A three-judge panel at the Court of International Trade heard arguments this week on whether the administration’s forced-labor tariffs, covering roughly 99 percent of U.S. imports from 60 trading partners, exceed the authority Congress granted under Section 301 of the Trade Act of 1974.
NEW YORK, Oct. 1, 2026. The legal foundation of the United States tariff regime went before a federal court on Wednesday morning for the second time this year, as a three-judge panel of the Court of International Trade heard arguments over whether the administration lawfully used Section 301 of the Trade Act of 1974 to impose duties on goods from 60 trading partners on the theory that those partners fail to police forced labor in their supply chains.
The hearing, convened at 10 a.m. in the Ceremonial Courtroom at One Federal Plaza, consolidated challenges brought by four small importing businesses and by 25 state attorneys general. The consolidated matter is captioned In Re: Section 301 Forced Labor Cases, and includes Burlap and Barrel, Inc. and Collective Horology, LLC v. Greer, along with claims by Learning Resources and hand2mind.
At issue are duties of 10 percent and 12.5 percent that took effect on July 24, 2026, one day after a presidential memorandum directed the United States Trade Representative to act. By the challengers’ calculation, the measures reach approximately 99.4 percent of American imports by value, a scope that plaintiffs told the court cannot plausibly be described as a targeted response to specific foreign practices.
The court is expected to issue a written ruling in a matter of weeks or months. Whichever side loses is widely expected to appeal to the United States Court of Appeals for the Federal Circuit, and from there potentially to the Supreme Court.
How the forced-labor tariffs came about
The action traces directly to the Supreme Court’s decision of Feb. 20, 2026, holding that the International Emergency Economic Powers Act does not authorize the imposition of tariffs. That ruling invalidated the architecture on which a substantial portion of the administration’s trade program had been built and set off a scramble to re-found the duties on alternative statutory authority.
Section 301 was the instrument chosen for the broadest replacement. The statute authorizes the Trade Representative to respond to acts, policies, or practices of a foreign country that are unreasonable or discriminatory and that burden or restrict United States commerce. It is the authority under which the China tariffs of 2018 were imposed, and the Federal Circuit has previously upheld that use.
The forced-labor action extended the statute in a new direction. Rather than investigating a single country’s conduct, the Trade Representative examined whether trading partners maintain and enforce prohibitions on the importation of goods made with forced labor, the kind of measure the United States maintains under Section 307 of the Tariff Act of 1930. Partners were then sorted into tiers.
Fifty-four countries were found to have no forced labor import prohibition at all. Six others, specifically Canada, Ecuador, the European Union, Indonesia, Mexico, and Pakistan, were found to maintain prohibitions but to enforce them inadequately.
The resulting rate structure assigns 10 percent ad valorem to 17 trading partners, a group that includes Argentina, Bangladesh, Canada, Mexico, India, Indonesia, and the United Kingdom. A rate of 12.5 percent applies to 38 partners including China, Brazil, Vietnam, Thailand, and Russia. Five partners received capped combined treatment: the European Union and Taiwan at a combined 10 percent, and Japan, South Korea, and Switzerland at a combined 12.5 percent, with the cap running against most-favored-nation duties.
The action carried significant carve-outs. Goods already covered by Section 232 national security regimes, including aluminum, steel, copper, vehicles, and semiconductors, were excluded, as were pharmaceutical articles, civil aircraft, humanitarian donations, accompanied baggage, and informational materials. Goods qualifying for duty-free treatment under the United States-Mexico-Canada Agreement were exempt, and textile and apparel goods from six Central American and Caribbean partners under CAFTA-DR were fully exempt. Goods loaded before July 24 and entered before July 28 escaped the duties.
The challengers’ case
The plaintiffs advanced two lines of attack, one statutory and one constitutional, and the statutory argument is the one most likely to decide the case.
