Beyond the Surcharge: How the End of Section 122 Accelerates the Convergence of Trade and Economic Security

Key Takeaways

1. As Section 122 tariffs reach their end, more durable tools are taking their place. The Trump administration is shifting to Sections 301 (unfair trade practices, including forced labor) and 232 (national security) because these authorities better withstand judicial challenge and are suited to sustained, focused engagement—particularly with respect to China and other higher-risk jurisdictions.
2. Forced-labor considerations are receiving greater attention through Section 301. The US Trade Representative has initiated reviews covering forced-labor enforcement gaps in sixty countries and structural excess capacity in sixteen economies, anticipated around the Section 122 expiration. Importers in apparel, electronics, agriculture, and minerals processing may prepare for additional measures that could complement existing Uyghur Forced Labor Prevention Act (UFLPA) requirements, along with continued coordination through the Forced Labor Enforcement Task Force (FLETF).
3. Critical minerals and supply-chain resilience remain central priorities for Section 232. The transition creates room for more tailored national-security measures on lithium, cobalt, rare earths, and related downstream products. Companies that rely on higher-risk sources should accelerate diversification, monitor new review initiations, and weigh participation in the administrative process. Measures in this area are increasingly aligned with industrial-policy and security objectives.
4. Tariff measures now form part of a broader economic-security framework. Actions under Sections 301 and 232 intersect with CFIUS reviews, expanded export controls (including on frontier AI models), and the US government’s Outbound Investment Security Program (OISP).
5. Effective corporate preparation draws on trade compliance, supply-chain risk, procurement, forced-labor due diligence, investigations, legal, and corporate development working together. Companies may review any remaining Section 122 exposures and potential refund opportunities, map supply chains against 301 and 232 focus areas, update supplier and customer contracts to allocate compliance responsibilities clearly, engage early in public-comment processes, and treat the transition as a catalyst for building more resilient and differentiated supply chains.
6. Trade compliance and investment reviews are increasingly interconnected. Companies evaluating acquisitions, joint ventures, greenfield investments, and supply-chain restructuring should assess tariff exposure alongside CFIUS, export-control, and outbound investment considerations. Decisions evaluated independently now require integrated economic-security analysis—particularly in semiconductors, artificial intelligence (AI) infrastructure, and critical-minerals processing.

The Temporary Import Surcharge and the Shift to More Durable Trade Tools

The temporary import surcharge imposed under Section 122 of the Trade Act of 1974 expired on July 24, 2026. It is clear the Trump administration is moving from a short-term, broad-based tariff mechanism to more durable authorities under Sections 301 and 232—tools that better withstand judicial scrutiny, align with targeted national and economic security objectives, and support sustained engagement, particularly with respect to China. Companies that have managed compliance under Section 122 should prepare for a more layered policy environment.

The Section 122 Process and Its Expiration

Following the Supreme Court’s February 2026 decision limiting the President’s authority to impose broad tariffs under the International Emergency Economic Powers Act (IEEPA), the administration turned to Section 122. That provision authorizes a temporary import surcharge of up to 15 percent for a maximum of 150 days to address “fundamental international payments problems,” including “large and serious United States balance-of-payments deficits.”

A presidential proclamation issued on February 20, 2026 (Proclamation 11012) imposed a 10 percent surcharge on most imports, effective February 24, 2026, with limited exceptions. The President has since indicated openness to raising the surcharge to the 15 percent statutory ceiling, though no formal action has been taken. The measure was designed as a bridge while the administration pursued longer-term strategies under other statutory authorities.

Because Section 122 is time-limited by statute, the surcharge will lapse on July 24 absent congressional extension—an unlikely prospect. Before that deadline, the regime has faced judicial challenges. On May 7, 2026, the US Court of International Trade held, 2–1, that Proclamation 11012 exceeded the President’s statutory authority because it failed to identify the type of balance-of-payments deficit Section 122 requires.[1] The court limited its injunction to the three named importer plaintiffs, and the government’s appeal to the Federal Circuit—which entered an administrative stay on May 12—means the surcharge remains in effect and is still being collected pending appellate review. The litigation highlights the legal constraints on broad, temporary tariff actions.

The administration has signaled that it intends to maintain policy continuity through other means. Attention is shifting to reviews and remedies under Section 301 (unfair trade practices) and Section 232 (national security), both of which offer greater durability and have been used extensively in recent years to address specific practices, countries, and sectors.

Section 301 Reviews and Forced Labor Considerations

Ongoing and New Section 301 Reviews

Section 301 remains a flexible and frequently invoked tool for addressing unfair foreign trade practices, including those involving forced labor. In March 2026, United States Trade Representative (USTR) opened two new reviews comprising seventy-six potential determinations—sixteen economies for structural excess manufacturing capacity and sixty countries for forced-labor enforcement gaps—with outcomes expected as the Section 122 surcharge expires. That volume signals a near-seamless handoff from one authority to the next.

