IEEPA Struck Down, Section 122 Takes Effect: What Customs Brokers Need to Know About Classification Now

On February 20, 2026, the Supreme Court ruled IEEPA tariffs unlawful. Within hours, the White House imposed a new 10% tariff under Section 122 of the Trade Act of 1974, effective February 24. By the next day, President Trump was posting about raising it to 15%. For customs brokers, the classification implications are enormous — and moving fast.

This guide breaks down what changed, what's exempt, and — most critically — how these shifts affect HTS classification decisions your brokerage is making right now.

What Happened: The Three-Day Timeline

February 20: The Supreme Court Ruling

The Supreme Court held that using the International Emergency Economic Powers Act (IEEPA) to impose broad-based import tariffs exceeded the statute's scope. The IEEPA tariffs — which had been layered on top of existing duties since early 2025 — were struck down as unlawful.

This immediately created a gap in the tariff structure. Goods that had been subject to IEEPA surcharges under HTSUS heading 9903.01.28 suddenly had those additional duties removed.

February 20 (same day): Section 122 Executive Order

Hours after the ruling, the White House issued an Executive Order imposing a new 10% "Temporary Import Surcharge" under Section 122 of the Trade Act of 1974 — a statute designed to address "fundamental international payments problems." Key details:

• Rate: 10% ad valorem on most imports
• Duration: 150 days (Section 122 has a statutory cap)
• Effective: February 24, 2026, 12:01 AM ET
• In-transit provision: Goods on vessels at port of loading before Feb 24, entered before Feb 28, are exempt

February 21: The 15% Social Media Post

President Trump posted that the tariff would increase to 15% "effective immediately." As of this writing, no formal Executive Order or Federal Register notice has been published for the increase. CBP has not issued guidance on the 15% rate. Brokers should monitor CSMS messages closely.

Key Exemptions That Affect Classification

The Section 122 EO includes significant exemptions that directly impact classification strategy:

1. USMCA-Qualifying Goods

All products originating in Canada and Mexico that qualify for duty-free treatment under USMCA are exempt from the Section 122 surcharge. This makes USMCA origin determination and rules of origin compliance more valuable than ever.

Classification implication: For products with components from multiple countries, the classification decision now has direct downstream effects on whether USMCA qualification is possible. A different HTS heading may have different rules of origin under USMCA — meaning the classification choice could be the difference between 0% and 10% (or 15%) additional duty.

2. Section 232 Products (Steel & Aluminum)

Products already subject to Section 232 tariffs — steel, aluminum, and their derivatives — are exempt from the Section 122 surcharge. This avoids "double stacking" but creates complexity:

Classification implication: The boundary between "steel derivative" and a finished product containing steel is a classification question. CBP rulings have been inconsistent on where this line falls. Getting it wrong in either direction now carries financial consequences.

3. Specific Annex II Exclusions

The EO's Annex II lists specific product categories exempt from the surcharge, including:

• Certain agricultural products
• Copper
• Pharmaceuticals
• Semiconductors
• Lumber articles
• Certain critical minerals
• Energy and energy products
• Civil aircraft articles (per U.S. Note 2(aa)(iv) to Subchapter III of Chapter 99)
• Goods qualifying under CAFTA-DR

Classification implication: Products on the boundary of these categories face heightened scrutiny. Is your client's product a "pharmaceutical" or a "dietary supplement"? Is that mineral "critical" under the EO's definition? Classification determines which side of the exemption line a product falls on.

The Classification Cascade: Why This Matters More Than Previous Tariff Rounds

Previous tariff actions (Section 301 on China, Section 232 on steel/aluminum) added duties to defined product lists. Brokers could check a product's HTS code against the list — binary in or out.

Section 122 is different. It's a universal surcharge with carve-outs. The default is "you pay." The exemptions are where classification decisions create leverage. This inverts the usual analysis:

• Before: "Is my product on the tariff list?" → Classification determines if extra duty applies
• Now: "Can my product qualify for an exemption?" → Classification determines if the surcharge is avoidable

This shift means brokers need to actively evaluate exemption eligibility for every entry — and classification is the first domino.

