Section 122 Tariffs Explained: The New Legal Authority Replacing IEEPA Duties
On February 20, 2026, the U.S. Supreme Court ruled that tariffs imposed under the International Emergency Economic Powers Act (IEEPA) were unconstitutional when used for trade purposes. Within hours, the White House responded with presidential actions reimposing tariffs under a different statute: Section 122 of the Trade Act of 1974. The shift created an immediate compliance scramble for customs brokers, importers, and trade attorneys across the country. This guide breaks down what Section 122 is, how it differs from IEEPA, and exactly what customs brokers need to change in their operations.
What Is Section 122?
Section 122 of the Trade Act of 1974 (19 U.S.C. 2132) is a statutory provision that authorizes the President to impose temporary import restrictions when the United States faces a large and serious balance-of-payments deficit. The statute was designed as a stabilization tool, giving the executive branch the ability to act quickly on trade flows that contribute to macroeconomic imbalances.
Under Section 122, the President may impose one or more of the following measures:
- An import surcharge of up to 15% ad valorem on goods entering the United States
- Temporary import quotas
- A combination of surcharges and quotas
These measures are subject to important constraints. The surcharge rate cannot exceed 15%, and any action taken under Section 122 is limited to 150 days unless Congress specifically authorizes an extension. The statute also requires the President to consult with the International Monetary Fund (IMF) before or promptly after taking action, and to take into account any applicable international obligations.
Key Statutory Limits
Section 122 tariffs are capped at 15% ad valorem and expire after 150 days without congressional action. These hard constraints distinguish it from the broader authorities previously used under IEEPA, where rates as high as 145% were imposed with no statutory ceiling.
Section 122 has rarely been invoked in modern trade policy. Its most notable prior use was in 1971, when President Nixon imposed a temporary 10% import surcharge as part of a broader set of economic measures. The statute remained largely dormant for decades until the February 2026 presidential actions brought it back into active use.
Why Section 122 Replaced IEEPA
To understand the current Section 122 tariffs, you need to understand why IEEPA tariffs fell. The International Emergency Economic Powers Act gives the President broad authority to regulate international economic transactions during a declared national emergency. Beginning in 2025, the administration used IEEPA to impose sweeping tariffs on imports from multiple countries, with rates reaching 145% on goods from China and significant surcharges on imports from Canada, Mexico, and other trading partners.
The legal challenge centered on whether IEEPA, a statute designed for emergency economic sanctions and asset freezes, could be used as a general tariff authority. On February 20, 2026, the Supreme Court ruled that it could not. The Court held that IEEPA does not authorize the imposition of tariffs on imported goods as a general trade measure, finding that Congress had established specific statutory frameworks for tariff policy (including Sections 201, 232, 301, and 122 of various trade acts) and that IEEPA was not intended to serve as an alternative to those authorities.
The ruling invalidated billions of dollars in IEEPA-based duties. CBP announced that approximately 53 million entries subject to IEEPA duties would be eligible for refunds, creating a massive administrative undertaking for both the agency and the brokerage community. For a detailed breakdown of the refund process, see our IEEPA Tariff Refund Guide.
Faced with the sudden loss of its primary tariff mechanism, the White House moved within hours to reimpose tariffs under Section 122. The new presidential actions invoked the balance-of-payments authority to impose surcharges on many of the same goods that had been subject to IEEPA tariffs, though at significantly lower rates due to the statutory 15% cap.
Section 122 vs IEEPA: Key Differences
The shift from IEEPA to Section 122 is not simply a change in legal citation. The two authorities differ in fundamental ways that directly affect duty rates, duration, scope, and broker filing requirements. The following table summarizes the most important distinctions:
FactorIEEPA (Pre-Ruling)Section 122 (Current)Legal authorityInternational Emergency Economic Powers Act (50 U.S.C. 1701-1706)Trade Act of 1974, Section 122 (19 U.S.C. 2132)Maximum tariff rateNo statutory cap (rates reached 145%)15% ad valorem maximumDurationNo expiration (lasted as long as the emergency declaration)150 days unless extended by CongressLegal justificationNational emergency declarationLarge and serious balance-of-payments deficitScopeCountry-specific (China, Canada, Mexico, EU, etc.)Can apply broadly or selectively; current actions are country-specificCongressional checkEmergency could be renewed indefinitely by the executiveExpires after 150 days without congressional authorizationHTS provisionsChapter 99 codes in the 9903.01.xx seriesNew Chapter 99 codes in the 9903.03.xx seriesStacking with other tariffsStacked with 232, 301, AD/CVDStacks with 232, 301, AD/CVD (but at lower rates)
The most immediate practical impact for importers is the rate reduction. Products from China that were subject to a 145% IEEPA tariff are now subject to a maximum 15% Section 122 surcharge (in addition to any applicable Section 301, Section 232, or AD/CVD duties). While the total duty burden remains significant for many products, the reduction from IEEPA levels is substantial.
