When a client who sources rattan furniture out of Vietnam called me at 7 a.m. the week of the deadline, he opened with one question: "Does my landed cost drop on Friday?" I told him the honest answer, which is the answer most importers did not want to hear. His cost was more likely to go up. Four days later the paperwork proved it. His duty rate went from 10% to 12.5%, and the surcharge everyone called an expiration turned out to be a rate increase wearing a sunset's clothes.
Section 122 died at 12:01 a.m. EDT on 24 July 2026. Its replacement was already in force at that same minute. There was no gap, no window, no cheap entry for anyone who timed a filing on a bet. Here is what actually happened, what you pay now by origin, and the two dates still sitting on the calendar this week.
What Section 122 did, and why it died on 24 July
Section 122 of the Trade Act of 1974 lets the President impose a temporary import surcharge to address a balance-of-payments emergency. The statute caps that surcharge at 15% and, critically, limits it to 150 days. The administration set the rate at 10% across the board and used it to replace the earlier IEEPA-based tariffs on 24 February 2026. Holland & Knight
Count 150 days from that effective date and you land on 24 July. The surcharge sunset by operation of law, not by policy choice. The President could not extend Section 122 unilaterally, and Congress passed nothing to keep it alive. USTR The clock simply ran out.
Under the surcharge the rule was clean. Goods that qualified under USMCA stayed duty-free. Everything else carried the flat 10%. The widespread assumption was that when the 10% layer disappeared, non-qualifying goods would fall back toward standard Most-Favored-Nation rates, which for a lot of manufactured goods sit in the 3-4% range depending on the tariff line. CBP For most origins that fallback never arrived, because a successor duty was already waiting.
A court called the surcharge unlawful, and importers paid it anyway
This is the part of the story that got lost in the deadline coverage, and it is the part with money attached. On 7 May 2026 the US Court of International Trade held, in a 2-1 decision, that the 10% global surcharge imposed under Presidential Proclamation 11012 was unlawful. Perkins Coie
The relief, though, was far narrower than the headline. The CIT entered a permanent injunction covering only the two private importer plaintiffs, Burlap & Barrel and Basic Fun!, plus the State of Washington, and declined to block collection nationwide. Snell & Wilmer Then on 11 June the Federal Circuit stayed even that injunction, finding the government had shown a sufficient likelihood of success and that the CIT's reading of Section 122 may be wrong. Gibson Dunn
So the practical position for everyone who is not a named plaintiff: you paid a duty a federal court called unlawful, there is no automatic refund mechanism, and whether any money comes back depends on how the appeal lands. I am not advising clients to book a receivable against it. I am advising them to know their total Section 122 exposure by entry, because if relief ever extends past the named plaintiffs, the importers who can document what they paid will be the ones positioned to ask. Preserve the records now while they are easy to pull.
The Section 301 successor: finalized, in force, no clock
USTR announced the replacement on 23 July, hours before the sunset, and it took effect at 12:01 a.m. on 24 July, immediately as Section 122 lapsed. The legal basis is not a balance-of-payments emergency this time. USTR determined that 60 foreign economies failed to effectively enforce prohibitions on importing goods produced with forced labor, or failed to impose such prohibitions at all, and that this burdens US commerce. Honigman Those 60 economies account for roughly 99% of US goods imports, so this is not a targeted action with a narrow footprint. USTR
The rates run from 10% to 12.5% depending on the economy, and they stack on existing tariffs rather than replacing them. Unlike the surcharge it replaced, this action carries no statutory rate ceiling and no 150-day fuse. That is the structural point worth absorbing: the temporary tool was swapped for a durable one. Anyone modeling this as another countdown is modeling the wrong thing.
The headline split is 38 economies at 12.5% and 17 at 10%, with the balance handled through net-of-MFN calculations described below. Honigman China and Vietnam sit in the 12.5% group; Canada, Mexico, India and the United Kingdom sit at 10%. Brazil appears in the forced-labor list while also carrying its own separate 25% action, which I come back to later because the two do not share a track.
