Gunnercooke | 60 economies, 1 night’s notice

How USTR’s forced labor Section 301 tariffs impact entry filers

If you went home Thursday evening with a clean entry-summary queue, you came back Friday to a different tariff schedule.

Overview

On Friday, July 24, 2026, the U.S. Trade Representative’s final action took effect for 60 parallel investigations under Section 301 of the Trade Act of 1974. The theory of the case was unusual, as USTR targeted the failure of each trading partner to impose and effectively enforce its own ban against imports made with forced labor. USTR found no such ban at all for 54 of the economies; it found no effective enforcement for the other 6 (Canada, Mexico, Ecuador, the European Union, Pakistan, and Indonesia).

The remedy is a broad tariff that applies to each country’s goods regardless of the goods’ actual connection to forced labor. Accounting for the standing exceptions, the tariff applies to roughly 35-50% of all US imports from the investigated economies. Tariff levels are 10% or 12.5% per country, also varying with whether these rates are caps inclusive of MFN duties.

The investigation has been known since March. What was not transparent until the final hours before implementation was what importers actually needed: the final rates by country, the country-specific exemption annexes, and the 471 product exemptions added in final but omitted from USTR’s June proposal. Those became knowable at publication – roughly a day before duties attached.

Goods warehoused and in transit are logged upon entry

The in-transit relief was thin and expired on July 28, far from a more commercially salient 45-day grace period. Further, in-transit relief is pegged to time of entry, not arrival. This means goods that were landed July 26 and awaited a broker’s document request until July 29 were subject to the new duties.

Bonded warehouse merchandise is squarely exposed. Duties are assessed on withdrawal, so goods that entered the warehouse in April and are withdrawn in August are subject to the new duties as well.

Origin, not shipment

The tariffs apply to country of origin, not of export. With fairly uniform coverage of countries originating 99.4% of US imports overall, the new tariffs allow exporters little in the way of avoidance. Instead, a more viable but less impactful strategy is rate arbitrage: supply chains may be altered just for 2.5% marginal savings, or potentially for further savings with use of an MFN-capped country of origin.

A risk factor is that country of origin is embedded in Chapter 99 HTSUS classification. A wrong origin is thereby subject to customs penalties for fraud and negligence under 19 U.S.C. § 1592.

Duties apply to FTA-qualifying merchandise past North and Central America

This is the provision that will surprise many. Under U.S. note 52(a), goods eligible for special tariff treatment are still subject to the additional duties. There are only carve-outs for two regional free trade pacts:

• Products of Canada or Mexico entered duty-free under USMCA; and
• Textile and apparel goods of Guatemala, El Salvador, Honduras, Nicaragua, Costa Rica, or the Dominican Republic entered duty-free under the CAFTA-DR trade deal.

The USMCA carve-outs create their own operational scramble for importers who do not hold documentation of origin because the duty was zero regardless. These importers have a sudden need to gather origin documentation in time to apply it to impending entries, in order to avoid a 10% tariff.

Stacking, and the Section 232 escape hatch

These duties stack generally on top of other tariffs, including with any applicable antidumping and countervailing duty orders. A significant exception is Section 232. Goods subject to Section 232 duties on metals and derivatives, automotive and parts, wood products, and semiconductors are exempt under heading 9903.05.90. Effective on July 31, patented pharmaceuticals join them.

A stacking note to bear in mind is that the Section 232 exception was worded broadly, as though a derivative product with Section 232 coverage on only a portion of its value is fully exempt from the Section 301 duties. This is not expressly addressed, and past customs practice has been apportionment.

Stacking with MFN tariffs is also limited by country. For example, tariffs on EU and Swiss origin merchandise do not stack as the 10% duty is a cap on the MFN + 301 total.

Product-specific exclusions? Sunset? Drawback? De minimis? Investigation-wide judicial review?

The investigation results omitted mention of some elements common to Section 301 actions, ruling out others.

USTR expressly declined to establish a product-specific exclusion process for the forced labor duties. Commenters sought one and were rebuffed at the president’s direction. Calls in the comments for periodic reviews were pointed to the Section 307 modification process.

The notice is also silent on duty drawback and on low-value shipments, a conspicuous silence given how explicitly prior Section 301 and 232 actions addressed both issues. We should treat this silence as an open question.

Finally, USTR provided extensive and detailed severability language claiming that the investigation is actually 60 independent investigations. This produces a possibility that a successful legal challenge involving a specific exporting country will only result in the tariff’s removal for that country.

By Luke P. Engan, Esq. Partner, US Customs and International Trade, gunnercooke LLP

Compliments of gunnercooke – a member of the EACCNY