India to Challenge Proposed 12.5% U.S. Tariff on Exports

Washington — India will challenge a proposed 12.5% U.S. tariff on its exports next week, arguing that Washington’s findings on forced labor are legally flawed, lack sufficient evidence and could disrupt supply chains between the two countries.

Indian government officials and representatives from leading industry groups are scheduled to appear before the Office of the U.S. Trade Representative’s Section 301 Committee on July 8 and 9.

Poornima Shenoy of the Federation of Indian Chambers of Commerce and Industry and Shuchita Sonalika of the Confederation of Indian Industry will testify on July 8. They will be followed by Brij Mohan of the Ministry of Commerce and Industry and Shubham Arora of the Agricultural and Processed Food Products Export Development Authority.

Vinnie Mehta, director general of the Automotive Component Manufacturers Association, is scheduled to testify on July 9.

The hearings follow a USTR proposal to impose an additional 12.5% duty on imports from India under a Section 301 investigation examining whether countries prohibit and effectively restrict imports of goods produced with forced labor. The proposal remains open for public comment before a final decision.

India’s Ministry of Commerce and Industry has rejected the USTR’s conclusions, saying the country has a “robust domestic legal regime reflecting a structured and progressive approach combining statutory prohibitions, institutional mechanisms, and ongoing policy measures aimed at reducing vulnerability to forced labour.”

The ministry also said there is “inadequate and insufficient evidence” that India’s import policies burden or restrict U.S. commerce, a requirement for action under Section 301.

CII said India’s policies cannot be considered “unreasonable” or “discriminatory” under the U.S. Trade Act. It cited constitutional protections, laws prohibiting bonded and child labor, labor codes adopted between 2019 and 2020, corporate sustainability reporting requirements and India’s ratification of major International Labor Organization conventions.

The industry group also disputed examples used in the USTR report, saying India imported no rice from Myanmar and no tobacco from Malawi during the 2021-2025 review period.

CII said India imported $1.537 billion worth of American cotton during the same period, nearly twice the amount imported from China. It argued that this showed there was “no material evidence” that Indian policies unfairly burdened U.S. commerce.

The group said industries including forgings, foundries and agricultural machinery are capital-intensive, dependent on skilled labor and closely integrated into global supply chains. Indian exporters serving U.S. manufacturers also operate under customer-mandated compliance systems and voluntary certification programs, it said.

“The proposed 12.5 per cent additional duty would raise costs for US manufacturers dependent on Indian inputs without addressing the stated policy objective,” CII said.

It urged the USTR to pursue “compliance-based cooperation through the established India-US Trade Policy Forum as a more effective and proportionate alternative to punitive tariffs.”

FICCI said Indian supply chains serving the U.S. market already operate within “well-established compliance frameworks” involving product traceability, supplier reviews, independent audits and responsible sourcing. It warned that broad tariffs would raise costs for American businesses and consumers while disrupting established supply chains.

APEDA said India’s rice sector “does not engage forced labour nor does it import inputs made with or using forced labour.” The agency said Indian rice exports comply with recognized standards and should be excluded from the proposed duties.

ACMA has also asked the USTR to exempt automotive components, arguing that India’s auto-parts industry is technology-driven and governed by established labor-compliance systems. Additional tariffs would raise costs for U.S. manufacturers and create sourcing uncertainty, the association said.

The USTR investigations cover 60 economies and examine whether governments have adopted and enforced bans on imports produced wholly or partly with forced labor.

India maintains that its constitutional protections, labor laws, regulatory safeguards and corporate compliance systems already address forced-labor concerns. It argues that the proposed tariff is unjustified and could undermine the growing U.S.-India trade relationship. (Source: IANS)