India Slams US Forced Labour Tariffs: Commerce Ministry Flags 1,600-Item Exemption Loophole

India Slams US Forced Labour Tariffs: Commerce Ministry Flags 1,600-Item Exemption Loophole​

The Indian government has strongly challenged the United States Trade Representative's (USTR) proposal for tariffs on goods linked to forced labor. During a public hearing before the USTR panel, officials pointed out significant inconsistencies in the US approach. These levies, which propose rates ranging from 10 to 12.5 per cent, target imports from 60 economies Washington claims have failed to prevent forced-labor inputs from entering global supply chains.

Brij Mohan Mishra, Joint Secretary at the Ministry of Commerce, testified that the USTR exempts 1,600 items from scrutiny—items that cannot be produced or grown within the US. He stated this exemption undermines both the policy rationale against forced labor and the effort to prevent such impacts through circumvention practices.

Concerns Over Arbitrary Requirements in US Tariff Mechanism​

Mishra also raised concerns regarding the reduced tariff rates applied by the US on textile products manufactured using US cotton and related items. He argued that the textiles mechanism functions as an arbitrary requirement, constraining sourcing decisions for foreign manufacturers without fully addressing the core concern of forced labor.

India maintained that dialogue is open and necessary to address these concerns. However, he stressed that all matters must be handled through the framework of India-US bilateral trade negotiations, rather than via a specific unilateral Section 301 investigation.

Industry Leaders Warn Higher Tariffs Will Inflate Costs​

Representatives from FICCI and CII echoed deep concern over the proposed tariffs. Poornima Shenoy, representing FICCI in the US, warned that imposing additional tariffs will increase costs not only for Indian exporters but also for US manufacturers, importers, retailers, and eventually American consumers.

Shenoy noted that many US industries rely on established sourcing relationships with Indian suppliers due to their quality, reliability, and compliance adherence. Higher tariffs threaten these trusted supply chains by making them more expensive without guaranteeing the identification of goods produced with forced labor.

CII Defends India’s Regulatory Commitment Against Section 301 Claims​

Suchita Sonalika, a representative from CII, provided a firm counter to the proposed tariffs. She asserted that India's existing policy framework does not qualify as 'unreasonable' or 'discriminatory' under Section 301(b) of the Trade Act of 1974. Sonalika confirmed that India possesses a robust constitutional and statutory structure guaranteeing that Indian companies do not engage in forced labor practices.

India Challenges Evidentiary Basis of US Investigations​

The USTR launched two separate Section 301 investigations on March 11 and 12, 2026, covering the 60 economies regarding forced labor and excess industrial capacity. After issuing findings on June 3 concerning forced labor, the USTR proposed these additional tariffs across 54 nations.

India submitted that the USTR failed to meet the evidentiary requirements necessary to demonstrate how the absence of bans in these countries conclusively or substantially distorts market conditions or undermines compliant firms' profitability. India added that a mere lack of an import prohibition cannot be construed as "unreasonable" within Section 301 without meeting other statutory evidence bases.

The country further highlighted that the USTR issued a sweeping determination instead of undertaking an economy-specific analysis across all 60 investigated economies. It stated, concerning India specifically, that there is inadequate and insufficient evidence proving the lack of a forced labor import ban creates any unfair comparative advantage to the detriment of US industry.