What you actually pay now, by origin
The structure is not one flat number, and this is where I see the most confusion. There are four different mechanics depending on which bucket your origin falls into, plus a set of product exemptions that can override all of it.
| Origin bucket | Mechanic since 24 July | Effect vs the old 10% |
|---|---|---|
| USMCA, CAFTA-DR or Jordan FTA qualifying goods | Exempt as qualifying FTA goods | Still duty-free on this axis |
| EU, Taiwan | Net-of-MFN calculation, capped at 10% | Roughly flat, MFN credited |
| 17 economies incl. Canada, Mexico, India, United Kingdom | Flat 10% additive | Flat for non-qualifying goods |
| Japan, South Korea, Switzerland | Net-of-MFN, capped at 12.5% | Modest increase, MFN credited |
| Remaining economies incl. Vietnam, Thailand (38 at 12.5% in total) | Flat 12.5% additive | Straight increase |
| China | 12.5% additional on top of existing 25% | 37.5% combined |
| Brazil | Separate 25% Section 301 track from 22 July | Materially larger, own model |
Note what changed against the pre-deadline reporting, because I had several clients planning off the earlier numbers. The proposal circulating in June described roughly 12.5% across about 46 countries. The final action covers 60 economies with a tiered structure, and India landed in the flat 10% bucket rather than the higher one. If you built a landed-cost model in June, it is wrong for at least some of your lanes.
Run the arithmetic on a real lane and it stops being abstract. Take that Vietnam furniture importer, roughly $500,000 in FOB value per shipment. At the 10% surcharge his duty exposure on that value was about $50,000. At the 12.5% successor it is $62,500. That is $12,500 more per shipment, on a lane he assumed was about to get cheaper. Multiply across his annual volume and the "expiration" costs him real money.
The China picture is the one I flag hardest. China already carried Section 301 duties from the earlier lists, and the new layer sits on top rather than replacing them, which puts the combined figure at 37.5%. Honigman The exact stacked outcome for a given HTS line is still something I verify line by line, not by rule of thumb, because Section 232 actions run in parallel on their own tracks.
The exemptions are where the money hides
The determination carries broad product-level exemptions detailed across a Federal Register notice running to roughly 431 pages, and more than 2,120 tariff lines are excluded outright. This is the most underused part of the action. USTR Honigman The carve-outs include raw materials where duties would risk supply unavailability, civil aircraft and parts, pharmaceutical articles, and articles already subject to Section 232 tariffs. There are country-specific carve-outs too, covering goods such as silk, diamonds and botanicals.
Two things follow from that. First, the headline rate for your origin may simply not apply to your product: with over 2,120 lines carved out, checking is cheaper than assuming, and nobody at CBP is going to volunteer it. Second, "already subject to Section 232" is doing heavy lifting: if your goods sit under a Section 232 action, they are outside this one. Checking your HTS lines against the exemption annex is the highest-value hour of work available to an importer this month, and it is the step most people skip because the notice is long.
One related point worth checking separately: importers who paid the earlier IEEPA tariffs before the February switch have refund questions of their own, running on a different legal track from both the Section 122 litigation and this successor duty. I walk through that in the IEEPA tariff refund guide rather than tangle the timelines here.
The 12:01 handoff: no gap materialized
Before the deadline I told clients not to file on a guess about a pricing seam, and to stage paperwork instead so they could move when the notice posted. That turned out to be the right call for a blunt reason. USTR published hours ahead of the sunset and set the successor effective at the exact minute Section 122 lapsed, so the fallback-to-MFN window that some brokers were openly planning around never opened. Honigman
I have watched enough tariff transitions to distrust clean handoffs, and this one was clean. The lesson generalizes: when an administration swaps instruments deliberately, it does not usually leave a discount sitting on the table for a week. Timing plays against a policy calendar are a bad habit. Exemption analysis is where the durable savings live.
Brazil is its own animal, and its grace period ends 29 July
Do not fold Brazil into the 60-economy conversation. The Section 301 action on Brazil was published on 15 July 2026 and its 25% ad valorem duty took effect at 12:01 a.m. ET on 22 July, two days before Section 122 even sunset. USTR It sits on an entirely separate track from the 10-12.5% forced-labor action.
The date that matters right now is the in-transit relief. Goods qualify only if they were loaded onto a vessel at the port of loading and in transit on the final mode before 12:01 a.m. ET on 22 July, and are entered for consumption, or withdrawn from warehouse for consumption, before 12:01 a.m. ET on 29 July 2026. C.H. Robinson Both conditions, not either. After that cutoff the transit provision is dead and every Brazilian entry pays the 25% unless a product exemption applies.