The 150-day time limit is equally significant. Section 122 tariffs imposed on February 20 will expire on approximately July 20, 2026, unless Congress passes legislation to extend them. This creates a window of uncertainty that importers and brokers must plan around, as the tariff landscape could shift again once the 150-day period ends.
What This Means for Customs Brokers
The transition from IEEPA to Section 122 triggered a series of immediate operational changes for customs brokers. CBP had to update the Automated Commercial Environment (ACE) system rapidly, and brokers needed to adjust their filing practices accordingly.
HTS Code Updates
The most visible change is the replacement of IEEPA-related Chapter 99 codes with new Section 122 codes. Brokers must update their entry filings to reference the correct HTS provisions:
- Remove IEEPA codes: Chapter 99 codes in the 9903.01.xx series that referenced IEEPA authority are no longer valid for entries filed after the ruling date.
- Apply Section 122 codes: New codes in the 9903.03.xx series have been published to reflect Section 122 surcharges. Each country-specific tariff action has its own set of codes.
- Verify ACE acceptance: Some brokers experienced ACE rejection errors in the first days after the transition when the system was still being updated. If you encounter unexplained rejections, confirm that the latest ACE build is active.
Proper HTS classification remains critical. The underlying product classification does not change, but the Chapter 99 overlay codes must be updated to reflect the new legal authority.
Duty Rate Recalculations
Every entry involving goods from countries previously subject to IEEPA tariffs must be recalculated using the new Section 122 rates. For entries in transit or awaiting liquidation at the time of the ruling, brokers should work with their importer clients to determine whether a post-summary correction or protest is appropriate.
Filing Deadline Alert
Entries filed between the Supreme Court ruling on February 20 and CBP's issuance of updated ACE guidance required careful handling. CBP issued CSMS messages with interim filing instructions. Brokers who filed during this window should review those entries for accuracy and submit corrections if the wrong Chapter 99 codes were used.
Client Communication
The rate reduction from IEEPA levels to the 15% Section 122 cap is significant enough that importers will want updated landed cost projections. Brokers should proactively reach out to clients affected by the change with revised duty estimates, particularly for high-volume importers where even a few percentage points translate to millions of dollars in duty savings.
What About Section 232?
An important point of clarification: Section 232 tariffs on steel and aluminum were not affected by the Supreme Court ruling. Section 232 of the Trade Expansion Act of 1962 is a completely separate legal authority from IEEPA, and the Court's decision addressed only the use of IEEPA for tariff purposes.
The 25% tariffs on steel and aluminum articles under Section 232 remain in full effect. Brokers must continue to apply Chapter 99 codes in the 9903.80.xx series for covered steel and aluminum products, perform steel splits, collect melt-and-pour declarations, and calculate 232 duties as before.
Similarly, Section 301 tariffs on goods from China (administered through USTR) were imposed under a different statutory framework and remain active. The ruling was specific to the use of IEEPA as a tariff authority and did not disturb other trade remedy programs.
For brokers handling steel or aluminum imports, the practical effect is that the total duty stack has changed. A steel product from China that previously owed NTR duty + 25% (232) + 25% (301) + 145% (IEEPA) now owes NTR duty + 25% (232) + 25% (301) + up to 15% (Section 122). The overall burden is still substantial, but the IEEPA component has been replaced with a significantly lower Section 122 surcharge.
How Cervo Keeps Your Tariff Data Current
Rapid regulatory shifts like the IEEPA-to-Section-122 transition are exactly the scenarios where manual processes break down. When tariff authorities change overnight, brokers relying on spreadsheets or static rate tables risk filing entries with the wrong duty codes and calculations. Cervo is built to handle this kind of volatility.
Here is how the Cervo platform supports brokers through tariff transitions:
- Real-time tariff updates: Cervo monitors Federal Register publications, CBP CSMS messages, and ACE system changes continuously. When new Chapter 99 codes are published or existing codes are revoked, the platform updates automatically, so your next entry filing reflects the current regulatory state.
- Tariff simulator: Use the to model duty costs under different scenarios. Compare pre-ruling IEEPA rates against current Section 122 rates, factor in 232 and 301 stacking, and generate accurate landed cost projections for your clients.
- Automated HTS code validation: Cervo's cross-references your product classifications against the latest Chapter 99 overlays, flagging entries that reference revoked IEEPA codes or are missing required Section 122 provisions.
- 150-day expiration tracking: Because Section 122 actions are time-limited, Cervo tracks expiration dates for each active tariff action and alerts your team as deadlines approach, giving you time to prepare for potential rate changes.
The February 20 transition demonstrated that tariff policy can shift in a matter of hours. Brokers who had automated systems in place were able to update their filings within the same business day. Those relying on manual processes faced days of uncertainty and potential filing errors. Building automation into your compliance workflow is no longer optional; it is the baseline for operating in today's trade environment.
Stay Ahead of Tariff Changes with Cervo
From IEEPA refunds to Section 122 surcharges, Cervo keeps your tariff data current and your entries accurate. See how our platform handles rapid regulatory changes automatically.
