USTR Makes Forced Labor Findings in Section 301 Investigation

On June 2, 2026, the Office of the U.S. Trade Representative (“USTR”) released its report on Section 301 investigations into whether 60 economies failed to impose and effectively enforce a prohibition on importing goods produced with forced labor (the “Report”). The Report, initiated under Section 302(b)(1)(A) of the Trade Act of 1974, found that all of the 60 investigated countries “have failed to impose a legal prohibition on the importation of goods produced wholly or in part with forced labor (“forced labor goods”) and to effectively enforce such a prohibition” and “[t]he failure of [these] economies to impose and effectively enforce a forced labor import prohibition burdens or restricts US commerce by subjecting US producers to unfair competition from forced labor goods in both export markets and the US market, and by displacing foreign goods produced without forced labor or forced labor inputs from their domestic market to the United States and other markets.”

The Report also identifies both the People’s Republic of China (the “PRC”) and the Hong Kong Special Administration Region of the PRC (“Hong Kong”) as contributors to forced labor practices that burden or restrict US commerce. Notably, the Report found that both the PRC and Hong Kong “failed to impose a legal prohibition on the importation of goods produced wholly or in part with forced labor and to effectively enforce such a prohibition.”

Summaries of the key findings relating to both the PRC and Hong Kong are provided below.

USTR’s Findings on the PRC

USTR found that the PRC, among many other investigated economies, “failed to impose and effectively enforce a forced labor import prohibition,” and this failure was “unreasonable” and “burdens or restricts US commerce.” The Report also specifically identifies the PRC as the primary source of forced labor goods across several high-risk sectors:

• Polysilicon and Solar Supply Chains: The Report found forced labor to be “prevalent” in polysilicon production and solar supply chains, particularly in the production of solar cell and solar modules. In support of its finding regarding solar supply chains, the Report cited to several studies and authorities, including a study that found the PRC produced 93.2% of the world’s polysilicon in 2024. The Report also “suggests that a substantial proportion of China’s exports of downstream solar wafers, ingots, cells, and modules may be produced using polysilicon that is the product of forced labor.” The Report further asserts that the prevalence of PRC-sourced polysilicon in downstream product supply chains has resulted in low-priced solar imports, which have been “devastating” to the US solar industry.
• Cotton/Textiles: The Report found that 92.8% of cotton grown in the PRC originates from the Xinjiang Uyghur Autonomous Region of the PRC (“Xinjiang”). Under the Uyghur Forced Labor Prevention Act (“UFLPA”), there is a rebuttable presumption that all goods manufactured wholly or in part in Xinjiang are made with forced labor and are banned from entering the United States. Moreover, “[n]early all investigated economies imported cotton from China from 2021 to 2025.” This prevalence “strongly suggests that unfair competition from apparel goods produced with forced labor inputs is a factor” that has contributed to the decline of US apparel production.
• Third-Country Circumvention: The Report found that Chinese inputs raising forced labor concerns are exported to third countries for processing into finished goods that are then shipped to the United States, which allows firms to circumvent UFLPA enforcement.

USTR’s Findings on Hong Kong

As with the PRC, USTR found that Hong Kong, among many other investigated economies, “failed to impose and effectively enforce a forced labor import prohibition,” and this failure was “unreasonable” and “burdens or restricts US commerce.” As above, the Report found that of the 213 regions reported to import cotton or cotton-mixed products from the PRC between 2016 and 2019, Hong Kong was one of the largest importers by volume and by value. As above, “the prevalence of [forced labor] goods in global apparel supply chains strongly suggests that unfair competition from apparel goods produced with forced labor inputs is one factor that has contributed” to the decline of US apparel production.

Subsequent Actions

As a result of the findings under the Report, the USTR found it appropriate to take action under Section 301(c) of the Trade Act, which authorizes the USTR, on behalf of the President, to suspend trade agreement concessions, impose additional duties or import restrictions, or enter into binding agreements to eliminate the offending conduct. The USTR also emphasized that in addition to these actions it may take any actions “within the President’s power with respect to trade in goods or services, or with respect to any other area of pertinent relations with the foreign country.”

On June 5, USTR published a Federal Register notice outlining the actions it proposed to take under Section 301 to address its findings. These actions include the addition of a 12.5% ad valorem duty on all PRC/Hong Kong-origin goods, except for goods identified in Annex A of the notice. The USTR also proposed a “textile mechanism that would allow for a certain volume of apparel and textile imports from certain economies to enter the United States at a reduced Section 301 tariff rate,”¹ based on an eligible trading partner’s purchases of US-produced textiles or cotton and cotton products. In one aspect of the mechanism “the volume of reduced-duty imports from certain trading partners would be equivalent to the quantity of exports of textiles (e.g., US produced man-made and cotton fiber textile inputs) from the United States to that trading partner.” In another aspect of the mechanism, based on the volume of US cotton and cotton products that “a trading partner imports from the United States during a certain period of time,” “a certain volume of apparel and textile imports would . . . be allowed to enter the United States at the reduced Section 301 rate[.]”

Public hearings on these proposed actions will commence on July 7, 2026. Public comments on the proposed actions are due by July 6, 2026, and post-hearing rebuttal comments are due five days after the final day of the hearing.

Key Takeaways and Recommended Actions

Importers whose supply chains directly or indirectly include the PRC or Hong Kong face continued regulatory scrutiny in the United States. The Report includes a focus on third-country circumvention, which is consistent with the critical role of supply chain tracing in US customs diligence. Importers should take steps to ensure they understand the forced labor risks associated with their supply chain at every tier, including at the raw material level, and how best to mitigate those risks.

In addition, interested parties should continue to monitor developments as USTR considers potential trade actions following the Report. We are available to assist with supply chain assessments, UFLPA compliance reviews, and strategic planning in response to these findings.

¹ The Notice did not specify which “economies” would be eligible to use this mechanism.