If you have Brazilian cargo that loaded before the 22nd and is sitting at a terminal right now, the entry needs to be filed before that cutoff, not queued behind routine processing. That is a today problem, not a this-quarter problem. Brazil's action has its own exemption list as well, carving out specified raw materials, civil aircraft and parts, pharmaceutical-application articles, goods already under Section 232, humanitarian donations, informational materials, plus beef, orange juice and energy products. C.H. Robinson I have one client on a Brazilian lane re-quoting downstream contracts, because a 25% duty does not absorb quietly into margin.
Your lane-by-lane checklist now that the rates are live
This is the sequence I am working through with clients this week. None of it requires guessing at a rate anymore, because the rates are published. It requires knowing your own book.
- File Brazil in-transit entries before the 29 July cutoff. Confirm both conditions are met: loaded before 22 July and entered before 12:01 a.m. ET on the 29th. This is the only deadline on the calendar with hours left on it.
- Check every HTS line against the exemption annex. Raw materials, civil aircraft, pharmaceuticals and anything already under Section 232 fall outside the forced-labor action. This is where the recoverable money is.
- Re-run any landed-cost model built before 23 July. The final action is 60 economies with four different mechanics, not a flat 12.5% on 46. India in particular moved to the 10% bucket.
- Verify USMCA rules-of-origin qualification for every Mexico and Canada SKU. Qualifying FTA goods are exempt; non-qualifying goods now take a flat 10% additive. I still find goods that rode the old surcharge because nobody re-ran the origin analysis.
- Document your total Section 122 exposure by entry. The appeal is live. There is no automatic refund and no guarantee relief extends past the named plaintiffs, but importers who can show what they paid are the ones who can act if it does.
- Model China on the combined 37.5%, line by line. The new layer stacks on the existing 25%, and Section 232 actions run in parallel.
- Confirm who is legally on the hook. The importer of record owns the duty liability and the classification accuracy, and this is a bad quarter to be fuzzy about that role.
Duty-deferral tools worth a second look
When a rate has just risen and litigation could still move it, the timing of when duty is assessed becomes a lever you can actually pull. I am not going to re-explain the mechanics here, because they deserve their own treatment, but two options move to the front of the list.
A bonded warehouse lets you land goods and defer the duty payment until you withdraw them for consumption, which buys time and can matter while an appeal is pending. The full mechanics are in the bonded warehouse deferral strategy. A foreign-trade zone goes further for some operations, letting you defer duty and, in certain cases, avoid it entirely depending on what you do with the goods inside the zone; that is covered in the foreign-trade zones guide. Neither is a magic eraser. Both are timing and structuring tools, and whether they pencil out depends on your volume and your holding pattern. Note the interaction with the Brazil cutoff: withdrawal from warehouse for consumption is one of the qualifying events before 29 July.
How this differs from the USMCA review noise
One clarification, because clients conflate the two constantly. The USMCA six-year joint review happened on 1 July 2026. The US declined to extend the agreement for a fresh 16-year term, and that is not the same as tearing it up: USMCA stays in full force, currently out to at least 2036, but it now moves into an annual review cycle that adds its own layer of uncertainty for North American supply chains. That outcome is a separate question from the Section 122 sunset. The review is about the future of the agreement itself and how North American trade gets renewed. What we are discussing here is a surcharge that lapsed and a forced-labor Section 301 duty that replaced it. They interact, since USMCA qualification still governs the FTA exemption, but they are not the same event. If your question is really about the agreement's renewal path, that lives in the USMCA joint review scenario guide, not in this playbook.
If I had to compress the past two weeks of client calls into one recommendation, it is this: stop treating 24 July as an event that already resolved and start treating your exemption analysis as unfinished work. The rates are published, so the guessing is over, but the four-bucket structure means your June model is stale and the several-hundred-page exemption annex means your effective rate may be lower than the headline. Pull your top five lanes by duty exposure this afternoon and check each against the carve-out list. File your Brazilian in-transit entries before the 29th. Preserve your Section 122 payment records while the appeal runs. Price China on 37.5%. The importers who got hurt this month were the ones who assumed a sunset meant relief. The ones who do the line-level math now will simply know their number, and in a few cases will find it is smaller than they feared.