Quick Answer: A 15% Section 122 tariff replaced IEEPA tariffs Feb 24, expiring July 24. Section 301 (7.5–25%) stacks on top. De minimis is dead.

The Supreme Court struck down all IEEPA-based tariffs on February 20, 2026, in Learning Resources Inc. v. Trump (6-3 ruling). Hours later, the administration imposed a 15% global tariff under Section 122 — the first time this authority has ever been used. It took effect February 24 and expires after 150 days (July 24) unless Congress extends it. Section 301 tariffs on China (7.5% or 25%) still apply on top. The $800 de minimis exemption remains dead for all countries. For a typical $30 Chinese-sourced product, your new landed cost includes 22.5–40% in combined tariffs — up from zero under the old de minimis regime. This guide walks through the math, your strategic options, and a compliance checklist to get through the next 150 days.

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US Tariff Reform 2026: The Actionable Guide

This article focuses on what to do about the tariff changes. For the full news timeline, see our February 2026 Intelligence Report.

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Four things happened in rapid succession on February 20–24, 2026:

1. SCOTUS struck down IEEPA tariffs — The Supreme Court ruled 6-3 that the International Emergency Economic Powers Act doesn't authorize tariffs. This invalidated over $160 billion in collected duties, including the "reciprocal" and "fentanyl" tariff programs.

2. Section 122 tariff imposed — Within hours, a new 15% global import surcharge was signed under Section 122 of the Trade Act of 1974. Effective February 24. This is the statutory maximum without congressional approval.

3. 150-day clock started — Section 122 tariffs expire automatically after 150 days. That's July 24, 2026. Congress must act to extend them.

4. De minimis stays dead — A separate executive order continues the suspension of the $800 duty-free threshold under fresh legal authority. Every package, regardless of value, requires full customs processing.

What was NOT affected: Section 301 tariffs on China and Section 232 tariffs on steel/aluminum remain intact. They rest on separate legal authority.

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This is where it gets practical. Chinese-sourced goods now face three stacked tariff layers:

Which Section 301 Rate Applies to You?

Most dropshipped consumer products — home and garden, pet supplies, fashion accessories, gadgets — fall under List 3 (25%) or List 4A (7.5%). Check your specific HTS codes at hts.usitc.gov.

Worked Example: $30 Product (List 4A — 7.5%)

Under the old de minimis exemption, that same $30 product shipped direct-to-consumer would have entered duty-free. That's an $8.25 per-unit increase.

Worked Example: $30 Product (List 3 — 25%)

Worked Example: $100 Product (List 4A — 7.5%)

Impact by Price Point

Assumes ~5% MFN duty. Your actual rate depends on HTS classification.

The takeaway: Low-margin products under $20 are the hardest hit in percentage terms. A $10 product with $2.75 in new duties needs a 27.5% price increase just to maintain the same margin. Higher-AOV products absorb the tariff more easily.

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The $800 duty-free threshold for imports is eliminated for all countries — not just China. This is the single biggest structural change for direct-to-consumer dropshipping.

Before vs. After

The February 28 Postal Deadline

Until February 28, postal shipments had two duty options:

• Ad valorem: Percentage-based duty (now 15% Section 122 + applicable Section 301)
• Flat fee: $80–$200 per item depending on origin country tariff tier

After February 28, only ad valorem applies. The flat-fee option is gone.

For most Chinese-sourced products, ad valorem is actually cheaper than the flat fee — a $30 product at 22.5% combined tariff costs $6.75 in duties, versus $200 flat. But the ad valorem method requires accurate HTS classification for every shipment.

Documentation Now Required

Every package entering the US needs:

• HTS classification of goods
• Country of origin declaration
• Accurate value declaration
• Importer of record information
• Payment of all applicable duties, taxes, and fees

If you're shipping direct-to-consumer from China, your fulfillment partner or carrier needs to handle this for every single package. The processing overhead is real.

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Section 122 is explicitly temporary. The statute limits tariffs to 150 days without congressional authorization. Here's what might happen:

Scenario 1: Congress Extends or Replaces

Congress passes new tariff legislation before July 24, giving the President broader tariff authority. Rates may change — up or down — but tariffs continue.

Probability: Moderate. Multiple bills are already being drafted, but congressional timelines are unpredictable.

Scenario 2: Section 122 Expires, Nothing Replaces It

The 15% surcharge drops off on July 24. Section 301 tariffs on China remain (7.5–25%), but non-China imports return to normal MFN rates only.

