Understanding Section 122 of the Trade Act of 1974

Section 122 of the Trade Act of 1974 is a U.S. trade law provision that gives the President temporary authority to address serious balance-of-payments deficits or significant declines in the value of the U.S. dollar. It is designed as a short-term economic safeguard tool, allowing the administration to respond quickly to international financial instability or trade imbalances.

Unlike other trade enforcement mechanisms that target specific countries or unfair trade practices, Section 122 can be applied more broadly and is primarily focused on macroeconomic concerns rather than individual trade violations.

Legal Foundation

Section 122 is part of the Trade Act of 1974, a major trade statute that also includes authorities such as:

• Section 201 (Safeguards)
• Section 232 (National Security)
• Section 301 (Unfair Trade Practices)

While Sections 232 and 301 are more commonly used in modern trade enforcement, Section 122 provides a distinct authority centered on balance-of-payments concerns.

What Powers Does Section 122 Grant?

Under Section 122, the President may:

• Impose temporary import surcharges of up to 15%
• Implement temporary import quotas
• Apply measures on a broad or global basis
• Take action without a lengthy investigative process

However, these measures are subject to important limitations:

• Actions generally cannot exceed 150 days unless extended through other trade authorities.
• The administration must consult with Congress.
• The measures are intended to stabilize economic conditions, not serve as permanent trade remedies.

When Can It Be Used?

It may be invoked if:

1. The United States faces a large and serious balance-of-payments deficit, or
2. There is a significant decline in the international exchange value of the U.S. dollar.

Because of its focus on macroeconomic conditions, Section 122 is rarely used in modern trade policy. Most recent trade actions have relied instead on Section 232 (national security) or Section 301 (unfair trade practices).

How It Differs from Other Trade Authorities

The key distinction is that Section 122 is economic stabilization-focused, not enforcement-focused.

Potential Impact on Importers and Supply Chains

If implemented, an action could:

• Increase landed costs due to import surcharges
• Disrupt global sourcing strategies
• Create short-term compliance and pricing challenges
• Require rapid supply chain adjustments

Because it can be applied broadly, importers across multiple industries may be affected simultaneously.

For companies engaged in international trade, it is important to monitor regulatory developments and assess exposure across HTS classifications, sourcing regions, and contractual pricing structures.

Why Section 122 Matters Today

Although infrequently used, Section 122 remains a powerful executive authority. In times of economic volatility, currency instability, or widening trade deficits, it can re-emerge as a policy tool.

Understanding how Section 122 works helps importers and exporters:

• Anticipate potential tariff exposure
• Model cost impacts
• Strengthen trade compliance strategies
• Diversify sourcing to mitigate risk

Need Guidance on Trade Policy Changes?

Trade authorities like Section 122 can shift the cost structure of global supply chains with little notice. Proactive compliance reviews, duty impact modeling, and scenario planning are essential to protecting margin and maintaining operational continuity.

If you have questions about how potential tariff actions could affect your imports, our team can help you evaluate risk and build a strategic response plan.