Section 122 Is Gone — Here's What Actually Replaced It
(and What It Means for Your Next Cost Sheet)

What actually expired on July 24

Section 122 (a law letting the President add a temporary import surcharge to correct a trade imbalance) has a hard limit written into it: 150 days, and no more than 15%. The 10% surcharge started on February 24, so the clock ran out on July 24.

Nobody had to cancel it. It simply stopped, and the President cannot renew it alone — only Congress can extend it (Congressional Research Service).

That is the whole of the expiry. We covered the run-up in the July 24 tariff cliff, and the costing of goods clearing afterwards in the August landed-cost rebuild. Both were written while the replacement was still a proposal. It is final now, and some of the country numbers moved.

“The blanket didn't get lifted. It ran out of road — and something narrower was already parked behind it.”

What replaced it — and why it isn't a blanket

On July 23 the US Trade Representative finalised a Section 301 action (a trade tool aimed at one specific unfair practice by one specific country) covering 60 economies. The practice being targeted is failing to ban — or failing to enforce a ban on — imports made with forced labour (USTR).

It took effect at 12:01 a.m. Eastern on July 24 — the same minute Section 122 lapsed, so there was no gap. Goods already loaded on the water had until July 28 to clear at the old rate, and that window has closed (Federal Register notice).

Two things matter more than the headline rate. It is sorted by country behaviour, not by product: a country that bans forced-labour imports pays 10%, one that does not pays 12.5%. And it has no end date — unlike Section 122, it stays until USTR changes it.

That last point is the one people get wrong. The new duty is added to the regular tariff your product already pays, and to any older Section 301 duty on Chinese goods (Holland & Knight). Nothing is replaced. Layers are added.

The new duty map, origin by origin

Here is the total duty on one ordinary product — a cotton knit T-shirt, tariff code 6109.10.00, which carries a 16.5% normal rate before anything is added (USITC Harmonized Tariff Schedule).

The spread between the cheapest dutiable lane and China is now 20 percentage points on the same T-shirt. Under the blanket that gap was 7.5 points, and all of it was China's older duty.

If you are comparing quotes across two countries, the duty column is doing more of the work than it has in years. That is the argument for costing a second origin properly rather than guessing at it.

Six countries switched lanes at the last minute

This is the part most summaries published in June got wrong, and it is worth checking your own notes against.

When USTR proposed the action on June 2, only six of the sixty economies had a forced-labour import ban on the books. Between the proposal and the final decision, Cambodia, Guatemala, Honduras, India, Sri Lanka and Trinidad and Tobago each adopted one, and Jordan committed to one in a trade agreement. All seven landed in the 10% lane instead of the 12.5% lane (Federal Register notice).

For a US brand producing in India that is the difference between a 29% total duty and a 26.5% one — and any spreadsheet built in June off the proposal has India in the wrong column. Our own August cost-sheet piece costed India at 12.5% on that basis. The final rate is 10%.

“A country changed its own law and its exporters got 2.5 points back. That is not a loophole — it is the entire design of the thing.”

It also means the map is not fixed. Any of the 12.5% economies can pass an enforcement law and be moved down. Treat the rate as current, not permanent — the same discipline that makes a two-country sourcing plan worth maintaining even when one origin looks cheapest today.

Three lanes that now pay nothing extra

Three groups of goods are carved out entirely, and two of them are specific to apparel.

One — CAFTA-DR apparel. Textile and apparel goods from Costa Rica, the Dominican Republic, El Salvador, Guatemala, Honduras or Nicaragua that already enter duty-free under that agreement pay no Section 301 duty at all. Not a reduced rate — none.

Two — USMCA goods. Products of Mexico and Canada entering duty-free under USMCA are exempt too, which for apparel means meeting the yarn-forward rule (the yarn and the fabric both have to originate inside the trade bloc).

Three — the capped countries. For the EU, Taiwan, Japan, Korea and Switzerland the rule is a ceiling rather than an addition: the normal duty and the new duty together cannot exceed 10% (EU, Taiwan) or 12.5% (Japan, Korea, Switzerland). Apparel already sits above both ceilings, so the extra duty on a 16.5% T-shirt is zero.

One more line is worth watching. USTR has been directed to build a quota letting a set volume of apparel from Bangladesh, Cambodia, Indonesia and Malaysia enter free of the new duty, tied to how much US cotton and fabric those countries buy, running three years once it starts. It does not exist yet — until USTR publishes it, those four pay the full 10%.

Your next cost sheet: a $14 tee, five origins

Take a blank cotton tee at $14 FOB (the supplier's price at the origin port, before freight and duty) on a 5,000-piece run brought in as one ocean entry. Here is the duty per tee before July 24 and after.

Read the India row first, because it is the surprising one. For the largest 10%-lane apparel exporter the number did not move: 26.5% before, 26.5% now. A brand producing there and bracing for a July increase does not have one.

Vietnam and China each pay 35 cents more per tee — about $1,750 across that 5,000-piece run. Real, but not the cliff people braced for. The bigger movements on this chart are the EU line falling $1.40 and the exempt lanes sitting flat at zero.

None of this includes the fixed charges underneath the duty: the Merchandise Processing Fee at 0.3464% of value, floored at $33.58 and capped at $651.50 for FY2026, and the Harbor Maintenance Fee at 0.125% on ocean freight (US Customs and Border Protection). On this consolidated entry they add roughly $0.12 a tee — near-fixed per entry, which is why splitting a run into small parcels hurts far more than the tariff does. It is the same arithmetic that broke the ship-direct model when the $800 de minimis exemption ended.

What we'd do in your shoes

We'd pull up every cost sheet written between June and late July and check one cell: the country rate. If it came from the proposal rather than the final notice, India, Cambodia and Sri Lanka are all 2.5 points too high on it.

Then we'd ask the broker to confirm in writing which tariff line each style enters under, and whether anything in the range could qualify for a CAFTA-DR or USMCA exemption we are not currently claiming. Those are worth more than any rate difference on this chart.

The blanket made sourcing a price question for five months. It is a policy question again. Does your current cost sheet carry the July 23 numbers — or the June ones?

The bottom line

Section 122 expired on schedule and a Section 301 forced-labour duty replaced it the same minute — 10% for seventeen economies, 12.5% for the rest, and nothing for qualifying CAFTA-DR, USMCA and high-duty European and East Asian goods.

For most apparel founders the total change is small: unchanged from India and Bangladesh, 35 cents a tee more from Vietnam and China, and a genuine saving on a handful of lanes. The risk is not the rate. It is running Q4 off a June spreadsheet with six countries in the wrong column.

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