Section 122 Sunset 6-Week Retrospective: What Actually Changed on Post-July-24 Entries and the Revised Duty Stack

Section 122 tariffs sunset at 12:01 AM EDT on July 24 2026, ending the 150-day statutory window that began February 24 2026. Six weeks in, the operative replacement regime is Section 301 forced-labor tier at 10 to 12.5 percent across roughly 60 country partners, activated at HTSUS Chapter 99 headings 9903.05.37 through 9903.06.14. This retrospective covers what actually changed on invoices filed after July 24 versus what did not change, the revised duty stack per major origin, the CBP CSMS 69326983 guidance on tier assignment, the substantial transformation traps that surfaced in the first six weeks, and the operational patterns brokers have converged on for tier A versus tier B defaults.

What Sunset and What Replaced It

Section 122 was a temporary 10 percent ad valorem duty on covered imports, effective February 24 2026 at 12:01 AM EST. Activation was at HTSUS Chapter 99 heading 9903.03.01 under Presidential Proclamation 11012 issued under authority of 19 USC 2132. The statutory sunset was 150 days from the effective instant, which fell on July 24 2026 at 12:01 AM EDT.

The rate quoted in earlier press coverage as 15 percent was an announcement figure that never made it into the operative HTS. Live HTS 9903.03.01 language throughout the surviving window read: The duty provided in the applicable subheading plus 10 percent. Any content or advisory quoting a Section 122 rate above 10 percent for the Feb 24 through Jul 24 window was working from the announcement figure rather than the operative HTS.

USTR announced Section 301 forced-labor tier duties as the replacement regime, effective 12:01 AM EDT July 24 2026 (same instant as the Section 122 sunset). Tier structure applies 10 percent (tier B) or 12.5 percent (tier A) ad valorem on covered imports from roughly 60 country partners identified by USTR under Section 301 investigation for insufficient forced-labor enforcement. Activation is at HTSUS Chapter 99 headings 9903.05.37 through 9903.06.14.

CBP CSMS 69326983 (post-effective, released mid-July) provides the tier assignment logic and the country-by-country tier list. Filers should have the CSMS on file as the operative implementation guidance for post-July-24 entries.

Tier A Versus Tier B Split

Tier A applies 12.5 percent ad valorem and covers country partners USTR identified as having documented enforcement gaps in specific high-risk sectors: textile, apparel, cotton, seafood, silica-based products, tomato-based products. Tier B applies 10 percent ad valorem and covers country partners with broader enforcement deficiencies but without sector-specific documentation.

Default assignment on ACE Entry Summary for a China-origin covered entry is tier A (12.5 percent at 9903.05.37) unless the filer applies a substantial transformation memo or origin declaration at entry time to shift to tier B or non-covered origin. This default behavior emerged in the first two weeks after sunset based on ACE fallback logic where the highest applicable tier is applied when no origin memo is on file.

Substantial Transformation Traps: 19 CFR 134.35 Versus 19 CFR 102.21

Under 19 CFR 134.35, the country of origin for CBP marking purposes is the country of last substantial transformation. For Section 301 forced-labor tier assignment, the operative country of origin is the country of substantial transformation of the finished article.

The trap is that textile and apparel have a distinct rule under 19 CFR 102.21 where origin can pin to fabric formation country rather than cut-and-sew country. That rule frequently flips origin to China for garments assembled in Vietnam or Cambodia from Chinese-origin fabric.

Worked example. Cotton yarn spun in China, knit into fabric in China, cut and sewn into T-shirts in Vietnam. Under 19 CFR 134.35 (general substantial transformation test), the shirt might be classified as Vietnamese origin. Under 19 CFR 102.21(c)(2) applicable to textile and apparel, origin pins to the country where the fabric was formed. In this fact pattern, fabric was formed in China (knit stage). Origin is China. Tier A default at 12.5 percent applies.

Same yarn cotton spun in Vietnam, knit in Vietnam, cut and sewn in Vietnam. Under 19 CFR 102.21(c)(2), fabric formed in Vietnam. Origin is Vietnam. Tier B at 10 percent applies (if Vietnam is on the covered list).

Yarn spun in China, everything else in Vietnam. Fabric formed in Vietnam (yarn to fabric is the knit step). Origin is Vietnam per 102.21. Tier B applies. The upstream yarn origin does not flip the country determination in this case because the knit step is the fabric-formation step.

The pattern: for textile and apparel, do the origin analysis under 102.21 not 134.35. The two rules can give different answers on the same fact pattern.

Broker Convergence in the First Six Weeks

For entries filed in the first two weeks after the sunset (July 24 to August 7), broker practice varied significantly. Some brokers defaulted to tier A (12.5 percent) at 9903.05.37 for any China-origin entry regardless of substantial transformation documentation. Others defaulted to tier B (10 percent) at 9903.05.38 for entries with any prior tier B history under other Section 301 lists.

