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Note: we missed last week's issue — our mistake, and not the standard we hold. So today, a double to make it right. This one's the offense — how to take the durable duty off your P&L for good. Part 2 lands at 1 PM: the defense, on not paying for it twice in frozen cash.
Every importer I know has July 24 circled. That's the day the Section 122 surcharge is scheduled to expire, and the whole cost conversation right now is a bet on what Congress does — or doesn't — before then.
It's the wrong number to be watching.
Rewind to February. When the Supreme Court struck down the IEEPA tariffs on the 20th, China's effective rate fell from roughly 37% to around 21% overnight. Four days later the administration replaced part of that with Section 122 — a flat surcharge, opened at 10% and pushed toward its 15% cap, landing on nearly every import regardless of where it's made. It's origin-blind. Vietnam pays it. Mexico's non-USMCA goods pay it. China pays it. And by statute it dies on July 24 unless Congress extends it — which no bill in committee currently does.
So the 15% is real, but it's noise. It hits your competitor's Vietnam SKU exactly as hard as it hits your China SKU, and it's three weeks from a legislated expiration.
The number that actually moves with your sourcing decision is the one nobody's talking about: Section 301. It's China-specific — 7.5% to 25% on most consumer-goods classifications, higher on some — it runs under a different statute the Court left completely intact, and it has now survived the IEEPA strike-down, the Section 122 litigation, and every ruling of the past year. On a $10 factory-cost unit sitting on List 3, that's $2.50 of duty that exists for one reason: the goods are made in China. Move the same unit to a non-China origin and that $2.50 is gone — not deferred, not litigated. Gone.
That's the arbitrage. Not the 15% everyone's hedging. The 25% welded to your origin.
Here's why the distinction drives the plan. Re-source to beat the 15%, and you've made a bet on a court docket and a congressional calendar — and if Section 122 lapses on schedule, you moved for nothing. Re-source to beat the Section 301 load, and you've captured the one layer of the stack whose survival doesn't depend on any of that. It's the only tariff decision available right now where the payoff isn't conditional on politics.
The Translation: The stack has a temporary layer and a permanent one, and most operators are optimizing around the temporary one because it's the one in the headlines. The 15% is a coin flip that resolves July 24. The China-only 25% has already survived everything thrown at it and will still be there in the fall. Re-source against the number that isn't moving — that decision pays off in every scenario, including the ones where the courts and Congress do nothing at all.
The Brief
The 15% can't be saved by fiat. Section 122 is capped at 150 days by statute; the president can't renew it alone. Only Congress can, and no extension bill has cleared committee. Plan for expiration, not rescue.
The courts already call it shaky. In May, the Court of International Trade struck Section 122 — but only for the three plaintiffs with standing. Everyone else pays through July 24 regardless. Don't wait on a refund that may never reach you.
The replacement is origin-specific. USTR opened Section 301 cases into 16 countries in March, timed to land the same week Section 122 expires. The administration calls Section 122 a "bridge" to durable, country-specific duties — meaning origin gets more decisive from here, not less.
Quick Win
Ask your broker for a 12-month duty report by HTS code — or read it straight off your entry summaries. The Section 301 duty is already itemized there as its own Chapter 99 line (9903.88.xx), separate from the Section 122 surcharge and the base duty. No rate to look up, no estimate to build — it's the number CBP already collected. Total that 301 column per SKU for your top China sellers and rank them by it. That total is the permanent, origin-driven cost — the part still standing after July 24 — and the SKU on top isn't the cheapest one to move. It's the one that pays back the most, every year, no matter what Congress does in three weeks.
The safe-looking move is to wait out July 24 and see what the stack looks like in August. But waiting is itself a bet — that the durable layer will somehow become less durable. It won't. The operators who separate the temporary tariff from the permanent one, and re-source against the permanent one, are the only ones whose margin math survives every outcome on the board.
Have any questions? Grab a 15-minute slot here: book a time here.
See you Friday.
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— Dan