Five Actions Customs Brokers Should Take This Week

1. Audit High-Volume Entries for Exemption Eligibility

Pull your top 20 entries by duty value. For each, evaluate:

• Does the product qualify under USMCA rules of origin?
• Is it a Section 232 product or derivative?
• Does it fall within the Annex II exclusion categories?

Even one high-volume product qualifying for exemption could save your client tens of thousands.

2. Review Classification Decisions at Category Boundaries

Products near the edge of exempt categories need immediate attention. Examples:

• Copper alloys: What copper content qualifies as "copper" under the exemption vs. a manufactured article?
• Pharmaceutical ingredients: Active pharmaceutical ingredients (APIs) vs. chemical compounds with pharmaceutical applications
• Semiconductor components: At what level of integration does a component become a "semiconductor" for exemption purposes?
• Lumber articles: Finished wood products vs. lumber — where's the line?

3. Document Everything for Reasonable Care

The tariff landscape is changing so fast that CBP itself may not have clear guidance for weeks. When the dust settles and audits begin, your reasonable care documentation will be your defense. For every classification decision affected by Section 122:

• Document your analysis of exemption eligibility
• Cite the specific EO provisions and CBP rulings supporting your position
• Record the date and the regulatory state at the time of the decision
• Note any ambiguities and your rationale for resolving them

4. Monitor CBP Guidance Daily

CBP will issue CSMS messages, CATAIR updates, and potentially Federal Register notices clarifying implementation. The 10% vs. 15% question alone could flip calculations overnight. Subscribe to:

• CBP CSMS notifications
• Federal Register daily digest
• Harmonize Trade Alerts — weekly digest of Federal Register tariff changes

5. Communicate Proactively With Clients

Your importers are reading the same headlines and panicking. Get ahead of it:

• Send a client advisory summarizing what changed and what it means for their products
• Flag any entries in transit that may qualify for the in-transit exemption (loaded before Feb 24, entered before Feb 28)
• Offer a classification review for their top products — this is a revenue opportunity for your brokerage

The 150-Day Clock: What Comes Next

Section 122 has a statutory limitation: tariffs can only be imposed for 150 days without Congressional approval. That puts the expiration around July 24, 2026 — unless Congress acts.

This creates two scenarios brokers should plan for:

Scenario A: Congress Extends or Replaces

If Congress passes legislation authorizing ongoing tariffs (potentially at different rates or with different exemptions), expect a new round of classification reviews. The exemption categories could change entirely.

Scenario B: Tariffs Expire

If the 150 days lapse without Congressional action, importers who over-paid may have refund claims. Document your entries now so you can file protests efficiently if needed.

Either way, the next 150 days are a planning window, not a waiting period.

How AI Classification Tools Help in Volatile Tariff Environments

When tariff structures shift this quickly, the old workflow — manual research across multiple CBP rulings databases, spreadsheet tracking of which products are affected — breaks down. The volume of classification decisions that need revisiting exceeds what most brokerage teams can handle manually in a week.

This is where AI-powered classification tools provide the most value:

• Rapid re-evaluation: Run your full product portfolio against updated tariff structures in minutes, not weeks
• Exemption identification: Automatically flag products that may qualify for USMCA, Section 232, or Annex II exemptions based on their classification
• CBP ruling citations: Build audit-defensible reasonable care documentation with specific ruling references — critical when the regulatory environment is this uncertain
• Consistency: When you're reclassifying hundreds of products under time pressure, automated tools prevent the inconsistencies that trigger CBP scrutiny

Key Takeaways

• IEEPA tariffs are dead. Section 122 (10%, possibly 15%) takes effect February 24.
• Unlike previous tariff actions, this is a universal surcharge with exemptions — classification determines exemption eligibility.
• USMCA, Section 232, and Annex II exclusions create real savings opportunities for importers willing to review their classifications.
• The 150-day statutory limit means this is temporary — but the classification decisions you make now will face audit scrutiny later.
• Document everything. The reasonable care standard applies regardless of how chaotic the regulatory environment gets.

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This article is for informational purposes only and does not constitute legal or customs brokerage advice. Importers and brokers should consult with a licensed customs broker or trade attorney for guidance on specific classification and compliance decisions. Harmonize.ai is a classification research tool operating under 19 U.S.C. § 1641 — we provide research support, not customs brokerage services.