USTR Publishes Conclusions of Section 301 Investigation Into Forced Labor

If you have not been following tariff updates closely, you may find this news somewhat confusing: Don’t we already have forced labor measures in place? If U.S. importers are already prohibited from importing merchandise made with forced labor, then what is the effect of this investigation?

Like with other Section 301 measures, this report will result in a tariff, not a prohibition on imports.

Moreover, the USTR’s Section 301 report does not, in itself, create a presumption that goods imported from listed countries were made (in whole or in part) with forced labor—so, unlike the Uyghur Forced Labor Prevention Act, it does not trigger U.S. import prohibitions under the Tariff Act of 1930.

(As you may recall, the Uyghur Forced Labor Prevention Act creates the presumption that goods made in whole or in part in the Xinjiang Uyghur Autonomous Region of China or by certain entities designated on the Forced Labor Entity List (distinct from the BIS Entity List) are made with forced labor, unless the importer proves otherwise. This presumption then triggers application of the Tariff Act of 1930’s prohibition on the import of goods made with forced labor.)

Key Takeaways

1. It is possible that USTR will share its research with CBP and the intergovernmental Forced Labor Enforcement Task Force for this purpose, or that the Task Force will consider this material on its own initiative. However, in general the USTR investigated whether these jurisdictions have adequate legislation in place to prevent the import of goods made with forced labor, which could then be recycled through their economies and sent on to the United States. That is, the USTR’s report is suggestive that goods from these countries could contain forced labor because they do not have adequate protections to avoid that outcome, but it does not actually find that the goods imported from listed countries were made with forced labor at any point in the supply chain.
2. From a forced labor standpoint, this report is, at best, a due diligence flag for importers, who should be aware that it is possible goods imported from the listed countries could contain forced labor. Just as CBP already detains goods from countries other than China at high rates to enforce the UFLPA (with goods from other Southeast Asian countries detained most frequently), it could now turn heightened scrutiny on merchandise from other countries named in USTR’s report.
3. But we should not forget the USTR and CBP are separate agencies, and CBP has to have sufficient enforcement capacity to adopt and apply USTR’s conclusions. Right now, those resources are focused on tariff evasion and fraud, and on processing IEEPA tariff refunds.
4. In fact, there is actually a bit of a perverse incentive for CBP not to presume that goods from these countries were made in whole or in part with forced labor because that would deprive the U.S. government of the revenue it would collect from the Section 301 measure. (Though revenue generation is not an explicit goal of Section 301 tariffs, it is generally understood—based on statements from President Trump—that this administration is attempting to replace tariff revenue lost from the invalidated IEEPA tariffs.)

Ultimately, while the countries listed in USTR’s report may in fact fact lack adequate controls to prevent the import of goods made with forced labor, the best way to view the USTR Section 301 investigation is as a means to partially replace invalidated IEEPA tariffs across a large number of jurisdictions through a single vehicle. This insight seems especially keen when you recognize that some of the jurisdictions named on this list are actually our strongest partners in attempting to prevent forced labor: Canada and the European Union.