The United States has imposed ad valorem tariffs of 10–12.5 percent on imports covering approximately 99 percent of merchandise goods from more than 60 countries, including India, following Section 301 forced labour investigations. The move is aimed at strengthening enforcement against forced labour practices and tightening access to the U.S. market for countries found to have inadequate compliance.
The new levies follow a temporary 10 percent tariff imposed in February, which expires on July 24, when the Section 301 investigations were initiated under the relevant U.S. law. The Office of the United States Trade Representative (USTR) issued a notification in this regard on Thursday, bringing the tariff measures into effect immediately.
The USTR notification stated: "As a result of these determinations, the Trade Representative proposed to determine in each investigation that action is appropriate under Section 301 to obtain the elimination of the actionable acts, policies, and practices, including imposing ad valorem tariffs on all goods of each investigated economy, with exemptions for certain goods. To obtain the elimination of the actionable acts, policies, and practices in each investigation, the Trade Representative proposed Section 301 tariffs." The notification further stated that the Trade Representative proposed ad valorem tariffs of 10–12.5 percent on merchandise goods imported from the countries under investigation.
The Trade Representative proposed 10 percent ad valorem tariffs on goods from economies that impose a forced labour import prohibition but do not yet enforce it effectively (Canada, Ecuador, the European Union, Indonesia, Mexico, and Pakistan); have undertaken commitments on forced labour import prohibitions under their respective Agreements on Reciprocal Trade (Argentina, Bangladesh, Cambodia, Ecuador, El Salvador, Guatemala, Indonesia, Malaysia, and Taiwan); or have implemented a partial regime that restricts the importation of certain goods produced with forced labour (the United Kingdom).
For all other economies whose failure to impose effective forced labour import prohibitions was found to be actionable under Section 301, the Trade Representative proposed 12.5 percent ad valorem tariffs. In addition, the Trade Representative proposed establishing a textile mechanism that would allow a specified volume of apparel and textile imports to enter the United States at a zero Section 301 tariff rate.
To increase landed costAccording to the Federation of Indian Export Organisations (FIEO), the additional 10 percent Section 301 tariff imposed by the United States on imports from India will increase the landed cost of Indian products. However, the overall impact should be viewed in the proper competitive perspective rather than through the headline tariff alone.
S C Ralhan, President, FIEO, said, "India has not been singled out under the new US measure. The fact that India has been placed in the lower 10 percent tariff category, while several competing exporting nations including China, Vietnam, Thailand, Türkiye, UAE, Brazil, South Africa and others face a higher tariff of 12.5 percent, reflects the recognition by the US of the policy measures taken by the Government of India to strengthen its framework relating to forced labour. This has helped India secure a relatively favourable position compared to many of its global competitors."
Labour intensive sectors under tariff netMany of India's direct competitors in labour-intensive sectors such as textiles, garments, leather and footwear—including Bangladesh, Cambodia, Pakistan, Sri Lanka, Indonesia and Malaysia—have also been subjected to the same 10 percent tariff. Consequently, Indian exporters largely retain their relative competitiveness in these sectors, as competing suppliers will face a similar duty incidence in the US market.
More importantly, Indian exporters could benefit from trade diversion in several product segments where competing countries are subject to the higher 12.5 percent tariff. Even a differential of 2.5 percent can influence sourcing decisions in highly competitive markets, particularly where Indian exporters are able to offer quality products, reliable deliveries and stable supply chains.
FIEO emphasised that the measure is not a finding against Indian exporters or Indian products, but forms part of a broader country-level US policy applicable to a large number of economies. Several important product categories, including steel, aluminium, auto components, pharmaceuticals, pharmaceutical ingredients, certain agricultural products already covered under Section 232 measures, continue to enjoy exclusions, thereby reducing the impact on a number of export sectors.
Advantage IndiaRalhan noted that the Government of India deserves appreciation for proactively strengthening the country's legal and policy framework on forced labour, which has contributed to India being placed in the lower tariff bracket. "The Government's timely policy interventions and continuous engagement with the United States have helped India secure a relatively competitive tariff position vis-à-vis many of its key trading rivals. Going forward, sustained bilateral dialogue will be equally important to secure wider product exclusions, seek treatment comparable with other partner countries, pursue India's inclusion in any textile tariff-rate quota mechanism and work towards an early review of the tariff," Ralhan said.
FIEO advised exporters not to draw broad conclusions based solely on the additional 10 percent tariff but to undertake a product-wise assessment of the applicable US tariff, available exclusions and the tariff treatment of competing supplier countries. Exporters should also strengthen supply-chain compliance, enhance productivity and continue investing in quality, innovation and value addition to leverage emerging opportunities.
"Indian exporters have repeatedly demonstrated resilience in overcoming global disruptions. While the new tariff presents challenges, it also offers opportunities for India to expand its presence in sectors where competing countries now face relatively higher duties. With proactive industry response and continued Government support, Indian exports remain well positioned to sustain their growth in the US market," Ralhan concluded.
DILIP KUMAR JHA
Editor
dilip.jha@polymerupdate.com