Probability: Low but possible if Congress is gridlocked.

Scenario 3: New Executive Action Under Different Authority

The administration uses Section 301 investigations (already announced for "most major trading partners") or other statutory authority to reimpose tariffs on a different legal basis.

Probability: High. USTR has already signaled this path.

What This Means for You

• Do recalculate costs now with the 15% rate — it's the reality for at least 150 days
• Don't make permanent infrastructure decisions based on a temporary tariff rate
• Do build flexibility into supplier contracts and pricing models
• Don't panic-switch your entire sourcing strategy for what may be a 5-month window
• Do set a calendar reminder for July 10 to reassess before expiration

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Option 1: Absorb and Reprice

When it makes sense: High-margin products where you can pass costs through without killing conversion rates.

The math: If your product costs $30 and you sell at $59.99 with $15 in fulfillment costs, your old margin was $14.99 (25%). With $8.25 in new tariffs, your margin drops to $6.74 (11%). You need to price at $68.24 to restore the same $14.99 per-unit profit — a 14% price increase.

How to execute:

• Increase prices gradually (5% now, 5% in two weeks) rather than a single shock
• Frame as "updated pricing reflecting 2026 import regulations"
• Test conversion impact — some products absorb price increases better than others
• Monitor competitor pricing — if everyone raises prices, the market adjusts

Option 2: Diversify Sourcing

Beyond China: Vietnam, India, Turkey, and Indonesia are the most common alternatives.

Reality check: Sourcing diversification takes months, not weeks. Product quality, supplier reliability, and MOQ requirements differ significantly from Chinese suppliers. This is a Q3/Q4 project, not a February decision.

The Section 301 angle: Moving sourcing from China to Vietnam eliminates the 7.5–25% Section 301 layer but still faces the 15% Section 122 surcharge. Net savings: 7.5–25% depending on product list classification. Worth it for high-volume SKUs.

Option 3: Duty-Inclusive Fulfillment

For markets with complex customs environments — Mexico, EU, Colombia — working with a fulfillment partner that handles customs declarations and duty collection removes the per-shipment compliance burden. This matters more now that every package requires full customs processing.

Partners like Just DS manage import clearance so you focus on selling, not classifying HTS codes. This is especially relevant for sellers shipping to multiple countries simultaneously — the documentation overhead multiplies quickly.

Option 4: Product Mix Optimization

The tariff impact is not uniform across your catalog. Use this framework:

Practical approach:

1. Export your product catalog with COGS, selling price, and volume
2. Add the applicable tariff rate to each product's COGS
3. Recalculate margins
4. Flag anything below your minimum acceptable margin
5. Decide: reprice, replace, or drop

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USMCA-qualifying goods from Canada and Mexico are exempt from the Section 122 surcharge. This is significant for sellers who source from or route through North American suppliers.

What qualifies: Products that meet USMCA rules of origin — generally meaning they're manufactured or substantially transformed in Canada or Mexico. Chinese-sourced products transshipped through Mexico do NOT qualify.

For Mexico-bound sellers: The picture is different. Goods going to Mexico face Mexico's own tariff environment (including the 50% tariff on 1,463 Chinese product categories since January 1, 2026). Duty-inclusive shipping solutions help simplify this complexity. See our Mexico market opportunity guide for more detail.

For US-bound sellers sourcing from Mexico/Canada: If your products qualify under USMCA, you just got a competitive advantage over China-sourced competitors who face the additional 15%.

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The Section 122 Proclamation includes Annex II — a list of 1,109 specific HTS subheadings exempt from the 15% surcharge. Notable categories include:

• Certain electronics and semiconductors
• Pharmaceuticals
• Energy products (crude oil, natural gas)
• Critical minerals
• Certain agricultural products
• Aerospace products

Action: Download the Annex II list from the Federal Register and cross-reference against your product HTS codes. If any of your products fall under an exemption, your effective tariff rate is lower than the general calculation.

