Amid Donald Trump administration’s Section 301 probe, the government has revised the Foreign Trade Policy (FTP) to prohibit the import of goods that are produced wholly or partly through forced labour.The move comes against the backdrop of a US investigation into forced labour practices across 60 economies, including India.Through an amendment to the Foreign Trade Policy, 2023, the Directorate General of Foreign Trade (DGFT) has introduced a new provision stating: “The import of goods produced or manufactured, wholly or in part, through the use of forced labour is prohibited”, according to a gazette notification issued on July 13.The notification said the new provisions will take effect after the completion of 30 days from the date of their publication in the Official Gazette.According to the DGFT notification, the central government may, at any time, issue a notification prohibiting the import of specific goods if, following an inquiry or on the basis of any other relevant evidence, it determines that such goods have been produced using forced labour.The notification also states that the procedure for inquiries conducted by the DGFT into the use of forced labour in the production of such goods will be laid down in the Handbook of Procedures, 2023.In addition, the DGFT has inserted a new provision under Chapter 11 (Definitions) of the Foreign Trade Policy, 2023. Under this provision, “Forced Labour” means all work or service which is exacted from any person under the menace of any penalty and for which the said person has not offered himself voluntarily, as defined under the ILO Forced Labour Convention, 1930 (No. 29).
What is the Section 301 probe by the US?
The Office of the US Trade Representative (USTR) is conducting its Section 301 investigations into 60 economies, including India, over concerns relating to forced labour. The USTR has alleged that these countries have not effectively enforced bans on the import of goods manufactured using forced labour.
Section 301: What India needs to know
On June 3, the US proposed imposing a 12.5% tariff on imports from 54 economies, including India, on the grounds that they had failed to prohibit imports of goods produced through forced labour. Separately, Canada, Ecuador, the European Union, Indonesia, Mexico and Pakistan would face an additional import duty of 10%.India is currently engaging with the US on the issue as both countries continue negotiations on a bilateral trade agreement.
India’s stand on Section 301 investigations
India has challenged the US proposal to introduce another round of tariffs linked to alleged forced labour, arguing that the American approach is inconsistent and that such concerns should be addressed through bilateral trade negotiations rather than unilateral measures.Appearing before a panel of the Office of the US Trade Representative (USTR) last week, Brij Mohan Mishra, Joint Secretary in the Ministry of Commerce, questioned the rationale behind the proposed tariffs and drew attention to what India considers inconsistencies in the US framework.
Section 301: India in focus
Mishra noted that the USTR excludes nearly 1,600 products that cannot be manufactured or cultivated in the US from its forced labour-related scrutiny.“What we submit is that the exemptions provided by the USTR not only undermine the policy rationale of addressing forced labour impact in the global supply chain but also of preventing such impact caused by circumvention practices,” Mishra said while responding to questions from the USTR panel.He also criticised the US policy of granting lower tariff rates for textile products manufactured using cotton and other related inputs originating from the US.“By providing reduced tariff rates on the basis of imports of US-origin textile inputs, the textiles mechanism operates as an arbitrary requirement that influences and constrains the sourcing decisions of foreign manufacturers, without fully addressing the concern of forced labour,” Mishra said.While presenting India’s objections, Mishra reiterated that the country remains open to engaging with the US and maintained that issues of this nature should be settled through the ongoing India-US bilateral trade negotiations rather than through Section 301 investigations.
Why the move on forced labour is significant
Manoj Mishra, Partner and Tax Controversy Management Leader, Grant Thornton Bharat sees the step as a significant policy shift in India’s trade framework. “While India has so far relied largely on labour and criminal laws to address forced labour domestically, the FTP now incorporates a dedicated trade measure aligned with international standards under the ILO Forced Labour Convention,” he says.“Announced amid heightened global scrutiny of supply chains and the ongoing USTR Section 301 investigation, the move strengthens India’s regulatory framework on ethical sourcing. However, its practical impact will largely depend on the enquiry mechanism and implementation framework to be prescribed under the Handbook of Procedures, which will determine the scope of compliance for importers,” he adds.Ajay Srivastava, founder of Global Trade Research Initiative (GTRI) calls India’s notification a sensible first step. However, he adds that its credibility will ultimately depend on enforcement.“The real challenge is proving that a product is made with forced labour when production spans multiple countries and opaque supply chains. The US and the EU themselves continue to import significant volumes of products from China in sectors where forced-labour concerns have been raised, highlighting the practical and political limits of such measures. For India, the priority should be to build credible traceability and due-diligence systems that protect legitimate trade while ensuring that forced-labour rules do not become arbitrary non-tariff barriers,” he adds.