The landscape of U.S. international trade shifted significantly at 12:01 a.m. ET on July 24, 2026. For the past five months, ecommerce sellers and international businesses have navigated the broad 10% global import surcharge under Section 122. As of yesterday, that surcharge has officially expired.
However, this does not mean a return to "business as usual." In a seamless transition, the U.S. government has replaced the expiring surcharge with a new, targeted Section 301 "forced-labor" tariff regime. If you are a UK limited company, a Canadian corporation, or an international SME shipping goods into the U.S., understanding these new tiers is critical to maintaining your margins and ensuring regulatory compliance.
The End of the Section 122 Global Surcharge
The Section 122 import surcharge was a temporary measure under the Trade Act of 1974, designed to address balance-of-payments issues. By law, this specific authority is capped at a maximum of 150 days. That statutory clock ran out on July 24, 2026.
For many ecommerce sellers based in the UK, the Section 122 surcharge was a flat, predictable 10% increase across nearly all product categories. Its expiration provides a brief moment of clarity, but it is immediately followed by a more complex, tiered system of Section 301 duties that vary by the country of origin.
Understanding the New Two-Tier Section 301 Tariffs
The new Section 301 tariffs are focused on economies based on their adoption of forced-labor import prohibitions. Unlike the global nature of Section 122, these new duties reward trading partners that have aligned their labor standards with U.S. enforcement goals.
Tier 1: The 10% Rate for Aligned Economies
A 10% duty applies to goods originating from economies that have adopted rigorous forced-labor import prohibitions. This list includes many of the primary trading hubs for our clients, such as:
- United Kingdom
- Canada
- Mexico
- India
- Bangladesh
- Indonesia
If your business is a UK Limited Company manufacturing in the UK or India, your additional duty burden effectively remains at the same 10% level previously seen under Section 122, but it is now classified under Section 301.
Tier 2: The 12.5% Rate for Other Economies
Goods from 45 other economies that have not yet met these specific labor enforcement criteria face a higher 12.5% duty. This includes major manufacturing hubs such as:
- Vietnam
- Brazil
- Thailand
- Philippines
Special Capped Rates for the EU, Japan, and Taiwan
To maintain stability with key strategic partners, the U.S. has implemented a combined cap for certain regions. For the European Union (EU) and Taiwan, the total duty (combining the Most Favored Nation (MFN) rate and the new Section 301 rate) is capped at 10%. For Japan, South Korea, and Switzerland, the combined cap is 12.5%.
The "China Shock": Duties Rise to 37.5%
For international sellers sourcing products from China, the July 24 update brings a significant cost increase. China falls into the 12.5% Tier 2 category. However, these new duties do not replace existing trade measures, they stack.
Prior to July 24, many Chinese goods already faced a 25% Section 301 tariff from previous trade actions. With the addition of the new 12.5% forced-labor tariff, the total Section 301 duty for these goods now reaches 37.5%. This is in addition to any applicable MFN rates and Anti-Dumping or Countervailing Duties (AD/CVD).
If your ecommerce brand relies heavily on Chinese manufacturing, you must immediately audit your landed cost calculations. A jump from the temporary Section 122 environment to a permanent 37.5% Section 301 environment can devastate profitability if not managed through precision bookkeeping and price adjustments.
Essential Product and Trade Agreement Exemptions
While the new Section 301 tariffs are broad, the USTR has provided significant carve-outs to protect critical supply chains and uphold existing trade treaties.
The following categories are generally exempt from the new Section 301 tariffs:
- Section 232 Goods: Items already covered under Section 232 (steel, aluminum, copper, semiconductors, wood products, and vehicles) are exempt from this specific Section 301 update.
- Health and Safety: Pharmaceuticals and essential raw materials for medical use remain exempt.
- Aerospace: Civil aircraft and related parts are not subject to these duties.
- Existing Trade Agreements: Goods qualified under USMCA (United States-Mexico-Canada Agreement), CAFTA-DR, and the Jordan FTA are exempt, provided they meet all origin requirements.
Maintaining clear records of your product's HS codes and country of origin is no longer optional, it is a survival requirement. Accurate record-keeping practices are the only way to prove eligibility for these exemptions during a customs audit.
Navigating the "In-Transit" Grace Period
The transition from Section 122 to Section 301 includes a critical "In-Transit" provision. This is designed to protect sellers who had goods moving across the ocean before the rules changed.
- Eligibility: Goods must have been loaded onto a vessel or aircraft for export to the U.S. before 12:01 a.m. ET on July 24, 2026.
- Deadline: These goods must be entered into the U.S. for consumption no later than July 28, 2026.
If your shipment meets these criteria, it will still be subject to the old Section 122 rules (the 10% surcharge) rather than the new Section 301 rates. If your goods arrive on July 29 or later, even if they were shipped weeks ago, they will likely be subject to the new Section 301 tiered rates. Coordination with your freight forwarder and customs broker during this window is vital to avoid overpayment or filing errors.
Why Section 301 is Different: No Expiration Date
The most important takeaway for international sellers is the permanent nature of Section 301. While Section 122 was legally limited to a 150-day window, Section 301 has no statutory expiration date. These new 10% and 12.5% tariffs will remain in effect until the U.S. President or the USTR affirmatively chooses to modify or remove them.
This represents a permanent shift in the cost of doing business in the U.S. market. Sellers should not wait for these tariffs to "sunset" as they did with Section 122. Instead, you should focus on optimizing your supply chain, verifying origin certificates, and ensuring your accounting system is configured to track these additional duty costs accurately.
How Sterlinx Global Supports Your US Expansion
Navigating international trade and tax compliance is a daunting task, especially when major regulations change overnight. At Sterlinx Global, we don't just provide advice, we deliver the compliance infrastructure you need to scale.
Whether you are managing a UK Limited Company or an international entity trading in the U.S., our structured, tech-driven system handles the complexities of bookkeeping and reporting. We ensure that your duty payments are accurately recorded and that your business remains compliant with both UK and international tax obligations.
Don't let tariff changes disrupt your growth. By centralizing your data with us, you gain a partner that monitors these deadlines and updates on your behalf, allowing you to focus on growing your brand while we handle the heavy lifting of compliance.
Ready to secure your international compliance?
Contact us today to talk to an expert about your US trade compliance and accounting needs.
FAQ: Section 122 Expiration and Section 301 Implementation
Does the expiration of Section 122 mean I get a refund for duties paid since February?
No. The expiration is not retroactive. The Section 122 surcharge was legally applied to all entries between February 24 and July 23, 2026. Refunds are generally not available unless there is a specific legal challenge or filing error.
Can I avoid the new 12.5% China tariff by shipping through another country?
Changing the shipping route does not change the "Country of Origin." Customs authorities look at where the "substantial transformation" of the product occurred. Attempting to bypass tariffs by misrepresenting the origin is a serious compliance violation.
Are these tariffs in addition to standard U.S. customs duties?
Yes. These Section 301 tariffs stack on top of the standard MFN (Most Favored Nation) duty rates listed in the Harmonized Tariff Schedule of the United States (HTSUS).
What happens if my goods were loaded on July 23 but arrive on July 30?
Because the entry date is after the July 28 "In-Transit" deadline, your shipment will likely be subject to the new Section 301 rates (10% or 12.5% depending on the origin), rather than the expired Section 122 surcharge.