Section 301, the challengers argue, is a country-specific remedy. The statute speaks of the acts, policies, or practices of a foreign country, and it requires the Trade Representative to determine that such conduct is unreasonable or discriminatory and that it burdens or restricts United States commerce. The challengers contend that the Trade Representative made no country-specific findings, drew no connection between any identified practice and the duties imposed on that country’s goods, and offered no reasoned explanation of the kind Congress and the Administrative Procedure Act require.
The tiering, in the plaintiffs’ telling, is the problem rather than the solution. Sorting 60 economies into two rate buckets on the basis of whether they have a particular category of statute on the books, without examining the actual incidence of forced labor in their export supply chains or the actual burden on American commerce, is the opposite of the particularized determination the statute contemplates.
Counsel for the small business plaintiffs characterized the standard the Trade Representative applied as unrealistic, arguing that essentially no trading partner could satisfy it and that a test no one can pass is not a test but a pretext for a blanket tariff.
The constitutional argument runs behind the statutory one. The Constitution, the plaintiffs told the court, assigns to Congress the power to lay duties and to regulate commerce with foreign nations. A reading of Section 301 that permits the executive to tariff nearly all imports from nearly all partners on a generalized theory would convert a delegated remedial authority into an open-ended taxing power, raising nondelegation concerns that the court should avoid by reading the statute narrowly.
The 25 states, whose complaint was filed on Aug. 3 and co-led by Oregon, Arizona, and California, pressed the Administrative Procedure Act angle hardest. Their filing argues that the Trade Representative exceeded statutory authority by failing to pursue the negotiation with foreign governments that Section 301 contemplates before retaliation, and that the uniform application of rates across 60 countries without consideration of relevant differences between them is arbitrary and capricious. The states further allege that the agency ran a process designed to reach a predetermined outcome and failed to engage meaningfully with public comments.
The states claim standing on the basis of direct financial injury, noting that state agencies import goods subject to the duties and purchase from vendors who pass the costs through.
The government’s position
The administration’s defense rests on the breadth of the statutory language and on judicial deference to executive judgment in foreign commerce.
Section 301 does not, on its face, limit the Trade Representative to a single country per investigation, and the government argues that nothing in the statute prohibits a determination that a category of practice, shared across many partners, is unreasonable and burdens American commerce. Forced labor in supply chains, on this reading, is precisely such a practice, and the absence or non-enforcement of import prohibitions is the policy failure that permits it to persist.
The government also leans on the practical reality that Congress has repeatedly legislated against forced labor in trade, most prominently in the Uyghur Forced Labor Prevention Act, and has expressed no objection to the use of trade authority to advance that objective.
On the reasoned explanation question, the government points to the investigation record and the tiering methodology as evidence that distinctions were drawn, noting that six countries were placed in a separate enforcement-failure category and that five received capped treatment reflecting their existing duty levels.
Deference is the throughline. The government’s position is that the court’s role in reviewing a Section 301 determination is narrow, that the Federal Circuit confirmed as much when it upheld the China tariffs, and that second-guessing the Trade Representative’s assessment of foreign labor enforcement would place the judiciary in a position Congress did not intend it to occupy.
What is at stake financially
The sums are large and difficult to pin down precisely, because the duties interact with a tariff landscape that has changed repeatedly over fifteen months.
A 10 to 12.5 percent layer applied across substantially all imports is, on a full-year basis, a revenue item in the tens of billions of dollars. The precise figure depends on the carve-outs, which are substantial: Section 232 goods, USMCA-qualifying goods from Canada and Mexico, pharmaceuticals, and civil aircraft together represent a meaningful share of the import base.
The refund question is what gives the case its urgency for importers. The February Supreme Court ruling on IEEPA created a refund process that is still being administered, with Customs and Border Protection running its Consolidated Administration and Processing of Entries system in phases. Phase Three, announced on Sept. 17, opens on Oct. 6 and is restricted to companies that both have a live case at the Court of International Trade and submitted an importer of record number by July 30.
