A Tale of Tariff Substitution

Trade and Customs

September 9, 2026

A Tale of Tariff Substitution: From IEEPA to Section 122 and the Section 301 Forced Labor Regime

Disclaimer: The summary below is intended for informational purposes only and should not be construed as legal advice. Given the fast-changing nature of the tariff environment, the measures discussed below could be revised, expanded or otherwise modified through litigation, agency action, new guidance or other government actions.

 

For importers, 2026 has been less a story of tariff elimination than tariff substitution. Although the U.S. Supreme Court invalidated the current administration's tariff regime under the International Emergency Economic Powers Act (IEEPA), broad-based tariff coverage has remained in place through a succession of alternative statutory authorities. What began as emergency tariffs under IEEPA evolved into a temporary Section 122 surcharge and ultimately into today's Section 301 forced labor tariff framework. The result is a trade environment in which tariffs remain a central feature of U.S. trade policy, albeit under a different legal justification.

February 2026 – The End of IEEPA

The first major development occurred on February 20, 2026, when the U.S. Supreme Court invalidated tariffs imposed under IEEPA. For many importers, the decision initially appeared to signal the end of broad-based tariff exposure that had characterized much of the preceding year. The administration responded almost immediately. Rather than abandoning broad tariff coverage, it pivoted to Section 122 of the Trade Act of 1974, a little-used provision that authorizes the President to impose a temporary import surcharge of up to 15% for a period not exceeding 150 days without congressional action in response to “balance of payments deficits”.

February to July 2026 – The Section 122 Bridge

Through Presidential Proclamation 11012, a 10% ad valorem surcharge became effective on February 24, 2026. It appears that the Section 122 measure was intended to function as a bridge between the invalidated IEEPA regime and a more permanent successor program the administration hoped to develop. Although Section 122 preserved broad tariff coverage, its temporary nature created a deadline. By statute, the measure could not remain in force indefinitely, and importers faced uncertainty as to what policy would replace it when the 150-day period expired.

Meanwhile, litigation quickly followed. On May 7, 2026, the Court of International Trade held that the Section 122 surcharges were unlawful, although relief was limited to the named plaintiffs. The government's position received a reprieve on June 16, 2026, when the Federal Circuit granted a stay pending appeal, allowing the tariffs to remain in place while litigation proceeded. Despite these legal challenges, the practical impact for most importers was limited. Tariffs continued to be collected, and the administration simultaneously began laying the foundation for a more durable replacement mechanism.

March 2026 – USTR Launches New Section 301 Investigations

Even before the Section 122 surcharge expired, the Office of the United States Trade Representative (USTR) initiated two new Section 301 investigations in March 2026. The first focused on structural excess capacity in key manufacturing sectors, while the second examined whether foreign governments had failed to prohibit or effectively enforce bans on goods produced with forced labor. These investigations targeted U.S. trading partner countries constituting the overwhelming majority of inbound U.S. trade by value. The forced labor investigation, in particular, examined labor enforcement practices across 60 economies representing approximately 99.4% of U.S. imports by value. By launching these investigations prior to the expiration of the Section 122 surcharge, it appears that USTR was creating a pathway to maintain broad tariff coverage without relying on IEEPA or reauthorized Section 122 authority.

July 2026 – Transition to the Section 301 Forced Labor Tariff Framework

On July 24, 2026, the Section 122 surcharge expired automatically at the end of its 150-day statutory period. Not coincidentally, the new Section 301 forced labor tariffs took effect on the same day. USTR’s immediate implementation of the Section 301 forced labor tariff framework ensured continuity of tariff coverage and avoided any period of tariff-free imports following the expiration of Section 122 authority. As a matter of policy, this appeared to be the administration’s signal that tariffs would remain a core component of U.S. trade strategy.

The resulting tariff structure introduced country-specific rates and caps in the same (albeit slightly reduced) range as the IEEPA country-specific reciprocal tariffs, namely:

  • A 10%  tariff rate for certain designated trading partners, including Canada, Mexico, India, Malaysia, Indonesia and the United Kingdom.
  • A duty and tariff cap of 10%  for the European Union and Taiwan.
  • A duty and tariff cap of 12.5%  for Japan, South Korea and Switzerland.
  • A 12.5%  tariff rate for all other investigated economies, including China, Brazil, Vietnam, Singapore, Australia and numerous others.

How Section 301 Forced Labor Tariffs Stack with Existing Tariffs

The Section 301 forced labor tariffs have become another layer within an increasingly complex duty environment. Most imports remain subject first to ordinary Most Favored Nation (MFN) duties based on classification under the Harmonized Tariff Schedule. Depending on the product and country of origin, additional exposure may arise under Section 232, antidumping and countervailing duty orders, traditional Section 301 actions against China, or the separate Section 301 action targeting Brazil.

Like their predecessor IEEPA and Section 122 tariffs, Section 301 forced labor tariffs generally do not stack with Section 232 tariffs. Products already subject to Section 232 measures are typically exempt from the Section 301 forced labor regime. Likewise, USMCA-qualifying goods remain exempt from these new tariffs. For example, an EU-origin industrial product subject to Section 232 tariffs would generally pay the applicable Section 232 rate rather than an additional forced labor tariff. Conversely, a product falling outside Section 232 coverage may instead be subject to the country-specific Section 301 forced labor rate.

Conclusion

In summary, 2026 has been a year of extensive tariff news, but with very little cumulative tariff impact. The demise of IEEPA tariffs has not returned the U.S. to the earlier trading environment. Instead, the administration rapidly transitioned from IEEPA to Section 122 and finally to a broad-based Section 301 forced labor framework affecting economies responsible for virtually all U.S. import value. For importers, the lesson is clear: the statutory authority may change, but tariff exposure remains a defining feature of the modern trade landscape.

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