When the President signed the Section 122 Executive Order at 6:04 pm on Friday February 20, 2026, the tariff architecture for US chemical imports changed in three important ways at once. IEEPA 20 point stack went away. A new Section 122 10% global tariff took effect February 24 for 150 days. And a surprisingly long list of chemical and raw material HS codes got carved out as exempt. That third change is the one your competitors will under appreciate and the one that will reshape your 2026 landed costs if you move fast.
Section 122 of the Trade Act of 1974, codified at 19 USC 2132, is narrower and older than IEEPA. It was written in response to Nixon era balance of payments pressures. It authorises the President to impose an ad valorem tariff of up to 15% for up to 150 days, extendable only with Congressional action, in response to large and serious US balance of payments deficits. The statute has specific, built in exemption categories that IEEPA did not have. The Penn Wharton budget model published Saturday morning calculated that the effective US tariff rate on Chinese goods fell from 51.6% to 31.6% as a direct result of the IEEPA removal and the Section 122 exemption list. For chemical importers the post exemption effective rate is lower still.
This piece sets out the Section 122 versus IEEPA comparison, the full exempt category list, which chemical HS codes cleared and which did not, the USMCA interaction, and a landed cost worked example across four representative chemical lines.
Section 122 versus IEEPA at a glance
| Feature | IEEPA 20 point stack | Section 122 10% |
|---|---|---|
| Statute | 50 USC 1701 et seq. | 19 USC 2132 |
| Rate | 10% fentanyl plus 10% reciprocal | 10% flat |
| Country scope | China specific | Global, all origins |
| Duration | Indefinite | 150 days max without Congress |
| Exemption categories | Narrow and discretionary | Built in statutory exemptions |
| Stackable with Section 301 | Yes | Yes |
| USMCA interaction | Not recognised | USMCA origin exempt |
| Authority basis | National emergency | Balance of payments |
| Refund status post Feb 24 | Full refund ordered by SCOTUS | Collecting as of Feb 24 |
| Legal vulnerability | Struck down 6-3 | Statutory, intact |
The two most consequential rows in that table are country scope and USMCA interaction. Under IEEPA, China paid 20 points extra and Mexico paid zero. Under Section 122, a USMCA qualifying good from Mexico pays zero and a Chinese good pays 10%. That is still 10 points of differential, but it is half the differential you operated under through 2025. If you had built a partial near shoring programme to Monterrey or Guadalajara, the near shoring premium versus China just shrank considerably.
The full exempt category list
Section 122(a) and the implementing Executive Order exempt nine categories from the 10% tariff. For a chemical importer, six of those categories are directly relevant.
Critical minerals on the USGS 2024 list of 50 critical minerals are exempt. That covers antimony, barite, bismuth, fluorspar, gallium, germanium, graphite, lithium, magnesium, manganese, rare earths, titanium, tungsten, vanadium, zinc and related compounds. If you import lithium carbonate under HS 2836.91.00, germanium oxide under 2825.60.00, or rare earth carbonates under 2846.10.00, you pay zero Section 122 and keep your Section 301 exposure only.
Pharmaceutical products and active pharmaceutical ingredients are exempt. Chapter 30 goods broadly, plus bulk APIs under chapters 28 and 29 where the HS code carries an FDA import coding, are exempt. This is a bigger carve out than it looks. Many speciality chemicals sold as intermediates into contract manufacturing for pharma customers qualify if you can prove end use. This is where your TSCA and FDA documentation trail becomes a tariff asset.
Energy products are exempt. Crude oil, LNG, LPG, refined fuels, and the feedstock chemicals tied to refining are exempt. For a specialty chemical importer, the relevance is narrower, but if you import lubricant additives under HS 3811 or petroleum resins under 3911, check the classification carefully. Some lines fall in, some out.
USMCA qualifying goods from Canada and Mexico are exempt. You need a valid USMCA certification of origin and you need to have claimed preference on the original 7501. Goods entered without claiming USMCA preference are not retroactively exempt.
Articles in short supply as determined by the USTR Section 122(e) process are exempt. USTR published a preliminary short supply list on February 23 covering 47 chemical HS codes where US domestic production is under 40% of demand. That list includes several fluorochemicals, speciality amines, and four pigment intermediates. Expect the list to grow through Q2 as industry petitions are heard.
Humanitarian and defence articles are exempt. This is narrow for most chemical importers, but if you supply into defence primes under DFARS clauses, some of your tonnes may qualify.
