India says 45% of exports to US exempt from new 10% tariff; textile mechanism under discussion
The Office of the United States Trade Representative (USTR) finalised action under Section 301 of the US Trade Act, 1974, imposing additional tariffs on 60 economies for failing to effectively prohibit the import of goods made with forced labour, effective July 24, 2026
India was placed in the lower tariff tier, attracting an additional 10% duty, compared with a 12.5% tier applied to economies found to have taken no action at all
The Ministry of Commerce and Industry stated that approximately 45% of India's exports to the US — including generic pharmaceuticals, smartphones, and items already covered under separate Section 232 national-security tariffs such as steel, aluminium and auto parts — remain outside the additional duty
The remaining 55% of India's exports to the US will attract the additional 10% levy
A textile-specific mechanism referenced in the final US measures has not yet been operationalised; India stated that discussions on this and other sector-specific issues continue as part of the broader bilateral trade agreement negotiations
Section 301 of the US Trade Act, 1974
Section 301 is a unilateral US trade remedy provision that authorises the USTR to investigate and act against a foreign country's acts, policies or practices that are "unreasonable" or discriminatory and burden US commerce. It does not require a prior WTO dispute ruling, which distinguishes it from WTO-sanctioned retaliation.
Key Details
- On March 12, 2026, the USTR initiated 60 simultaneous Section 301 investigations into countries' failure to impose and effectively enforce a prohibition on importing forced-labour-made goods
- Two rounds of public hearings and over 2,100 public comments were part of the investigation process before final tariffs took effect July 24, 2026
- Section 301 has historically been used for intellectual-property disputes (the "Special 301" report) and was the legal basis for tariffs imposed on China from 2018 onward
- India's own equivalent trade-remedy toolkit — anti-dumping and countervailing duties under the Customs Tariff Act, 1975, and safeguard duties — is administered by the Directorate General of Trade Remedies (DGTR), a body created in 2018 by merging India's separate anti-dumping, safeguards and countervailing-duty directorates
The 10% tariff on Indian goods is a Section 301 action distinct from the earlier "reciprocal tariff" track between India and the US, showing how a single trading partner can face multiple, independently-triggered US tariff mechanisms at once.
Section 232 of the US Trade Expansion Act, 1962
Section 232 allows the US President to impose tariffs or quotas on imports found to threaten national security, following an investigation by the Department of Commerce. It is the legal basis for the standing US tariffs on steel, aluminium and certain auto parts.
Key Details
- Section 232 tariffs are separate from and additional to Section 301 tariffs; goods already facing Section 232 duties (steel, aluminium, auto parts) were excluded from this new forced-labour Section 301 action to avoid double tariffing
- Widely used since 2018 for steel and aluminium (initially 25% and 10% respectively) under the same statute
- India's outcomes on generic pharmaceuticals under ongoing Section 232 pharmaceutical investigations remain contingent on a separate US determination
Understanding why steel, aluminium and auto parts were excluded from the new 10% forced-labour duty requires distinguishing the Section 232 track (national security) from the Section 301 track (unfair trade practice/forced labour) — both operate in parallel on Indian exports.
India-US Bilateral Trade Agreement (BTA) and the reciprocal tariff track
Separately from the forced-labour Section 301 action, India and the US have been negotiating a comprehensive Bilateral Trade Agreement, launched in February 2025, alongside an interim framework addressing "reciprocal tariffs."
Key Details
- Under an early-2026 interim framework, the US agreed to lower its reciprocal tariff on Indian goods from 25% to 18%, linked to India's commitments on energy trade
- The BTA negotiations, ongoing through mid-2026, separately cover market access, a preferential tariff-rate quota for automotive parts, and sector-specific issues including textiles
- The textile-specific mechanism mentioned in the July 2026 Section 301 measures is distinct from, but runs alongside, these broader BTA talks
The "textile mechanism under discussion" line in the government's statement refers to unfinished sector-specific carve-out talks within this wider bilateral negotiation, not a new standalone dispute.
ILO Forced Labour Convention, 1930 (No. 29)
The Forced Labour Convention (No. 29) is one of the eight ILO fundamental conventions, requiring member states to suppress the use of forced or compulsory labour in all its forms. It underpins the international legal definition of "forced labour" that the US measures invoke.
Key Details
- India ratified Convention No. 29 in 1954 and has ratified six of the eight ILO fundamental conventions
- The 2014 Protocol to Convention No. 29 supplements it with obligations on prevention, victim protection and remedies; only states that have ratified the base Convention can ratify the Protocol
- India's domestic anti-forced-labour framework includes the Bonded Labour System (Abolition) Act, 1976, enacted under the Article 23 prohibition on forced labour and traffic in human beings
The US Section 301 forced-labour tariffs are premised on trading partners' enforcement of prohibitions consistent with conventions like ILO No. 29 — India's ratification history is directly relevant to how such enforcement gaps are assessed.
- US Section 301 forced-labour tariffs took effect: 12:01 a.m. ET, July 24, 2026
- Tariff tiers: 10% (economies with a forced-labour import ban but weak enforcement) vs 12.5% (economies with no such ban) — India in the 10% tier
- Share of India's US exports exempt from the new duty: ~45%
- Investigations covered: 60 economies, initiated March 12, 2026
- Reciprocal tariff on India (separate track): reduced from 25% to 18% in the early-2026 interim framework
- India's BTA negotiations with the US launched: February 13, 2025
- India ratified ILO Forced Labour Convention No. 29: 1954