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03 June 2026 USTR issues Section 301 determinations on forced-labor investigations across 60 economies; additional duties proposed and comment period open
On 2 June 2026, the United States Trade Representative (USTR) announced determinations in 60 Section 301 investigations (initiated on 12 March 2026) concerning the failure of various economies to impose and effectively enforce prohibitions on the importation of goods produced wholly or in part with forced labor. For more on the initiation of the Section 301 investigations, see EY Global Tax Alert, USTR initiates Section 301 investigations into 60 economies regarding imported goods produced with forced labor; comment period and hearings announced, dated 13 March 2026. The USTR determined that all 60 investigated economies failed either to impose or to effectively enforce such prohibitions, and that these acts, policies and practices are unreasonable and burden or restrict US commerce. As a result, the USTR has proposed imposing additional duties on imports from these economies, with differentiated tariff rates based on the extent of each economy's forced-labor import prohibition framework and related commitments. The USTR concluded that failures to impose and effectively enforce forced-labor import prohibitions distort global competition by allowing goods produced with forced-labor inputs to benefit from lower costs, thereby disadvantaging US producers and other market participants that comply with labor standards. The USTR determined that all 60 economies subject to the investigations have failed either to impose or to effectively enforce a prohibition on the importation of goods produced with forced labor. Specifically, 54 economies were found to have failed both to impose and effectively enforce such prohibitions, while six economies (Canada, Ecuador, the European Union, Indonesia, Mexico and Pakistan) were found to have failed to effectively enforce existing prohibitions. Based on these findings, the USTR concluded that the acts, policies and practices of all investigated economies are unreasonable and burden or restrict US commerce, rendering them actionable under Section 301. These failures were deemed unreasonable because they undermine the global objective of eliminating forced labor, permit the continued production of goods at artificially low costs through the use of forced-labor inputs and distort competitive market conditions for firms that adhere to internationally recognized labor standards. In addition, the USTR determined that these practices burden US commerce by exposing US producers to unfair competition both in export markets and within the US. The presence of forced labor in global supply chains allows foreign producers to undercut compliant competitors, resulting in the displacement of goods produced without forced labor and negatively affecting US exports, domestic production and employment. The USTR proposes to impose additional ad valorem duties on all products of the investigated economies (subject to specified exclusions), with two tiers:
Annex A provides certain product specific exclusions. In addition to the products listed in the Annex, "the proposed action does not cover informational materials, donations, accompanied baggage; all articles and parts of articles that are subject to section 232 tariffs; USMCA-compliant goods of Canada or Mexico; and textiles and apparel articles that enter duty-free as a good of Costa Rica, the Dominican Republic, El Salvador, Guatemala, Honduras, or Nicaragua under CAFTA DR." Additionally, the USTR has proposed a textile and apparel mechanism that would allow specified volumes of imports to enter at reduced tariff rates. Eligibility under this mechanism would be linked to US export performance by tying the volume of apparel and textile imports from partner economies to their use of US textile inputs (e.g., cotton and man-made fibers). The USTR is seeking stakeholder input on the design, scope and applicability of this approach. These proposed measures introduce significant additional burdens on importers, with imports from a broad range of economies potentially subject to additional duties of 10% or 12.5%. Companies that rely on supply chains involving the trading partners outlined in the determination may face both increased tariff exposure and heightened scrutiny from regulators and customers. Within this higher-rate environment, though, the proposed textile mechanism may create limited opportunities for duty mitigation for certain businesses in the apparel and textile sectors, where tariff reductions could be tied to US export activity. Increased enforcement attention on forced-labor issues may also elevate regulatory, legal and reputational risks, requiring enhanced monitoring, documentation and internal controls across supply chains. The USTR invites comments on the proposed tariffs, including the scope of covered products, the appropriateness of exclusions in Annex A, and the proposed duty rates. The USTR also seeks input on whether tariff treatment should vary based on forced-labor commitments and on the design and application of the proposed textile mechanism. Comments are due by 6 July 2026.
Document ID: 2026-1183 | ||||||
