US' Section 301 tariff linked to forced labour import may not survive court

Experts say fresh US tariffs imposed under Section 301 could face legal challenges, potentially dealing another setback to President Donald Trump's trade strategy

Fresh tariffs imposed by the United States (US) under Section 301 of the US Trade Act of 1974 could face the same judicial scrutiny that derailed American President Donald Trump’s reciprocal tariffs earlier this year, according to experts.

 

The Office of the US Trade Representative (USTR) last week imposed tariffs of 10-12.5 per cent on various trading partners following its Section 301 investigation related to imports of products using forced labour. Indian goods are subject to an additional 10 per cent duty over and above the most-favoured nation tariff.

 

The Section 301 tariffs again raise the question of whether the US President has the legal authority to determine and implement US tariff policy — an authority that the US Constitution vests in Congress, according to Washington-based think tank Peterson Institute for International Economics (PIIE).

 

 

“Congress did not delegate authority of such breadth to the President. If they were challenged in court, the Supreme Court would likely overturn them,” PIIE Senior Fellow Alan Wm Wolff, who is also former deputy director-general of the World Trade Organization, said in a blog.

 

A legal battle over Section 301 tariff has begun as two US companies are said to have filed a lawsuit against it in the US Court of International Trade.

 

Experts also argue that the legal footing of the tariffs is further weakened by the USTR’s differential tariff treatment of countries in its forced-labour investigation. While the USTR found the European Union, Taiwan, Japan, South Korea and Switzerland to have failed to adequately address forced-labour imports, it granted them preferential treatment, capping the tariff at 10 per cent for the former two and 12.5 per cent for the remaining three, said Ajay Srivastava, founder of the Global Trade Research Initiative, a New Delhi-based think tank.

 

“That departure from the traditional use of Section 301 is likely to face legal challenges,” Srivastava said.

 

Besides forced-labour investigation, the USTR has also initiated a Section 301 probe of India and several other economies over alleged excess capacity, findings of which are awaited.

 

Experts say tariff action arising from that investigation would also be vulnerable to judicial scrutiny.

 

“Tariff action relating to the excess-capacity investigation will be even more susceptible to judicial overturn,” Srivastava said.

 

If the tariffs are eventually struck down, it would mark the second judicial setback for Trump’s tariff strategy.

 

In February, the US Supreme Court invalidated the reciprocal tariffs imposed under the International Emergency Economic Powers Act (IEEPA).

 

“After originally presenting tariff measures as responses to a national emergency and next as remedies for balance-of-payments problems, officials now characterise their latest effort as a tool to press other countries to intensify their efforts against forced labor,” Wolff said. “The first two approaches failed to achieve the administration’s objective of lasting worldwide US tariffs, and the third will probably fail as well,” he added.

 

The legal uncertainty comes even as India and the US continue negotiations on a bilateral trade agreement. Waiting for greater legal clarity may be the more prudent approach at the moment, Srivastava said.

 

The Indian commerce ministry is waiting for the US to devise a framework that offers India a meaningful competitive advantage over competing nations before concluding the deal.