).

The current exemption schedule lives in CBP's HTS chapter 99 cross-reference, updated as amendments occur. Importers should confirm exemption status per HTS line rather than relying on country-level shortcuts.

How Section 122 stacks on the other regimes

The anti-stacking rule against Section 232 was the most-litigated point in early 2026. The proclamation's text is clear: where the entered value is covered by a Section 232 measure, no Section 122 applies to that portion. Where only part of the entered value is 232-covered (steel components in a finished article), Section 122 applies to the non-232 portion only.

The sunset clause

Section 122(c) limits any presidential action to 150 days. From February 24 2026 (the effective date), that runs to July 24 2026. After the 150-day period, the proclamation expires by operation of law unless:

1. Congress passes implementing legislation extending the authority.
2. The President invokes a different authority (Section 232, IEEPA, Trade Expansion Act sections) to maintain the surcharge under a different legal hook.
3. A fresh Section 122 proclamation restarts the 150-day clock with a new balance-of-payments finding.

The sunset operates regardless of the Federal Circuit appeal outcome. Even if the government wins the appeal, the underlying authority lapses on July 24 2026 unless one of the above happens.

As of June 2026, congressional reaction has been mixed. The Senate Finance Committee has held hearings. The House Ways and Means Committee has not introduced legislation. Industry groups are split: import-competing manufacturers favor extension, retailers, importers, and agricultural exporters favor sunset.

How importers should plan

Three scenarios for July 25 2026 onward:

1. Section 122 sunsets cleanly. Prices revert. Importers who pre-bought inventory at the higher landed cost see margin compression as competitors restock at the post-sunset price.
2. Congress extends Section 122. The surcharge becomes the new normal. Industries that have not yet repriced to consumers will need to do so.
3. Section 122 sunsets but Section 232 (or another authority) expands. The duty regime changes in form but not in level. The list of affected goods shifts.

Hedging strategies:

• Bonded warehouse and FTZ storage to defer entry until the regime is clearer.
• Foreign-trade-zone manufacturing for goods whose final classification or origin will change before entry.
• Duty drawback claims for re-exported goods.
• Contract terms with pass-through duty clauses on long-term supply agreements.
• Protest preservation on Section 122 paid pending the Federal Circuit appeal.

CBP entry handling

Section 122 is implemented via chapter 99 of the HTSUS. On a Form 7501 entry summary the importer reports the regular HTS classification on one line and the chapter 99 surcharge on a parallel line. The HTS for the surcharge varies by country grouping, with specific subheadings for steel-and-aluminum-stacking cases.

ACE (Automated Commercial Environment) accepts the parallel reporting. Most customs brokers updated their software in February 2026.

How the calculator handles Section 122

The LandedFees calculator automatically applies Section 122 at 10 percent to any HTS in scope and any origin in scope, with the anti-stacking logic against Section 232 and the exemption list applied. The output line item is labeled "Section 122 reciprocal tariff" for transparency. If the sunset occurs and the proclamation lapses, the engine updates the same day and saved calculations show both the pre-sunset and post-sunset rates.

Related guides

• Section 232 vs 301 vs 122: How US Tariffs Stack in 2026
• Calculate Import Duty: China to USA
• Calculate Import Duty: Mexico to USA
• Steel HS Codes Under Section 232
• USMCA Origin Rules: What Qualifies and What Doesn't
• Duty Drawback: Are You Owed a Refund?
• IEEPA Refund Eligibility Checker

Citations

• 19 USC 2132 (Section 122 of the Trade Act of 1974): https://www.law.cornell.edu/uscode/text/19/2132
• White and Case, "Trump administration imposes 10 percent Section 122 tariff plan to replace IEEPA tariffs": https://www.whitecase.com/insight-alert/trump-administration-imposes-10-section-122-tariff-plan-replace-ieepa-tariffs
• Skadden, "US Trade Court strikes down Section 122 tariffs": https://www.skadden.com/insights/publications/2026/05/us-trade-court-strikes-down-section-122-tariffs
• Ward and Smith, "Court of International Trade rejects Section 122 tariff": https://www.wardandsmith.com/article/court-of-international-trade-rejects-10-section-122-tariff-what-businesses-should-know-while-the-appeal-proceeds
• Clark Hill, "Section 122 tariffs ruling": https://www.clarkhill.com/news-events/news/section-122-tariffs-ruling/

Run a Section 122 calculation in the LandedFees calculator.