USTR Report on Forced Labor Enforcement Highlights June 2026 Import Developments

The Analysis

Strictly speaking, nothing new took effect on 17 June. What arrived that day was a roundup, Wilson Sonsini's review of the month's U.S. import developments, and inside it the item I want to spend this column on: the report the Office of the U.S. Trade Representative published at the start of the month, on 2 June, on whether America's trading partners impose and actually enforce forced labor standards. USTR's characterization was blunt. Globally inadequate. That finding is the legal predicate for what came next.

The next thing is a proposal, and the distinction matters more than anything else in this piece. On 5 June USTR published a notice of proposed action in the Federal Register: new Section 301 tariffs of 10 to 12.5 percent on all U.S. trading partners. Proposed, not levied. Comments are being accepted through 6 July 2026 under docket USTR-2026-0265, and USTR has said it is particularly interested in three things: whether the rates should be higher, whether there should be exclusions, and whether textiles need a mechanism of their own.

Here is the exception I would circle before anyone does anything else. The rate is split in two, and the split is not a reward list. The lower 10 percent is proposed for trading partners that already maintain forced labor import prohibitions, and for countries that have committed to address forced labor concerns through reciprocal trade agreements concluded with the United States over the past year, including Argentina, Bangladesh, Cambodia, Canada, Ecuador, El Salvador, the European Union, Guatemala, Indonesia, Malaysia, Mexico, Pakistan, and the United Kingdom. The proposed 12.5 percent covers the rest of the investigated countries, a list running from Algeria and Angola through China, India, Japan, Korea, Taiwan, Thailand, Turkiye, Vietnam and dozens more. There is no origin in this proposal that escapes a rate. The only question is which one.

Let me be precise about what a Section 301 action is, because the label gets used loosely in trade press. The statute authorizes the Trade Representative to act against a foreign country's practices after an investigation and a determination. What USTR did on 2 June was publish the determination on the enforcement question. What it did on 5 June was propose the remedy. Those are two instruments, and the second is not self-executing: between a proposed action and an effective duty there sits a notice-and-comment process, and in this case that window closes in days rather than months. If you take one date away from this column, take 6 July.

The precondition question is where most of the misunderstanding sits. I have watched people read “10 to 12.5 percent” as though the number were already printed on the entry summary. It is not. Strictly speaking, no new tariff is in effect. What is in effect is the 10 percent temporary import surcharge under Section 122, which is scheduled to expire in late July, and which the Court of International Trade has already held unlawful in a decision now on appeal. So the importer's actual near-term position is a surcharge that is running out and a Section 301 proposal that has not begun. That gap is the whole planning problem, and it is measured in weeks.

Don't jump to conclusions about the succession either. It is tempting to read the forced labor proposal as the obvious replacement for the expiring Section 122 surcharge, since the timing lines up and the policy direction is the same. The legal bases are different. Section 122 and Section 301 rest on different findings, different procedures, and different records, and one lapsing does not install the other. What I can say without overreaching is that the proposal is built to be more durable than the measures the courts have been striking down. That is the plain reading of an administration working through full notice-and-comment rather than emergency authority, after the Supreme Court held in February 2026 that the IEEPA tariffs imposed since February 2025 were unlawful.

Now the enforcement half of the story, which is the half that does not wait for a tariff. The report's own emphasis, and the roundup's, is that scrutiny of supply chains with exposure to regions where forced labor is suspected is continuing. That scrutiny operates today, under authority already on the books, and it operates at the shipment. Detention and exclusion are the outcomes named. If your goods are stopped, the schedule damage and the cash damage arrive long before any rate question is settled, and they arrive whether or not the Section 301 proposal is ever finalized.

Here I want to state the working assumption carefully, because I am not going to recite statutory text I have not verified in front of me. Under the forced labor import prohibition that already exists in U.S. law, the practical experience of importers is that once a shipment is flagged, the burden of showing the goods are clean falls on the party trying to bring them in. Treat that as the working assumption, and have your counsel confirm the precise standard and its exceptions against your facts. What follows from the assumption is not a legal conclusion but a record-keeping posture: if the burden is yours, the record has to exist before the flag, not after it.

