US tariff policy regarding forced labor

The United States has implemented a new tariff policy under Section 301 of the Trade Act of 1974, targeting imports from 60 countries. The policy applies duties of either 10% or 12.5% on approximately 99% of all U.S. imports. The varying rates are designed to incentivize trading partners to enforce stricter bans on goods produced with forced labor; countries with comparable restrictions face a 10% rate, while others face 12.5%.

In response to these measures, some companies are utilizing vertical integration to mitigate costs. For example, Canadian apparel manufacturer Gildan Activewear leverages manufacturing facilities in regions like Honduras, Nicaragua, El Salvador, and the Dominican Republic to utilize trade agreements such as CAFTA-DR for exemptions.

Following the imposition of a 12.5% tariff, the Costa Rican government has ordered the creation of an official list of goods linked to risks of forced or compulsory labor. This measure, established via Executive Decree, aims to help public institutions and economic operators manage risks within international value chains after the U.S. Office of the Trade Representative concluded that Costa Rica had not effectively applied prohibitions against the importation of goods produced through forced labor.