Section 301 Tariffs Challenged as Forced-Labor Workaround—What Sourcing Teams Need to Know

This article is for informational purposes only and does not constitute legal, compliance, or sourcing advice. Verify certification and regulatory requirements with the relevant standards body or counsel.

Editorial note: Reported by The Sourcing Desk editorial team. We cross-reference claims against standards-body publications, regulatory filings, and primary sourcing data. Published 2026-07-28.

New Section 301 tariffs of 10% or 12.5% applied to 60 trading partners took effect on July 25, 2026, the same day two U.S. businesses filed a lawsuit at the U.S. Court of International Trade seeking their removal and a refund of duties already paid. For apparel sourcing managers, the filing introduces immediate uncertainty: the rates now embedded in landed-cost models may not survive judicial review, and the forced-labor compliance logic underpinning the tariffs is itself under attack.

The plaintiffs are spice importer Burlap and Barrel and watch retailer Collective Horology. They argue, in a complaint filed through the Liberty Justice Center, that the U.S. Trade Representative (USTR) Jamieson Greer ran an abbreviated investigation, predetermined the tariff rates before completing it, and then assembled supporting evidence after the fact. Their core claim is that the Section 301 action is "arbitrary and capricious" and functions as a backdoor replacement for two prior duty regimes that courts have already invalidated: the International Emergency Economic Powers Act (IEEPA) global tariffs struck down by the Supreme Court in early 2026, and the temporary Section 122 levies that expired on July 25 after their statutory 150-day limit. As Supply Chain Dive reported, the new Section 301 rates "closely track the rate structure previously imposed or negotiated under the invalidated IEEPA program, including its 10 percent baseline tariff and additional country-specific rates."

The USTR launched the forced-labor investigation in March 2026, concluded it in under three months, proposed the 10% or 12.5% rates, ran a public comment period and hearings, and then imposed the duties. The plaintiffs note that a comparable Section 301 probe into China's technology and intellectual property practices during the first Trump administration took more than twice as long.

What changed

Section 301 of the Trade Act of 1974 authorises the USTR to investigate and respond to foreign trade practices that are "unreasonable or discriminatory" and burden U.S. commerce. It has historically been used for targeted, country-specific actions with detailed findings. The current action applies a near-uniform rate structure across 60 countries on the basis that each has inadequate forced-labor regulations, without, the lawsuit argues, a country-by-country analysis of each nation's specific laws or a clear rationale for why a tariff, rather than another remedy, addresses the identified harm.

The timing matters for apparel. The Section 122 tariffs that expired on July 25 had themselves been imposed after the Supreme Court invalidated the IEEPA tariffs in February 2026. The Court of International Trade had already ruled in May 2026 that the Section 122 levies were illegal, though that ruling remains under appeal. The Section 301 tariffs now sit on top of this contested legal history. Alexander Schaefer, a partner at Crowell and Moring, told Supply Chain Dive that the government faces a difficult task convincing the court that proportional relief for each of roughly 60 countries "just happened to fall in the 10-12.5% range in every instance, which in turn just happened to be more or less the same rate heretofore deployed under Section 122."

For apparel brands, the affected sourcing geographies are broad. The 60-country list, as proposed by the USTR in June 2026, includes major apparel production hubs across South and Southeast Asia, sub-Saharan Africa, and Latin America. The Uyghur Forced Labor Prevention Act (UFLPA), which applies a rebuttable presumption that goods produced wholly or in part in China's Xinjiang region are made with forced labor, remains fully in force and is a separate legal instrument. A successful challenge to the Section 301 tariffs would not affect UFLPA enforcement or U.S. Customs and Border Protection (CBP) withhold-and-detain actions.

What this means for sourcing teams

The immediate operational task is scenario planning on landed costs. Sourcing managers should model two states: current duty rates in place (10% or 12.5% on affected origins) and a scenario in which the Court of International Trade grants an injunction or ultimately orders refunds. Neither outcome is certain. The Court of International Trade previously ruled against the Section 122 tariffs, which gives the plaintiffs some precedent, but the legal theory here is different and the court has not yet indicated how quickly it will move.

On documentation, teams should begin retaining import records, duty payment receipts, and entry summaries from July 25, 2026 onward. If the court orders refunds, importers who can demonstrate paid duties on covered entries will be positioned to claim them. This is standard practice in tariff litigation but requires proactive record-keeping from the date of imposition, not after a ruling.

On forced-labor compliance, the lawsuit's success or failure does not change what CBP expects under the UFLPA. Sourcing teams importing cotton, polyester, or other inputs with any Xinjiang nexus still need supply chain traceability documentation: transaction records, production records, and evidence of due diligence at each tier. Cotton traceability is the ability to verify a finished garment's cotton content back through spinning and ginning to the farm of origin. Brands sourcing from India, Bangladesh, Vietnam, or other countries on the Section 301 list should also review whether any of their tier-2 or tier-3 suppliers draw inputs from UFLPA-covered regions, since that exposure sits entirely outside the Section 301 dispute.

Supplier contracts signed or renewed now should include duty-fluctuation clauses that address both upward and downward rate changes. Some brands have already built such language into agreements following the IEEPA litigation cycle. If your standard terms do not address tariff refund sharing, this is the moment to add it.

Compliance leads should also watch whether the USTR's separate Section 301 investigation into global manufacturing capacity, launched in parallel in March 2026, produces a second wave of tariffs. That probe has not yet concluded.

Limitations and open questions

The lawsuit was filed the same day the tariffs took effect, so no court schedule has been set. The Court of International Trade could move to consolidate this case with any related challenges, as it did with the IEEPA litigation. An injunction pausing the tariffs pending litigation is possible but not guaranteed; the court declined to issue one in the early stages of the IEEPA cases.

The USTR has not published a full country-by-country breakdown of the forced-labor findings that supported each rate. The complaint argues this absence is itself a statutory defect, but the government will have the opportunity to submit the administrative record. How complete that record is will shape the court's analysis.

It is also unclear whether the Section 122 appeal, still pending, will affect the Section 301 proceedings. If an appellate court reverses the Section 122 illegality ruling, it could complicate the plaintiffs' argument that the Section 301 tariffs are a substitute for an unlawful predecessor.

Finally, the 60-country scope has not been published in final, itemised form with harmonised tariff schedule chapter-level detail for all affected product categories. Sourcing teams should monitor the Federal Register and USTR.gov for the implementing notice and confirm which HTS codes covering their product categories are covered.

This article is for informational purposes only and does not constitute legal, compliance, or sourcing advice. Verify certification and regulatory requirements with the relevant standards body or counsel.