Tariff Applicability Framework

Bottom line for distributors as of 7/27:

1. Know your Section 232 exposure first. For most HVACR products, this is the tariff that matters most — both because of its size (up to 50% on covered steel, aluminum, and copper derivatives) and because it now determines whether the new Section 301 forced-labor tariff even applies. Goods already subject to Section 232 are excluded from the new 301 action, so getting your 232 classification right isn't just a cost question — it decides which tariff regime you're in at all.

2. Check whether your products qualify for the reduced 15% (Sect. 232) rate, and don't assume the relief is permanent. A June 1 proclamation dropped the rate from 25% to 15% for a defined list of residential HVAC equipment and components, effective June 8. Qualification depends entirely on specific HTS codes — two similar products can land on opposite sides of that line — so confirm your classifications rather than assuming coverage, and keep an eye out for updates given the relief's temporary framing.

3. For anything outside Section 232 — certain components, electronics, or finished goods not included on the derivative list — confirm USMCA-qualifying status is still being properly claimed for Canada/Mexico goods, since that's what keeps those imports exempt from the new Section 301 forced-labor tariff. Also watch CBP guidance on whether the new Section 301 duty stacks with the incoming Section 338 Canada tariffs (effective August 19) — that stacking question is still unresolved and could meaningfully change landed costs on Canadian-sourced goods that fall outside 232.

The sections below walk through the full applicability logic behind this guidance.

Section 122 of the Trade Act of 1974 — the temporary 10% global import surcharge President Trump imposed in February following the Supreme Court's ruling that IEEPA does not authorize broad-based tariffs — expired by statutory limit at 12:01 a.m. on July 24, 2026. Congress did not act to extend it.

In its place, the U.S. Trade Representative finalized new Section 301 tariffs on 60 trading economies following investigations into forced-labor enforcement practices. These new duties apply a 10% rate to economies USTR found have adopted, or committed to adopt, an effective forced-labor import prohibition, and a 12.5% rate to economies that have not — a group that includes China, the EU, Japan, and most other major trading partners. A narrow in-transit exception applies to goods already loaded for shipment before July 24, provided they are entered for consumption before July 28, 2026.

As shown in the figure below, U.S. HVACR equipment is primarily supplied by domestic manufacturing, supplemented by imports — most notably from Mexico, China, and Canada.

Source: U.S. Census Bureau, U.S. International Trade Commission, HARDI estimates

At the same time, existing trade measures — including Section 232 (steel, aluminum, and copper) and the original China-specific Section 301 tariffs — remain in place. Because these authorities operate independently, products may be subject to more than one tariff program simultaneously.

The framework below outlines how Section 232, the new Section 301 forced-labor tariffs, and the original Section 301 China tariffs interact for purposes of determining potential duty exposure. This overview is intended for general informational purposes and reflects current CBP implementation guidance, which continues to evolve.