That eligibility structure is the reason trade counsel have been advising importers with significant exposure to file protective actions rather than waiting to see how the forced-labor case resolves. The lesson importers drew from the IEEPA refund process is that relief flowed first and most reliably to parties already in court, and that a company sitting on the sidelines when a ruling lands may find the administrative path to recovery narrow and slow.
Brazil as a case study in stacking
The Brazilian position illustrates how the forced-labor layer interacts with the rest of the tariff structure.
Brazilian goods carry the 12.5 percent forced-labor rate, placing Brazil in the higher tier alongside China, Vietnam, and Russia. That layer sits atop a separate 25 percent duty arising from a distinct Section 301 action concerning Brazilian acts and policies, producing a combined 37.5 percent surcharge on most Brazilian goods entering the United States.
Exemptions carve out coffee, beef, iron ore, and aircraft parts, which together account for a substantial share of Brazilian export value to the United States and reflect the sensitivity of American consumer prices and industrial inputs rather than any assessment of Brazilian labor practices.
If the forced-labor layer falls, Brazilian goods drop from 37.5 percent to 25 percent. That is a material change for Brazilian exporters of manufactured goods, footwear, and processed products, and for the American importers who buy from them. It would not disturb the separate 25 percent action, which rests on its own investigation and its own record.
The wider litigation landscape
The forced-labor case is one of several proceedings testing the limits of executive tariff authority, and importers trying to plan have to track all of them.
The Section 122 balance-of-payments tariffs, a 10 percent duty imposed in February, were struck down by the Court of International Trade on May 7. The Federal Circuit stayed that ruling on May 12 and later granted a longer stay pending appeal, with its reasoning read by several commentators as signaling skepticism of the trade court’s narrow statutory reading. Those duties continue to be collected.
The IEEPA tariffs were invalidated by the Supreme Court in February and the refund machinery is grinding forward.
The China Section 301 duties of 2018, by contrast, have been upheld by the Federal Circuit, which is part of why the government’s defense of the forced-labor action leans on that precedent and part of why the 30-for-30 tariff reduction lists published this week by the White House operate on firmer legal ground than much of the surrounding tariff structure.
Notably, the author of the modern tariff statute has weighed in against the administration’s reading. In comments reported in late September, the drafter argued that the tariffs as constructed are not what the statute authorizes, a point the challengers can be expected to press.
Implications for importers and exporters
The practical guidance from trade counsel this week is consistent and does not depend on predicting the outcome.
Importers with significant exposure should quantify it now, by entry line and by country tier, so that a refund claim can be assembled quickly if the duties fall. The IEEPA experience demonstrated that documentation assembled after a ruling is documentation assembled late.
Companies not already in litigation should take advice on whether a protective filing makes sense. The Phase Three eligibility conditions for IEEPA refunds, which required both a live case and a timely importer of record submission, are a concrete illustration of how procedural posture determined who recovered.
Contract review matters here as much as in any tariff development. Supply agreements written in the second half of 2026 commonly allocate the forced-labor duty to one party or the other. If the duty is invalidated and refunds flow, the question of who owns the recovery is a contract question, and it is better settled before the money moves.
Sourcing decisions should not be made on the assumption of a particular outcome. The rate differential between the 10 percent and 12.5 percent tiers is narrow enough that it rarely justifies relocating production on its own, and a company that moves sourcing from a 12.5 percent country to a 10 percent country will have incurred transition cost for a 2.5 point benefit that may disappear entirely if the court rules for the challengers.
Exporters to the United States, and the foreign governments representing them, have their own calculation. Several of the 54 countries found to lack forced labor import prohibitions could, in principle, adopt such measures and argue for removal from the tiering. Whether the Trade Representative would act on that is unclear, but it is the one lever available to a trading partner that does not involve waiting for an American court.
What to watch
A written ruling is expected within weeks to months, with no fixed deadline. The panel’s questions at argument will be read closely by the trade bar when the transcript becomes available, though oral argument has proved an unreliable predictor in the tariff cases of the past two years.