The roundup's advice to importers is to strengthen due diligence and documentation, and I agree with it as far as it goes, though I would put the emphasis somewhere else. The useful question is not whether you have a policy document. It is whether you can trace a given finished good back through the chain to the raw material and to the entity that produced it, and whether that trace is evidenced by something created in the ordinary course of business rather than assembled after a detention notice arrives. A supplier attestation collected in a week under pressure is worth less than a purchase order, a production record and a payment trail collected over two quarters. Time scale matters here: this is a quarters-and-years exercise, not a scramble.

Let me put numbers on the rate differential, with the assumptions stated. Assume an importer with 20 million dollars of annual entered value from an origin that would fall in the proposed higher tier, and assume for simplicity that the entire entered value is exposed. At 12.5 percent that is 2.5 million dollars a year in additional duty; at 10 percent it is 2.0 million. The difference between the two tiers is 500,000 dollars a year, or 125,000 a quarter. Now assume the importer operates on an 8 percent net margin. Absorbing the higher tier in full would consume 2.5 million dollars, against an annual profit on that book of 1.6 million. The duty as proposed exceeds the annual profit. I am not telling anyone where to buy or what to charge. I am telling you the arithmetic of this proposal is not marginal, and that it should be run on your own entered values before the comment period closes rather than after a final action lands.

Second calculation, on the enforcement side rather than the rate side, because it is the one people underweight. Assume one detained shipment worth 400,000 dollars at entered value, held 30 days while evidence is assembled. At a 25 percent annual carrying cost, 30 days is roughly 8,200 dollars. Add the demurrage and the re-delivery that follow a missed delivery window, and add the contractual penalty if your customer agreement has one. Then add the item that actually hurts: if the shipment is excluded rather than released, the 400,000 is gone. One exclusion in a year costs more than a quarter of the tier differential on the 20 million book I used above. If you are deciding where to spend compliance effort this quarter, that is the comparison to make.

A third calculation, on cash, because two flows are moving in opposite directions at once. The out-flow is the proposed duty. The in-flow is the IEEPA refund pipeline: after the Supreme Court's February decision the government began refunding certain reciprocal and fentanyl-related tariffs through the Consolidated Administration and Processing of Entries system, and importers have submitted refund requests through CAPE for 15 million customs entries, with more than 20 billion dollars in refunds approved and tens of billions more being processed. Here is the exception that stops me calling that settled. The Department of Justice, in a mandamus petition to the Federal Circuit, has asserted that the CIT's orders prescribing universal injunctive relief are plainly unlawful under Trump v.

CASA, and it describes the refunds already made as processed voluntarily by CBP rather than pursuant to court order. Read that as: the pipeline exists, its legal footing is contested, and its pace is a dispute between a court and an agency rather than a schedule you can plan against. Do not recognize those refunds as cash in a forecast that already assumes a new 12.5 percent duty.

One more instrument belongs in the same file, because it changes the calculus for a specific group of readers. On 5 June the administration issued an executive order on strengthening customs enforcement. It broadens the definition of foreign importers of record subject to heightened enforcement, broadly enough on the reading I have seen to capture subsidiaries of U.S. multinationals and not only foreign-headquartered companies. It directs maximum penalties for customs brokers who fail to conduct due diligence, repeatedly represent noncompliant clients, or fail to cooperate with information requests. It introduces a good standing concept for importers that could be evaluated on the basis of quite distant affiliates.

And it eliminates CBP discretion to set a minimum penalty below 50 percent of the statutory penalty. That last one I would flag to anyone who has relied on voluntary disclosure as a quiet way to resolve an issue: if mitigation below the halfway mark is no longer available, the expected value of coming forward changes, and more of these matters end up litigated. This is a structural change in enforcement posture, and it plays out over quarters and years.

Two further dockets deserve a line, because they carry July deadlines of their own. USTR has also issued a request for comments on the scope and operation of a mechanism to promote reciprocal managed trade with China, as the work of the U.S.-China Board of Trade is defined; comments on that one run to 10 July 2026. And USTR published a separate Section 301 determination on Brazil, finding that its tariff policies, digital trade and electronic payment services policies, lax anti-corruption enforcement and inadequate intellectual property protection disadvantage U.S.

businesses, and proposing a 25 percent tariff on most Brazilian goods subject to the same notice-and-comment process. On the other side of the ledger, the government adjusted Section 232 metals tariffs this month, giving some parties a reduced rate of 15 percent against 25 percent previously, particularly for agricultural, industrial and HVAC equipment, with favorable provisions extended to parties that recently signed trade deals with the United States. Relief and burden are arriving in the same month, which is why origin-level mapping beats headline reading.

