Section 122 Tariff Surcharge: Impact on Florida Warehouses

For fifty years, Section 122 of the Trade Act of 1974 sat unused — a statutory relic authorizing temporary import surcharges that no president had ever invoked. That changed on February 24, 2026, when a 10% global import surcharge took effect on virtually every product entering the United States, per the White House proclamation published in the Federal Register.

Backstory: on February 20, the Supreme Court ruled 6-3 in Learning Resources, Inc., et al. v. Trump that the International Emergency Economic Powers Act (IEEPA) does not authorize tariff imposition — that power belongs to Congress, per Troutman Pepper's analysis of the ruling. Within hours, the White House invoked Section 122 for the first time in history, imposing a 10% ad valorem surcharge — a duty calculated as a percentage of the goods' declared customs value — to replace the invalidated IEEPA tariffs, per a White House fact sheet issued the same day.

July 24, 2026. That's the hard stop — 150 days from invocation — unless Congress extends it. Twenty-four state attorneys general filed suit on March 5 in the U.S. Court of International Trade to block it, per the New York Attorney General's office.

For anyone operating, leasing, or investing in warehouse space across Palm Beach County — from West Palm Beach to Boca Raton — the next 116 days reshape the math on every decision from lease negotiation to inventory strategy to property valuation.

The Full Tariff Stack: What Florida Importers Actually Pay

Section 122's 10% surcharge does not replace existing tariffs. Stacks right on top. CRFB (Committee for a Responsible Federal Budget) estimated in March 2026 that the surcharge alone will generate approximately $35 billion over its 150-day window — or roughly $900 billion over a decade if Congress makes it permanent.

Math gets ugly fast for goods already carrying high duties. How ugly? A Florida importer moving Chinese-origin electronics through Riviera Beach or the Port of Palm Beach faces the base Most Favored Nation rate, plus Section 301 tariffs, plus the new Section 122 surcharge. By January — before Section 122 even took effect — the effective tariff rate across all U.S. imports had already hit 10.3%, per the Penn Wharton Budget Model (March 2026).

Goods from Canada and Mexico qualifying under USMCA — roughly 85% of cross-border trade by January 2026, per China Briefing's tariff tracker — were previously exempt from country-specific tariffs. Now they carry the 10% Section 122 surcharge for the first time. First time ever.

Tax Foundation puts it at roughly $1,000 per household from 2025 tariff increases, another $600 from 2026 measures. For a distributor leasing industrial space in Lake Worth or a 3PL running fulfillment operations in Boynton Beach, those costs land before any consumer price adjustment. Real money out the door.

How the Surcharge Reshapes Warehouse Operations in Palm Beach County

Don't expect the immediate effect on Palm Beach County's industrial market to show up as higher lease rates. What's actually changing is how tenants use, finance, and occupy space.

Cash Flow Compression

Every dollar of additional tariff duty is a dollar of working capital locked at the port. An importer bringing $3 million in goods through the Port of Palm Beach at a 25% effective tariff rate owed $750,000 in duties before Section 122. At 35%, that jumps to $1,050,000 — $300,000 in additional cash due before a single unit hits the warehouse floor. Where does that $300,000 come from?

That squeeze changes how tenants think about warehouse sizing. Companies conserving capital downsize or defer expansion. Others — stockpiling inventory ahead of further increases — need more space on shorter timelines, and they need it with the right clear height and loading dock configuration to maximize throughput on tighter margins.

The Front-Loading Wave — and the Hangover

WTO data tells the story: U.S. imports surged 11% year-over-year in the first half of 2025, businesses racing to beat escalating tariffs. STG's March 2025 survey backs that up — 85.6% of shippers front-loaded shipments ahead of implementation.

South Florida warehouses hit near-full capacity by April 2025. Then the hangover. Stockpiled inventory depleted, reorder volumes dropped, and 3PL (third-party logistics) operators and flex-space tenants faced demand cycles that swung month to month.

TRADLINX projected in its 2025 logistics analysis that restocking costs will run roughly 15% higher as inventory purchased at pre-tariff rates gets replaced with goods carrying the full Section 122 burden. For cold storage operators handling imported produce and for distributors managing tenant-improved space in Delray Beach or Lantana, that margin erosion compounds with already-elevated occupancy costs.