If the challengers prevail, the immediate question is remedy. The Court of International Trade’s prior practice has been to grant relief to named plaintiffs rather than to vacate duties universally, and the Federal Circuit has shown a willingness to stay injunctions pending appeal. Importers should not assume that a plaintiff victory produces an immediate stop to collection.
If the government prevails, the forced-labor layer becomes a settled feature of the landed cost structure for nearly all imports, and the broader proposition that Section 301 supports multi-country, practice-based tariffs becomes available for future actions. That precedent would matter well beyond this case.
Either way, the decision will arrive into a tariff environment where the negotiated track and the litigation track are moving in opposite directions at the same time. The same week that Washington and Beijing published lists of goods headed for lower duties, a federal court in lower Manhattan was asked whether a tariff covering nearly every import in the country was lawful at all.
How the tiering was built, and why it is contested
Understanding the dispute requires looking at what the Trade Representative actually measured.
The investigation did not attempt to quantify forced labor in any partner’s export production. It examined the legal architecture each partner maintains at its own border, asking whether a country prohibits the importation of goods made with forced labor and, if so, whether it enforces that prohibition in practice. Countries with no such prohibition went into the higher tier. Countries with a prohibition but weak enforcement were identified separately and placed in the lower tier alongside partners whose combined duty burden warranted capping.
The logic is coherent on its own terms. If a partner does not screen its own imports for forced labor content, goods made with forced labor can enter that partner’s economy, be incorporated into its exports, and reach the United States laundered through a supply chain the American importer cannot see. Closing that channel is a legitimate policy objective and one Congress has endorsed in other statutes.
The difficulty is the fit with Section 301. The statute asks whether a foreign practice burdens or restricts United States commerce. A partner’s failure to maintain a forced labor import ban burdens American commerce only through a chain of inference: the absence of a ban permits tainted inputs to enter, those inputs reach American buyers, and American firms that do screen their supply chains are disadvantaged against competitors who do not. Each link in that chain is plausible. None of them was quantified country by country in the record the plaintiffs describe.
That is the gap the challengers are asking the court to find fatal, and it is the gap the government is asking the court to treat as a matter of executive judgment beyond close judicial scrutiny.
Why small importers brought the case
The identity of the plaintiffs is not incidental.
Burlap and Barrel is a single-origin spice importer. Collective Horology makes watches. Learning Resources and hand2mind produce educational toys and classroom materials. These are companies whose entire business model depends on sourcing from specific overseas producers, often in countries with no realistic domestic substitute, and whose margins cannot absorb a double-digit duty layer applied across the board.
Learning Resources and hand2mind were also plaintiffs in the IEEPA litigation that reached the Supreme Court, which gives them both standing experience and a template. Small importers have proved to be effective tariff plaintiffs precisely because their injury is concrete, documented in entry summaries, and impossible to characterize as speculative.
Large importers have generally stayed out of the public litigation, for reasons that include relationships with the administration, the availability of in-house mitigation strategies, and a preference for working through trade associations. The result is that the legal boundaries of American tariff authority are being set in cases brought by companies with annual revenues that would not register on a Fortune 1000 list.
The administrative record question
Among the less visible but more consequential issues before the panel is the adequacy of the administrative record.
Section 301 actions follow a notice and comment process, and the Administrative Procedure Act requires an agency to consider significant comments and explain its reasoning. The states allege that the Trade Representative received substantial comment opposing the tiering methodology and responded in terms that did not engage the substance.
Courts reviewing agency action rarely substitute their own policy judgment, but they do police the obligation to explain. A remand for further explanation is a middle path available to the panel that would leave the duties in place while requiring the agency to do more work, and it is an outcome several trade practitioners have identified as plausible given the court’s reluctance in prior cases to order immediate universal relief.
For importers, a remand would be the least satisfying result: continued collection, continued uncertainty, and a further round of briefing before any refund question is reached.