Forced Labor - A New Era Of Global Trade Accountability

Key Highlights

Brazil initiates WTO dispute against additional duties imposed by U.S. under Section 301(30 Jul)  

Brazil has initiated a WTO dispute settlement proceeding against the U.S. by requesting consultations concerning additional duties, pursuant to two Section 301 investigations. The measures include an additional 25% ad valorem duty on products originating in Brazil, subject to certain exemptions; and an additional 12.5% ad valorem duty resulting from a separate Section 301 investigation concerning allegations relating to forced labour. Brazil contends that these additional duties, which are imposed over and above the duties applicable, under the U.S. Harmonized Tariff Schedule, are inconsistent with various provisions of the GATT 1994 and the WTO Dispute Settlement Understanding (DSU).  

India seeks WTO consultation with U.S. over years long Quartz Surface Tariff Quota (17 Aug)

India has sought WTO consultations with the United States challenging the four-year tariff-rate quota on imports of quartz surface products. India has raised concerns that the measure restrict market access for Indian exporters and adversely affects India’s exports of quartz surface products to the US. India has requested examination of the measure for its consistency with the U.S.’ obligations under the GATT 1994 and other relevant WTO Agreements.  

WTO members adopt panel report regarding EU duties on Fatty Acid from Indonesia (28 Aug)

On 28^th August 2026, the WTO Dispute Settlement Body (DSB) adopted the panel report - European Union – Anti-Dumping Measures on Imports of Fatty Acid from Indonesia. The panel found that the EU had imposed an anti-dumping duty in excess of the established dumping margin by failing to use the exchange rate applicable on the date of sale while converting certain export transactions from euros into US dollars, thereby acting inconsistently with the WTO Anti-Dumping Agreement.  Indonesia welcomed the findings and called for a prompt implementation, while the EU emphasised that the inconsistency identified was a narrow issue concerning currency conversion in a minor portion of export transactions and maintained that most aspects of its investigation and measures were found consistent with the WTO Agreement.

• United States Trade Representative (USTR) initiated investigation on countries which have not prohibited imports through forced labour.
• USTR imposed additional duty of either 10% or 12.5% on 60 economies.
• India amended its Foreign Trade Policy (FTP) and Handbook of Procedure (HBP) to introduce provisions on import ban of the goods produced out of forced labour.

Various economies have, for several years, maintained laws and regulations prohibiting the importation of goods produced using forced labour. However, the enforcement of such measures has historically remained limited, with investigating and enforcement authorities seldom invoking these provisions or giving them significant attention.  

The topic has come to spotlight after the United States Trade Representative (USTR) on March 12, 2026, announced to initiate investigation under Section 301 of the Trade Act, 1974 into 60 economies including India, which together account for 99.40 percent of U.S. imports. The purpose was to determine whether each of these economies’ have taken sufficient action to prohibit the importation of goods produced with forced labour. The report published by the office of the USTR dated June 2, 2026, has categorized 60 economies into following two categories.

1. The economies that have both failed to impose a legal prohibition on the importation of goods produced wholly or in part with forced labour and to effectively enforce such a prohibition. 54 economies including India falls under this category.
2. Economies that have a prohibition in place but have failed to enforce it effectively. Canada, Ecuador, the European Union, Indonesia, Mexico and Pakistan fall in this category.

Having concluded that these economies lack adequate means to prohibit imports produced through forced labour, the USTR imposed additional custom duties on imports from these countries. Countries that have made commitments to adopt and effectively enforce force labour import prohibits will have a 10% Tariff. India falls into this category because India has made commitments to introduce provisions on prohibition of import ban of goods made out of forced labour. The countries that have failed to adopt a law on forced labour import prohibition will have a 12.5%. The applicable tariff becomes effective from July 24, 2026.

This is not the first time the United States has restricted imports produced through forced labour. The history of restrictions/sanctions date as long as 100 years where US has prohibited the importation of goods produced with forced labour under Section 307 of the Tariff Act of 1930. Infact, the US makes it mandatory in all the free trade Agreements negotiated, the agreement have provisions on elimination of goods produced of forced labour.

Among many sanctions imposed by USA, a classic case to refer is the import ban on products produced wholly or in part in the Xinjiang Uyghur Autonomous Region (XUAR) of China, or by entities named on the U.S. Government’s UFLPA entity list.

The ban followed the United States enaction of Uyghur Forced Labor Prevention Act (UFLPA) on December 23, 2021, which become effective on June 21, 2022. The Act stem from Section 307 of the Tariff Act of 1930 and creates a rebuttable presumption that product produced are made of forced labour used against the Uyghurs and other ethnic minorities in the XUAR.  

Any entity which intended to import goods into USA has to show evidence to demonstrate that goods were not mined, produced, or manufactured wholly or in part in the Xinjiang region of China or by forced labour in the said region. This requirement is set out in the strategy to prevent the importation of Goods Mined, Produced, or Manufactured with Forced Labor in the People’s Republic of China.  

Forced labour provisions in various jurisdictions.

USTR had found that various economies failed to impose a legal prohibition or restriction on the imports of goods produced with forced labour. At the same time, USTR had also found that while six countries have had legal prohibitions, they have failed to effectively enforce a forced labour import prohibition. Out of these six countries, three have been analysed closely.  

Canada has a legal prohibition since 2020 under Customs Tariff item 9897.00.00 to cover goods mined, manufactured or produced wholly or partly by forced labour. As per the USTR report, since the introduction of the law, Canada had intercepted 50 shipments out of which two were ultimately denied entry.

Mexico on February 17, 2023, issued a decree under which goods imported under any tariff heading must not have been produced wholly or partly using forced or compulsory labour. Similarly, European Union adopted Regulation 2024/3015 on 27^th November 2024, which prohibits imports of products made with forced labour. The regulation will become applicable on 14^th December 2027.

India’s response and the way forward. 

Pursuant to the investigation undertaken by USTR, the Directorate General of Foreign Trade (DGFT) has amended the Foreign Trade Policy (FTP) 2023 vide Notification No. 23/2026-27 dated 13^th July 2026 and inserted the following paras- 

1. Para 2.20B is an enabling provision stating that the import of goods produced or manufactured, wholly or in part, through the use of forced labour is prohibited.
2. Para 11.64 defines the meaning of forced labour and states that forced labour shall be considered as defined under the International Labour Organization Forced Labour Convention, 1930 (No. 29)

DGFT has also amended the Handbook of Procedure (HBP) 2023 vide Notification No. 21/2026-2027 dated 13^th July 2026 and inserted para 2.50A which sets the procedure for undertaking an investigation on imports of products produced using forced labour.

Considering the stringent yardsticks set up by USTR that even where there is a law on prohibition existed, the law lacked the elements needed to make it work. Therefore, effective implementation may require clarity on how the DGFT will conduct an investigation. The provisions under FTP 2023 and HBP 2023 now empower the DGFT to undertake the investigation and make appropriate recommendations in the form of sanctions. A standard list of evidence setting out the investigation procedure that DGFT will accept may be prescribed. The clarity may most likely come through detailed rules or guidelines which may be issued by the DGFT time to time.

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