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Use this checklist to ensure you're operating correctly under the new tariff regime:

Immediate (This Week)

• Verify HTS codes for all active products
• Recalculate landed costs with 15% Section 122 + applicable Section 301
• Check Annex II exemptions against your product catalog
• Update product pricing to reflect new costs
• Confirm your fulfillment partner or customs broker is processing declarations correctly

Before March 15

• Ensure all customs documentation is current for every SKU
• Review supplier contracts for tariff adjustment clauses
• Recalculate break-even points for each product
• Identify and flag products that become unprofitable
• Communicate pricing changes to any wholesale/B2B customers

Before July 10

• Reassess strategy ahead of July 24 Section 122 expiration
• Monitor congressional tariff legislation
• Build contingency pricing models for both extension and expiration scenarios
• Evaluate sourcing diversification progress (if started)
• Work with a fulfillment partner who handles customs declarations across markets — the documentation burden is only growing

Ongoing

• Track USTR Section 301 investigation announcements for non-China countries
• Monitor HTS code reclassifications that could change your rates
• Review monthly landed cost reports against projections
• Stay current with the monthly intelligence reports for policy updates

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Your tariff rate depends entirely on how your products are classified under the Harmonized Tariff Schedule. If you've never dealt with HTS codes before (because de minimis meant you didn't have to), here's what you need to know:

What it is: A 10-digit code that categorizes every product entering the US. The code determines your MFN duty rate, whether Section 301 applies, and whether you qualify for any exemptions.

Where to look: hts.usitc.gov — search by product description or browse by chapter.

Common pitfall: Products that seem similar can have very different duty rates. A "plastic container" and a "plastic storage organizer" might fall under different subheadings with different rates.

Who should do this: For a small catalog (under 20 SKUs), you can research HTS codes yourself. For larger catalogs, consider working with a licensed customs broker. Misclassification can result in penalties, underpayment, or overpayment.

Key Section 301 subheadings to check: The four lists cover specific HTS subheadings, not broad product categories. Your product might fall under List 4A (7.5%) rather than List 3 (25%) even if it seems like a "consumer good." The difference is significant — check the specific subheadings.

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What tariff rate do I pay on Chinese imports now?

Your total tariff is: normal MFN duty + Section 301 (7.5% or 25% depending on product list) + 15% Section 122 surcharge. For most dropshipped consumer goods, this totals 22.5–45% on top of product cost. Check your specific HTS codes — some electronics and other categories are exempt from the Section 122 portion.

Is the de minimis exemption coming back?

Not in the foreseeable future. A new executive order on February 24 continues the suspension under fresh legal authority, separate from the invalidated IEEPA. Both parties have signaled support for ending de minimis, making legislative reinstatement unlikely.

Do Section 301 tariffs still apply on top of Section 122?

Yes. Section 301 tariffs on China stack on top of the Section 122 surcharge. Section 232 tariffs (steel, aluminum) are the exception — those products are exempt from Section 122 to avoid double-stacking.

How do I find my product's HTS code?

Search at hts.usitc.gov using product descriptions. For complex products, consult a licensed customs broker. Misclassification risks penalties and incorrect duty payments. Your freight forwarder or fulfillment partner may also be able to assist with classification.

What happens after July 24 when Section 122 expires?

Three scenarios: Congress extends or replaces the tariff, it simply expires (dropping the 15% surcharge), or the administration reimposes tariffs under different authority (Section 301 investigations already announced). Plan for continued tariffs but build flexibility into your pricing model.

Are there any exemptions I can use?

Yes. Annex II of the Section 122 Proclamation lists 1,109 HTS subheadings that are exempt. USMCA-qualifying goods from Canada and Mexico are also exempt. Products already under Section 232 tariffs (steel, aluminum) don't face the additional Section 122 surcharge. Check all three exemption categories against your product catalog.

How does USMCA help for Mexico and Canada shipments?

USMCA-qualifying goods — products manufactured or substantially transformed in Canada or Mexico — are exempt from the 15% Section 122 surcharge. This does NOT apply to Chinese products transshipped through North America. For sellers sourcing from Mexican or Canadian manufacturers, this provides a real cost advantage over China-sourced competitors.

What about goods that were already in transit on February 24?

Goods loaded onto a vessel before 12:01 AM ET on February 24 and entered for consumption before February 28 are exempt from the Section 122 surcharge under the in-transit provision.

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The tariff landscape just got simpler in one way (uniform 15% rate) and more complex in every other way (stacking duties, dead de minimis, 150-day uncertainty). The sellers who adapt fastest — recalculating costs this week, repricing within days, and building flexibility for July — will maintain their margins while competitors scramble.

Don't overreact to a temporary tariff. Don't underreact to the permanent death of de minimis. And set that July 10 calendar reminder.

For the full news timeline and broader market context, see the February 2026 Intelligence Report. For shipping route specifics, check our Global Shipping Guide. And if customs complexity is eating your time, our customs delay handling guide covers the practical playbook.

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Last updated: February 23, 2026

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