By week three (August 8 onward), the emerging consensus is tier A default at 9903.05.37 for China-origin unless the filer supplies a substantial transformation memo on file at entry time, plus Post Summary Correction pathway for corrections within 314 days of liquidation per 19 USC 1520. This pattern was validated in an August 5 post to the r/freightforwarding community by a live filer on batch RQ-2026-766F1B (Tinnex Ltd), showing 5 SKUs across CN, VN, and IN origins where the July 25 China-origin entry defaulted to 10 percent (tier B) on ACE, was subsequently PSC-corrected to tier A 12.5 percent per broker review, and the tier B origin declarations for the VN and IN SKUs were held on file for CBP records-audit exposure.

Revised Duty Stack: 500k CIF China Container

Take a 500k CIF China container of general merchandise at HTS 6109.10.00 (T-shirts of cotton).

Pre-July 24 stack:

• MFN column 1: 16.5 percent = 82,500
• S122: 10 percent = 50,000
• S301 List 4A: 7.5 percent = 37,500
• MPF: capped 634.62
• HMF: 625
• Total duty: roughly 171,260

Post-July 24 stack (same shipment):

• MFN column 1: 16.5 percent = 82,500
• S301 forced-labor tier A: 12.5 percent = 62,500
• S301 List 4A: 7.5 percent = 37,500
• MPF: capped 634.62
• HMF: 625
• Total duty: roughly 183,760

Delta: +12,500 on the 500k container. The S122 layer sunset but the S301 forced-labor tier A layer is larger, so net duty went up not down on covered China-origin entries.

This is the number to build into landed cost models for China-origin post-July 24 sourcing. Content and advisory that framed the S122 sunset as a duty-reduction event were working from the assumption that the replacement regime would be lower rate than the layer sunset. It is not, for tier A country partners.

Origin Substitution Outcomes Post-Sunset

Same 500k CIF T-shirt shipment sourced from alternate origins:

• Vietnam origin (tier B under S301 forced-labor if Vietnam is on the covered list): MFN 16.5 percent plus S301 forced-labor tier B 10 percent = roughly 132,500 total duty.
• Cambodia origin: tier B basis assumed, roughly 132,500.
• Bangladesh origin: tier B basis, roughly 132,500.
• Egypt origin (assuming not on covered list): MFN 16.5 percent only, roughly 84,000 total duty.

Net advantage of Egypt over China origin: 183,760 minus 84,000 equals roughly 100,000 savings on the same 500k shipment.

Origin-shift analysis remains a real lever six weeks post-sunset. The destination determination under 19 CFR 134.35 or 19 CFR 102.21 for textiles must be defensible against CBP challenge. Egypt-origin cotton T-shirts require documentable Egyptian yarn or Egyptian fabric formation (depending on the applicable origin rule) rather than Chinese-origin fabric cut and sewn in Egypt.

CBP Records-Audit Exposure

Under 19 USC 1509(a), CBP maintains a 5-year records-audit window on entry summary determinations, including tier assignment under Section 301 forced-labor. Filers using tier B or non-covered country origin on entries filed after July 24 2026 should retain:

• The substantial transformation memo
• Country of origin analysis under 19 CFR 134.35 or 19 CFR 102.21
• Underlying bill of materials showing fabric or component origin
• Manufacturer or supplier origin declaration
• Any factory-side production records supporting the origin determination

Retention for at least 5 years from the date of entry. CBP challenge on origin can result in reclassification to the higher tier, backdated duty assessment, plus penalty under 19 USC 1592 for material misstatement of country of origin. Post-sunset the audit-risk profile on origin declarations went up because tier B versus tier A now carries a 2.5 percent ad valorem delta on covered goods.

What This Means Six Weeks In

The Section 122 sunset was a rate-layer swap, not a rate reduction. On tier A country partners (China and other high-risk-sector partners), net duty went up modestly (roughly +12,500 on a 500k container). On tier B country partners (Vietnam, Cambodia, Bangladesh where covered), the effective rate is slightly lower than the pre-sunset combined stack. On non-covered origins (Egypt in the T-shirt worked example), the arbitrage is now larger than it was pre-sunset because the S122 layer no longer applies uniformly.

Filers who built landed cost models around a July 24 duty-reduction event should update the models. The reduction is asymmetric by origin and by tier assignment. The default tier A assignment on China-origin entries is the operative pattern brokers have converged on by week 6.

For entries filed with tier B or non-covered origin, the substantial transformation documentation must sit on file for records-audit exposure under 19 USC 1509(a) through the 5-year window.