This development builds on recent USTR statements concerning forced labor. Earlier this year, the agency outlined plans to use tariff authority more deliberately against goods produced with forced labor, particularly from China. While those plans faced questions about available trade recourse and administrative feasibility, the post-Section 122 environment may support more targeted and sustained measures—and the newly opened forced-labor review provides a concrete vehicle for them.

Forced-Labor Focus and Practical Implications for Business

For companies, the practical implications are immediate. Importers should map forced-labor exposure now—before a Section 301 determination forces it on a compressed timeline—particularly in higher-risk sectors such as apparel, electronics, agriculture, and minerals processing. FLETF continues to play a central coordinating role, and closer alignment between tariff measures and existing mechanisms under the UFLPA and related authorities is likely.

Businesses should invest in robust traceability programs, enhanced supplier due diligence, and contractual provisions that clearly allocate responsibility for forced labor findings. Those already subject to Withhold Release Orders (WRO) or other enforcement actions may face additional considerations if new Section 301 measures layer onto existing restrictions. Conversely, companies that can demonstrate strong supply-chain practices may be positioned to differentiate themselves in a higher-tariff environment.

Section 232, Critical Minerals, and Supply Chain Resilience

Section 232 reviews and measures—focused on national security—offer a further, security-grounded pathway. The administration has used this authority in metals and is well-positioned to extend it to critical minerals and related supply chains—securing domestic and allied sources for batteries, semiconductors, defense systems, and clean-energy technologies remains a core priority.

The expiration of the broad Section 122 surcharge creates space for more tailored Section 232 actions that can be justified on security grounds and are less vulnerable to the legal challenges that affected broader International Emergency Economic Powers Act and Section 122 measures. Companies that rely on imported critical minerals or downstream products should monitor new review initiations and engage constructively in the administrative process.

This shift also intersects with ongoing efforts to strengthen supply-chain resilience. Companies are  integrating national security considerations into import strategies, diversifying sourcing away from higher-risk jurisdictions, and investing in domestic or allied capacity. The post-Section 122 landscape reinforces that approach. Measures in this area are likely to function less more as calibrated instruments aligned with industrial policy and security objectives.

Interplay with CFIUS, Export Controls, and Outbound Investment

The tariff transition does not occur in isolation. It forms part of a broader, increasingly integrated economic security framework that includes the CFIUS inbound investment reviews, export controls on advanced technologies (including recent actions targeting frontier AI models), and the OISP, codified and expanded by the Comprehensive Outbound Investment National Security (COINS) Act.

For example, a single transaction—such as a semiconductor acquisition, a battery or critical-minerals joint venture, a manufacturing expansion, or a cross-border sourcing arrangement—may now trigger concurrent review under tariff, CFIUS, export-control, and outbound-investment frameworks at once. Investments in or imports related to AI data centers, semiconductor manufacturing, or critical minerals processing may involve overlapping considerations under multiple regimes. A foreign investment that clears CFIUS may still face export control or tariff implications downstream. Similarly, US companies investing abroad in sensitive technologies navigate an OISP that today reaches China and the semiconductor, AI, and quantum sectors—and  will broaden once Treasury completes its COINS Act rulemaking, to additional countries of concern and hypersonics and high-performance computing.

Advisers supporting clients on cross-border transactions or supply-chain restructuring should take a holistic view, assessing the tariff, investment-screening, export-licensing, and outbound-investment dimensions together rather than in isolation.

Steps Forward

Importers and supply-chain managers should now take the following steps:

• Review current exposures to the expiring Section 122 surcharge and document any potential refund opportunities arising from successful legal challenges.
• Map supply chains against likely Section 301 focus areas, with particular attention to forced labor considerations and critical minerals.
• Assess eligibility for any duty drawback, quota, or exclusion programs that may accompany new tariff actions.
• Engage early with USTR and other agencies during ongoing reviews, including through public comments where available.
• Update contractual provisions with suppliers and customers to address allocation of tariff and compliance responsibilities.

The expiration of Section 122 marks the end of a chapter in the evolution of US economic statecraft and the beginning of another. The Trump administration is moving toward more durable and targeted authorities, that are more explicitly tied to national and economic security imperatives. The end of the surcharge does not signal a reduction in trade compliance obligations. Instead, companies face a more durable economic-security framework in which tariffs, forced-labor enforcement, critical-minerals policy, export controls, and investment screening increasingly operate together. Organizations that treat this transition as an opportunity—investing now in supply-chain visibility, integrated compliance, and strategic sourcing rather—will be better positioned to navigate the next phase of US trade and economic-security policy.

[1] See Oregon v. United States, Slip Op. 26-47, 2026 WL 1257669 (CIT May 7, 2026).