Vacancy, Rent, and the Narrowing Window

Palm Beach County industrial vacancy stood at 6.8% in Q4 2025, with a record average asking rent of $16.01 per square foot NNN (triple net) — where the tenant pays base rent plus property taxes, insurance, and common area maintenance — per the Colliers Q4 2025 PBC Industrial Report. Net absorption — the total square footage leased minus square footage vacated during a period — totaled 141,890 square feet for the year, and leasing activity reached 2.9 million square feet.

Only 797,000 square feet are under construction countywide (Colliers) — low by any standard. Nationally, construction starts hit their lowest since 2017, per CommercialCafe's February 2026 industrial report.

Tenants have a negotiating window right now, but the supply pipeline is drying up fast. I'm telling every operator I work with the same thing: lock in tenant improvement allowances, rent abatement, and NNN expense caps while vacancy gives you leverage. That window won't last through 2026.

We track availability across every PBC submarket — from Jupiter to Boca Raton — with listings updated as inventory turns over. For the full cost breakdown by submarket and lease type, see the warehouse space pricing analysis.

Small-bay warehouse space — under 5,000 square feet — remains the tightest segment, with vacancy barely above 2% countywide per ComReal's South Florida industrial report. If you need a small warehouse in Jupiter near Park of Commerce or a unit in Royal Palm Beach, the tariff environment has not loosened that micro-market. Understanding commercial zoning requirements before signing matters more when every month of delay costs more in tariffed inventory.

South Florida's Ports: Cargo Volumes Under Tariff Pressure

Three ports feed Palm Beach County's warehouses. Container throughput is measured in TEUs (twenty-foot equivalent units — the standard measure of container shipping volume). Section 122 introduces uncertainty across all of them.

Port of Palm Beach hit a record 2.8 million tons in 2024, generating $27 million in gross revenue — the highest in over 20 years — per the Florida Ports Council. Over 3,500 direct jobs, more than $14 billion in annual commodity value, and a recently expanded bulk cement operation through a long-term Ozinga agreement expected to add 300,000 tons of granite and 200,000 tons of cement annually.

What happens to volume when costs spike? Import cargo is projected to decline year-over-year in the first half of 2026 — total U.S. volume at 12.27 million TEUs, down 2% — per a March 2026 NRF press release. Tariff uncertainty. That's the driver.

Florida ranked 10th nationally for imports in 2024 at $117 billion in total value, per Florida TaxWatch. Construction material importers are getting squeezed hardest — contractors adjusted building material cost projections from 3% to 10% after tariff impacts on steel, aluminum, lumber, and electrical components, per the same Florida TaxWatch analysis.

For warehouse landlords leasing to import-dependent tenants across PBC's industrial parks, tenant credit risk just shifted. Understanding whether your tenants can absorb a 10–15% increase in goods costs matters for lease renewal discussions. Landlords considering whether to list available space or assess current property value should weigh the tariff headwind on tenant demand against the thinning supply pipeline.

The Bond Sufficiency Crisis Nobody Is Talking About

Customs bonds — the financial instruments that guarantee duty payments to CBP — are under extreme strain. Nobody in the warehouse world is talking about this one. They should be.

In FY2025, CBP flagged 27,479 bond insufficiencies valued at nearly $3.6 billion (and I had to read that number twice) — a record, roughly double the 2019 level when bond stress first spiked during the first round of Trump-era tariffs, per CNBC's February 2026 reporting. Some surety companies imposed bond increases exceeding 200%. One auto manufacturer saw a 550% increase in its bond requirement, per Sourcing Journal's coverage of CBP data.

When a bond is insufficient, CBP holds your freight. You cannot receive it. Obtaining a new, larger bond takes a minimum of 10 days, per Coughlin Insurance's customs bond analysis.

Section 122 makes it worse — mechanically. Continuous entry bonds — standing financial guarantees that cover all of an importer's shipments over a 12-month period — are generally calculated at 10% of an importer's estimated annual duties, taxes, and fees, per Crowe's bond sufficiency analysis. A blanket 10% surcharge increases every importer's total duty obligation, pushing bond thresholds higher across the board. Chinese-origin goods carrying Section 301 tariffs of 25–100% plus Section 122 require commensurately larger bonds.

Tariff collections reached $30 billion in January 2026 alone. Year-to-date totals: $124 billion — up 304% from the same period in 2025, per CNBC.

What this means for warehouse operators: If your tenants import goods, their bond capacity directly affects their ability to receive inventory — and pay rent. I've had tenants call because their freight was held at port for two weeks over bond issues. No inventory means no revenue, and they still owe rent. Factor bond status into tenant creditworthiness alongside standard lease structure review. If you're a property owner evaluating applications, this is a due diligence item that didn't exist at this scale 18 months ago.

