10% Section 122 Import Surcharge Takes Effect as Device Makers Seek Tailored Tariffs

A temporary 10% surcharge on most goods imported into the United States took effect on Tuesday, replacing tariffs the Supreme Court struck down last week, as the medical device industry's main trade group urged the administration to treat medtech differently from sectors with large trade deficits.

The surcharge was imposed under Section 122 of the Trade Act of 1974 in a proclamation dated February 20. It applies to goods entered for consumption on or after 12:01 a.m. eastern time on February 24 and continues through July 24 unless it is suspended, modified or ended earlier or extended by Congress, according to the text. Section 122 allows a surcharge of up to 15% for no more than 150 days to address what the law calls fundamental international payments problems.

What the surcharge covers

The proclamation lists categories of products that are not subject to the surcharge, including certain critical minerals, energy products, certain electronics, certain aerospace products, and "pharmaceuticals and pharmaceutical ingredients." Medical devices are not among the categories named in the proclamation's text; the full product lists are set out in its annexes.

The surcharge also does not apply on top of tariffs imposed under Section 232 of the Trade Expansion Act. Where a Section 232 tariff covers part of an import, the surcharge applies only to the remaining part, the proclamation says. The administration opened a Section 232 national security investigation into medical equipment imports in September, MedTech Dive reported.

The Supreme Court ruled 6-3 on February 20 in Learning Resources, Inc. v. Trump that the International Emergency Economic Powers Act does not authorize the president to impose broad tariffs, Medical Economics reported. Trump announced the 10% global tariff under Section 122 and then said he would raise the rate to 15%, the legal maximum, according to the outlet. The proclamation in effect on February 24 sets the rate at 10%.

Industry asks for a narrower approach

In a statement after the ruling, AdvaMed President and CEO Scott Whitaker said: "we expect the administration will now pursue tariffs through other authorities to meet the President's goal of eliminating trade imbalances and incentivizing U.S. manufacturing." He described medtech as an industry that is "primarily U.S.-based, with trade surpluses in most major markets worldwide."

In a LinkedIn post on Monday, Whitaker said implantable heart devices, imaging systems and AI-enabled diagnostics can contain thousands of validated components, and that changing a supplier can take years and require substantial investment, MedTech Dive reported. "Hospitals, operating under multi-year purchasing contracts and fixed reimbursement structures, cannot easily absorb sudden cost spikes," he wrote, according to the outlet.

Whitaker said about 70% of medtech products used in the US are made domestically and that more than $340 billion has been invested in US manufacturing and research in the sector since 2017, MedTech Dive reported. He pointed to the Section 232 process as one that "allows policymakers to examine supply chains in detail, identify genuine vulnerabilities, and tailor remedies accordingly."

Suppliers have said they have limited room to pass on higher import costs. Casey Hite, chief executive of home medical equipment supplier Aeroflow Health, told Medical Economics in an interview before the ruling that "90% of our revenue is paid through third-party payers," under contract rates negotiated years in advance.

The court did not set out how tariffs already collected under the emergency law would be refunded, leaving the details to the Court of International Trade, other lower courts and the administration, Medical Economics reported.