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 executive proclamation invoked it for the first time, imposing a 15 percent ad valorem surcharge across most US imports.

This guide explains the legal mechanics, the scope, the exemptions, the sunset, and how Section 122 interacts with the other US tariff regimes (301, 232, MFN, AD/CVD).

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 5 February 2026 the President signed Proclamation 10674 invoking Section 122. The proclamation found that the US merchandise trade deficit had reached a level constituting a fundamental international payments problem and imposed:

• 15 percent ad valorem duty on most HTS lines.
• USMCA-originating goods exempt.
• A specified exemption schedule covering semiconductors, certain civil aircraft parts, emergency medical supplies, and a narrow list of pharmaceutical APIs.
• Anti-stacking rule against Section 232.

The proclamation took effect 14 February 2026. CBP guidance issued the same day instructed importers to add the surcharge on entry summaries via a chapter 99 HTS subheading (specifically 99.03.30.XX, with variants by country group).

Subsequent amendments

The proclamation has been amended twice:

• March 10, 2026 amendment: expanded the exemption list to cover semiconductor manufacturing equipment, additional pharma APIs, and EV battery raw materials.
• April 28, 2026 amendment: clarified the anti-stacking rule against Section 232; established the producer-affidavit documentation standard for the steel melt-and-pour origin.

Additional amendments are possible before the sunset date.

Scope: who pays

Almost everyone, with limited exceptions:

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

Exemption list

The exempt HTS lines include:

• Semiconductors and semiconductor manufacturing equipment: HTS 8541, 8542, 8486, and certain 9030 subheadings.
• Civil aircraft parts: HTS 8802, 8803 subheadings under the WTO Civil Aircraft Agreement.
• Selected pharmaceutical APIs: a list in chapter 28, 29, 30. Insulin, anti-retrovirals, oncology generics, certain antibiotics.
• EV battery materials: lithium hydroxide, lithium carbonate, cobalt sulfate, processed graphite (HTS 2802, 2818, 2825, 2827, 3801).
• Emergency medical supplies: ventilators, respirators, certain PPE (HTS 6307, 9019, 9018).
• USMCA-originating goods: from Canada and Mexico.

The current exemption schedule is in CBP's HTS chapter 99 cross-reference, updated as amendments occur.

How Section 122 stacks on the other regimes

The anti-stacking rule against Section 232 was the most-litigated point in March 2026. CBP guidance issued 31 March 2026 clarified: 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 14 February 2026, that runs to approximately 14 July 2026 (Congressional working day calculations vary by interpretation; common citations put the expiration at "around 24 July 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.

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.

A practical implication: contracts written before February 2026 with delivery after 24 July 2026 should include force-majeure or duty-pass-through language addressing the unknown tariff state after the sunset.

How importers should plan

Three scenarios:

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 / 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.

CBP entry handling

Section 122 is implemented via chapter 99 of the HTSUS, specifically subheading 9903.30 (variant by country). 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 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?

Run a Section 122 calculation in the LandedFees calculator.