Five Mitigation Strategies for Florida Warehouse Operators

The surcharge is mandatory. Your response to it is not. Five approaches below — use them alone or stack them — that reduce exposure for operators, tenants, and investors across Palm Beach County's industrial corridor.

1. Activate Foreign-Trade Zone Benefits

FTZ #135 operates under the Port of Palm Beach as grantee, covering Palm Beach, Martin, and St. Lucie Counties with eight designated sites, per the Port of Palm Beach's FTZ program page. Key sites include 286 acres at Palm Beach Park of Commerce in Jupiter, 25 acres at the Port of Palm Beach in Riviera Beach, and 24 acres at Palm Beach International Airport near West Palm Beach. Most tenants I talk to in PBC don't even know FTZ #135 exists — that's a competitive advantage sitting on the table for anyone importing through the port.

In an FTZ, tariffs are assessed when goods leave the zone for domestic consumption — not when they enter. Goods re-exported incur zero U.S. duties. And the "inverted tariff" benefit? Manufacturers pay the lower finished-product rate instead of higher component rates when assembling within the zone. Port Everglades hosts FTZ #25 (Broward County), and PortMiami expanded FTZ #281 to cover all of Miami-Dade County in November 2023.

2. Use Bonded Warehouse Space for Duty Deferral

Bonded warehouses allow importers to defer tariff payments for up to five years under CBP regulation — paying duties only upon withdrawal for domestic sale, at the rate in effect on the withdrawal date. If Section 122 expires July 24 and you withdraw goods on July 25, the surcharge does not apply. For the full breakdown of bonded warehouse mechanics, CBP application requirements, and cost structures, see the bonded warehouse tariff deferral guide.

3. Renegotiate Lease Terms to Offset Tariff-Driven Cost Increases

Tenants absorbing higher duty costs have less margin for occupancy. The current lease negotiation environment in Palm Beach County favors tenants who act now — vacancy at 6.8% provides leverage that a thinning construction pipeline will erode by late 2026.

Target free rent periods of 3–4 months on a five-year term, TI allowances of $5–15 per square foot for warehouse buildout and improvements, and NNN expense caps limiting annual operating cost escalation. Florida's elimination of the commercial rent sales tax under HB 7031 (effective October 1, 2025) already saves tenants roughly $8,800 per year on a 10,000-square-foot space at $16 per square foot — redirect that savings toward absorbing tariff impact.

4. Pivot Supply Chains Through Florida's Nearshoring Corridor

Source Logistics' 2025 nearshoring analysis puts the number at 80% of COOs planning to increase nearshoring within three years — up from 63% in 2022. Mexico surpassed China as the top U.S. goods trading partner in 2023 and hasn't looked back.

Florida is the primary gateway for North-South trade, accounting for 29% of all U.S. trade with the Caribbean and Latin America, per the Florida Supply Chain Summit. For warehouse tenants in Boca Raton and Lake Worth involved in re-export or LATAM distribution, this corridor offers a structural hedge: goods re-exported through bonded facilities or FTZ zones incur zero U.S. duties regardless of Section 122.

5. Optimize Inventory Timing Around the July 24 Expiration

If Section 122 expires as scheduled, goods entering the country on July 25 would not carry the surcharge. Importers with sufficient warehouse capacity and capital reserves can time large shipments to arrive after expiration. Importers using bonded warehouses have additional flexibility — goods already stored face the duty rate at withdrawal, not at import.

The risk: Congressional action is unpredictable, and the 24-state lawsuit could invalidate the surcharge before its expiration. Building a flexible warehouse operation — with overflow capacity on shorter terms rather than rigid long-term commitments — hedges against timing uncertainty. Evaluate spaces with adequate clear height and dock access to handle surge volumes when the inventory timing strategy calls for rapid receipt.

What Happens After July 24, 2026?

Three scenarios are on the table.

Scenario 1 — Section 122 Expires. The surcharge ends after 150 days. Importers who deferred duties in bonded warehouses can withdraw goods without the surcharge. The IEEPA refund portal (CAPE — Consolidated Administration and Processing of Entries) would process claims for tariffs paid under the invalidated IEEPA authority; that portal was approximately 70% complete as of March 12, 2026, per Global Trade Alert. Import volumes likely rebound, but the underlying tariff structure (Section 301, Section 232) remains intact.