So what to do, by when, and who owns it. The comment docket is the only lever open to you right now and it closes on 6 July. If your industry has a position on the rate level, on exclusions, or on the textile question USTR raised, the association route is usually faster than drafting alone, and an association letter filed on time carries more weight than a company letter filed late. Internally, your trade compliance lead should produce, in the week of 18 June, a two-column origin map with annual entered value against each origin, sorted into the proposed 10 percent group and the proposed 12.5 percent group, and hand it to whoever owns pricing by 25 June. That map is a legal classification exercise. I am deliberately not touching the sourcing question, which is a commercial judgment and not mine to make.

Then hold three dates on a quarterly cadence. The comment deadline of 6 July. The late-July expiry of the Section 122 surcharge, together with the appeal of the decision that struck it down. And the progress of the separate Section 301 investigations still underway, including the one on excess structural capacity in certain trading partner economies, because those stack: a 12.5 percent forced labor action and a structural capacity action on the same origin are additive, and anyone modeling only one of them is modeling the wrong number.

The pitfalls, then. Treating a proposed rate as an effective one and pricing cargo on it before final action. Treating the 10 percent group as a safe list, when its membership is conditioned on a country's own forced labor import prohibition and on commitments made in agreements that can be renegotiated. Assuming an exclusion process will exist because one existed somewhere else. Assuming the refunds are money in hand. And the oldest one in the book: assuming that because a measure is aimed at someone else's country, it does not reach your supply chain. On a proposal written this broadly, with exposure defined at the level of inputs rather than finished goods, the reach question is what decides whether you are in scope at all.

The second thing importers consistently model wrong is stacking, and the roundup gives you the pieces for it in the same month. Let me run it with every assumption explicit. Assume a 100 dollar entered value for a product with aluminum content, from an origin in the proposed 12.5 percent group. Assume a most-favored-nation rate of 3 percent. Assume the Section 232 metals rate now applies at the adjusted 15 percent rather than 25 percent on the metal content, and assume that metal content is 30 dollars of the 100; that is 4.50 dollars of 232 duty.

Assume the proposed Section 301 forced labor rate applies to the full entered value: 12.50 dollars. Add the 3 dollars of MFN and you are at 20.00 dollars against a 100 dollar entered value, before any fee. Confirm the real application against your own classification rather than against my arithmetic, because I am showing you the shape of the stack and not your entry. But look at what the shape says: the tariff line that arrives last is not necessarily the largest, and it is always the one nobody has modeled.

The other piece of work worth starting now, and it is quarters of work rather than weeks, is making the forced labor file defensible rather than merely existent. Defensible is a narrow word here. It means you can name the tier-two and tier-three suppliers for the product families in scope. It means your contract carries an audit right and a remediation obligation rather than a one-page code of conduct nobody has exercised. It means purchase records, payment trails and the production records you were given all tell the same story when they are laid side by side.

And it means there is a written escalation path that was used before anyone from the government asked a question. None of that is a defense in itself, and I am not going to tell you it is. It is the difference between a detention you can answer in ten days and one you cannot answer at all, and the response window is the only part of this that is actually yours to control.

On ownership, four questions sit with four different people, and mixing them up is how things get missed. The rate question belongs with whoever sets landed cost, because it is a price question wearing a legal costume. The scope question, whether you are in the proposal at all and on which tier, belongs with trade compliance, and it should be answered in a signed document rather than in a meeting. The refund question belongs with finance and should be tracked against approvals rather than submissions. The question of whether your corporate structure puts you inside the broadened foreign importer of record definition belongs with counsel and with nobody else. Each of the four runs on a different clock, and only one of them runs in days: the comment deadline.

Where this lands on the paperwork for a particular shipment, what goes in the file, what the broker needs, how a detention response is actually assembled, Derek Xu follows that more closely than I do, and I will leave it to him. My side is narrower and slower: what the rule says, what its precondition is, when the clock runs, and what happens if the precondition is not met. On all four, the honest answer today is that the report is a finding, the tariff is a proposal, the enforcement is live, and the comment window closes on 6 July. None of that is a reason to panic. All of it is a reason to have your file in order before the file is asked for.

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— By Dr. Ingrid Voss