USTR Launches Sweeping Section 301 Investigations Targeting Global Manufacturing "Overcapacity" And Forced Labor Across Major Trading Partners

I. Executive Summary

On March 11 and 12, the Office of the United States Trade Representative (USTR) initiated two unprecedented Section 301 investigations affecting imports from numerous trading partners. The first investigation purports to examine whether the acts, policies, and practices of certain trading partners have created "structural excess capacity" in manufacturing sectors that restrict U.S. commerce (the "Overcapacity Investigation"). The second investigation purports to examine whether the failure of foreign countries to prohibit the importation of goods produced with forced labor is unreasonable or discriminatory and burdens or restricts U.S. commerce (the "Forced Labor Investigation").

Unlike prior Section 301 actions, which typically targeted a single country per investigation, the new investigations cover numerous economies simultaneously. In particular, the Forced Labor Investigation targets 60 of the largest trading partners of the United States, including Canada, China, the European Union, Japan, Korea, India, Mexico, Indonesia, Vietnam, and others. The Overcapacity Investigation similarly includes the European Union and 15 other major trading partners.

In its notices, the USTR specifically refers to industries such as steel, aluminum, automotive, batteries, and semiconductors, among others. The notices do not make clear whether USTR aims to impose tariffs on all goods imported from certain countries, or only on selected goods.

Section 301 investigations historically have resulted in the imposition of significant tariffs. The Section 301 tariffs imposed on China beginning in 2018, which remain in effect today, imposed tariffs ranging from 7.5% to 100% and were expanded several times to cover hundreds of billions of dollars of imports from China.

The new investigations align with the Administration's broader trade agenda and are launched in response to the U.S. Supreme Court's decision finding that the imposition of tariffs under the International Emergency Economic Powers Act (IEEPA) was unlawful.¹ Public statements by the USTR indicate that the Administration aims to complete the investigations before the temporary tariffs imposed under Section 122 expire in July this year,² indicating that the Administration seeks to use Section 301 as an alternative legal basis for continuing the broad-based tariff measures the court held the President lacked authority to impose under IEEPA. Moreover, many of the countries named in the Overcapacity Investigation had previously reached Agreements on Reciprocal Trade with the U.S. in an effort to reduce the tariffs imposed by the Trump Administration under IEEPA. Now that the U.S. Supreme Court has struck down the use of tariffs under IEEPA, the Trump Administration intends to use Section 301 as an alternative pathway to enforcing the agreements previously reached with these countries.

Key Dates for the Overcapacity and Forced Labor Section 301 Investigations

II. Background and Scope of the Investigations

These new investigations target numerous major trading partners, including Canada, China, the European Union, Japan, Korea, India, Mexico, Vietnam, Singapore, Indonesia, Malaysia, Thailand, etc. The inclusion of both major developed economies and emerging manufacturing hubs shows that these investigations will have wide-ranging implications for global supply chains. The countries included in these investigations make up well over 75% of imports into the U.S.³

Regarding the Overcapacity Investigation, USTR asserts that some of the U.S.' trading partners have allegedly maintained industrial capacity "untethered from the incentives of domestic and global demand," leading to overproduction and underutilized capacity in global manufacturing sectors. USTR's Overcapacity Investigation notice appears to contain several errors, including its claim that the U.S. has a large trade deficit with Singapore, when in fact the U.S. maintains a large trade surplus with Singapore.

Separately, in the Forced Labor Investigation, USTR alleges that certain economies have failed to impose or effectively enforce bans on the importation of goods produced with forced labor into their markets, thereby placing U.S. workers and businesses at a competitive disadvantage. This theory raises questions about the legality of using Section 301 to address alleged failures by foreign governments to adopt regulatory measures within their own jurisdictions, as the statute has traditionally been used to address affirmative acts, policies, or practices that burden or restrict U.S. commerce.

Section 301 of the Trade Act of 1974 authorizes USTR to investigate and take discretionary actions if an act, policy, or practice of a foreign country is "unreasonable or discriminatory and burdens or restricts United States commerce."

The typical process involves several stages:

1. Initiation of the investigation by USTR.
2. Public comment period, during which interested parties may submit written comments.
3. Public hearings before the Section 301 Committee.
4. USTR determination as to whether the practices investigated are actionable under Section 301.
5. Administering trade action, which may include tariffs, quotas, or other restrictions, under the direction of the President.

Under the law, USTR will have 12 months to issue its determinations in these investigations. However, statements from USTR make clear that the Administration anticipates completing these investigations by July 2026, before the Section 122 tariffs expire. Section 301 actions can also evolve over time. For example, the tariffs imposed following the China Section 301 investigation were modified and expanded multiple times, ultimately covering a significantly larger volume of imports than initially proposed.

III. Opportunities for Interested Parties to Submit Comments

Foreign governments, foreign producers/exporters, U.S. importers, and industry groups affected by these investigations should consider participating in the comment process and hearings.

For the Overcapacity Investigation, USTR specifically invites comments addressing:

• Whether the acts, policies, or practices of the investigated economies create or maintain structural excess capacity or production in specific sectors.
• Whether such practices are unreasonable or discriminatory.
• Whether these practices burden or restrict U.S. commerce, and if so, the nature and level of the burden or restriction.
• Whether they are actionable under Section 301.
• What actions, if any, the U.S. should take in response.
• Additional considerations for assessing acts, policies, and practices that contribute to structural excess capacity or production in manufacturing sectors.

For the Forced Labor Investigation, USTR specifically invites comments addressing:

• Whether the economies under investigation have adopted, or are developing, measures prohibiting imports of goods produced with forced labor, and whether those measures are effectively enforced.
• Whether the failure to prohibit imports of goods produced with forced labor constitutes an unreasonable or discriminatory practice burden to U.S. commerce.
• The extent to which such failures harm U.S. commerce, including effects on U.S. exports, prices, output, or worker wages.
• What actions, if any, the U.S. should take in response, including the possible scope and level of tariffs or other import restrictions.
• The appropriate overall value or volume of imports that should be subject to any additional duties imposed as a result of the investigation.

Affected parties may consider submitting comments explaining that capacity levels in many industries reflect normal market conditions rather than government distortion or that the governments identified in the Forced Labor investigation are already taking measures to stop the importation of goods made with forced labor. They may also highlight the importance of global supply chain integration and the potential costs of additional tariffs for U.S. consumers and downstream domestic manufacturers, particularly in sectors already subject to existing trade remedy measures. Companies could also use the comment period to advocate for an exclusion of certain products from any Section 301 tariffs. In addition, commenters may consider addressing the legality of the investigations, including whether the practices identified by USTR are actionable under Section 301.

Those affected by these investigations or with questions should contact Taft's International Trade practice.

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