Scenario 2 — Congress Extends. Not unlikely. CRFB estimated a permanent 10% surcharge would generate approximately $900 billion over FY2026–2036; a 15% rate would produce $1.3 trillion. Given the revenue incentive, extension is plausible. This scenario accelerates demand for bonded and FTZ-designated space — property owners weighing a sale should note that sustained tariff revenue may increase industrial asset values as domestic production and nearshored supply chains generate sustained demand for local distribution capacity.

Scenario 3 — Courts Strike It Down. The 24-state lawsuit argues Section 122's statutory requirements — specifically that a "fundamental international payments problem" must exist — have not been met. A U.S. Court of International Trade judge ordered immediate IEEPA refunds on March 4, but compliance was suspended March 6, per EY's tariff analysis. A ruling against the surcharge would unwind the duty obligation retroactively.

Regardless of outcome: negotiate with tariff uncertainty priced in, keep your bond above current requirements, and build enough operational flex to shift inventory timing fast.

Frequently Asked Questions

What is the Section 122 tariff surcharge?

Section 122 of the Trade Act of 1974 authorizes the president to impose a temporary import surcharge of up to 15% to address balance-of-payments deficits. It was invoked for the first time in history on February 24, 2026, imposing a 10% ad valorem surcharge on virtually all U.S. imports, per the Federal Register. The surcharge expires July 24, 2026, unless Congress acts.

Does Section 122 apply to goods already in a bonded warehouse?

No — goods in a bonded warehouse are assessed duties at the rate in effect when withdrawn for domestic consumption, not when imported. If Section 122 expires on July 24 and goods are withdrawn after that date, the surcharge would not apply, per CBP's Bonded Warehouse Manual.

How does Section 122 affect warehouse lease rates in Palm Beach County?

Section 122 doesn't directly change lease rates, which hit a record $16.01 per square foot NNN in Q4 2025, per Colliers. The indirect effect is demand-driven: higher duties compress tenant margins, which can push tenants to downsize on larger spaces while driving up demand for bonded and FTZ-designated facilities. Property owners should monitor tenant health and bond sufficiency during the surcharge period.

What is FTZ #135 and how can Palm Beach County businesses use it?

Foreign-Trade Zone #135, operated by the Port of Palm Beach, covers Palm Beach, Martin, and St. Lucie Counties with eight sites. Key locations include Riviera Beach (Port of Palm Beach), Jupiter (Park of Commerce), and Palm Beach International Airport near West Palm Beach. Businesses within the zone defer duties until goods leave for domestic sale, eliminate duties on re-exports, and can access inverted tariff rates on assembled goods.

Are USMCA goods from Canada and Mexico exempt from Section 122?

No. While USMCA-compliant goods are exempt from country-specific tariffs, the Section 122 surcharge applies to all imports regardless of origin, per the Tax Foundation. Roughly 85% of Canadian and Mexican imports were claiming USMCA exemptions by January 2026 — those goods now carry a 10% surcharge they did not face before February 24.

What should warehouse landlords do during the surcharge period?

Three priorities: First, assess tenant exposure — tenants importing goods face higher costs and potential bond insufficiency, so review their financial health. Second, audit lease structures for escalation caps and ensure operating cost provisions are clearly defined. Third, evaluate listing available space at competitive rates — the construction pipeline remains thin at under 800,000 square feet countywide (Colliers Q4 2025), and demand from bonded and FTZ operators may create premium pricing for compliant, well-specified buildings.

How do I check my customs bond sufficiency?

Contact your customs broker or surety company to verify your continuous entry bond covers at least 10% of your estimated annual duties, taxes, and fees — including the Section 122 surcharge. In FY2025, CBP flagged a record 27,479 bond insufficiencies valued at $3.6 billion, per CNBC. Insufficient bonds mean CBP holds freight until a new bond is secured — at least 10 days.

Where can I find warehouse space in Palm Beach County to support tariff mitigation?

Browse available warehouse listings across West Palm Beach, Boca Raton, Delray Beach, Jupiter, Lake Worth, Boynton Beach, and Riviera Beach. For bonded-specific options and CBP application requirements, see the bonded warehouse guide. For FTZ activation, contact the Port of Palm Beach's FTZ #135 program office. For help sizing your space needs or comparing industrial parks, reach out directly — I work with operators across every submarket in the county.

This article is for informational purposes only and does not constitute legal, financial, or investment advice. For specific guidance, consult a qualified attorney or CPA.

Zachary Vorsteg | Cornerstone Realty Equal Housing Opportunity