Chemical HS codes that cleared versus those that did not
The clearest way to understand the impact is a side by side on the HS codes a typical chemical distributor runs. The IEEPA column shows what you paid before February 24. The Section 122 column shows what you pay today.
| HS code | Description | IEEPA Feb 19 | Section 122 Feb 24 | Exempt? |
|---|---|---|---|---|
| 2917.36.00 | Terephthalic acid | 20% | 10% | No |
| 3904.10.00 | PVC primary forms | 20% | 10% | No |
| 2836.91.00 | Lithium carbonate | 20% | 0% | Critical mineral |
| 2846.10.00 | Cerium compounds | 20% | 0% | Rare earth |
| 2941.10.00 | Penicillin and derivatives | 20% | 0% | Pharmaceutical |
| 3808.94.50 | Disinfectants | 20% | 10% | No |
| 2903.39.20 | Fluorinated derivatives | 20% | 0% | USTR short supply list |
| 3911.90.45 | Petroleum resins | 20% | 10% | No |
| 2825.60.00 | Germanium oxide | 20% | 0% | Critical mineral |
| 3204.17.60 | Pigment preparations | 20% | 10% | No |
Five of the 10 lines on that table dropped to zero Section 122. Two others may qualify for short supply exemption pending USTR review of pending petitions. Importers who do not work through their portfolio code by code will miss the exemption and quietly pay 10% they did not need to pay.
The USMCA recapture play
If you source a chemical from a Chinese producer who also has a Mexican finishing operation, or a Chinese producer who exports to a Mexican maquila that completes a substantial transformation, you can potentially route the goods through Mexico and claim USMCA origin. This only works if the Mexican operation meets the regional value content requirement under USMCA Chapter 4, which for most chemical HS codes sits around 60 to 65% transaction value or 50% net cost method.
Substantial transformation for chemicals is not trivial. You cannot simply repack a Chinese drum in Juarez and claim Mexican origin. You need a change in tariff classification plus an RVC threshold. But for many speciality formulations, a Mexican blending operation can satisfy both. Importers who built Mexican contract blending capability during 2025 now have a material cost advantage over competitors who did not.
Run this calculation carefully because CBP has flagged USMCA origin fraud as a 2026 enforcement priority. The civil penalty under 19 USC 1592 for origin misdeclaration starts at the value of the merchandise plus duty lost and can go higher for fraud. The safe way to play the USMCA route is to document every step of the Mexican operation, keep CBP Form 434 certifications on file, and run a legal review before your first entry.
Landed cost worked example, four chemical lines
Take a representative monthly import book of 120 tonnes. Four lines, Chinese origin, delivered Houston.
| Line | HS code | Tonnes | CIF USD/t | Section 301 | Sec 122 | Duty USD/t | Landed USD/t |
|---|---|---|---|---|---|---|---|
| PVC primary form | 3904.10.00 | 40 | 2,400 | 25% | 10% | 840 | 3,240 |
| Lithium carbonate | 2836.91.00 | 12 | 12,800 | 25% | 0% | 3,200 | 16,000 |
| Rare earth cerium | 2846.10.00 | 8 | 9,600 | 25% | 0% | 2,400 | 12,000 |
| Pigment prep | 3204.17.60 | 60 | 4,800 | 25% | 10% | 1,680 | 6,480 |
Monthly IEEPA era duty across the book was USD 239,040. Monthly Section 122 era duty across the book is USD 177,120. Monthly saving USD 61,920. Annualised USD 743,040. Of that annualised saving, roughly USD 220,000 comes from the critical mineral carve outs on lithium and rare earths, which IEEPA did not spare but Section 122 does.
What you do this week and this quarter
This week, pull your top 25 HS codes by annual spend. Map each one against the Section 122 exemption categories. Flag any line that may qualify as critical mineral, pharmaceutical, energy, USMCA or short supply. For the short supply lines, pull the USTR petition list published February 23 and see if a petition already covers you. If not, consider filing one through your industry association before the April 15 comment window closes.
This quarter, price your Mexican USMCA option on any SKU where the landed cost differential versus direct Chinese import under Section 122 exceeds USD 200 per tonne. Build the Mexican routing cost model properly, including the substantial transformation requirement and the regional value content check. Put a CIT watching brief on any entry filed between February 4 and February 23, 2025 because those need a court filing not an administrative 29R.
And keep a date circled. July 23, 2026 is the Section 122 expiry if Congress does not act. Your forward contracts, your customer pricing, and your inventory position should all be sized against that cliff. The importers who plan for the 150 day clock expiring will be the ones who do not get caught long at 15 July when rates may reset again.