The in-transit grace period has closed on Washington’s forced labor tariffs, locking in duties of 10 to 12.5 percent on imports from 60 economies as Congress stirs and the courts loom
WASHINGTON, July 29, 2026
The last escape hatch closed at one minute past midnight on Monday. As of 12:01 a.m. Eastern Time on July 28, the in-transit exemption that had shielded ocean cargo already on the water expired, and the United States’ sweeping new Section 301 tariff regime became fully binding on virtually every non-exempt shipment entering American ports. Imports from 60 economies, together accounting for roughly 99.4 percent of everything the United States buys from abroad, now face additional duties of 10 percent or 12.5 percent under a legal framework the administration built in a matter of months to replace two predecessors struck down or expired under legal pressure.
The tariffs, announced by the Office of the United States Trade Representative on July 23 and effective for goods entered on or after 12:01 a.m. on July 24, formally arise from Section 301 investigations into the failure of the 60 economies to impose and effectively enforce prohibitions on the importation of goods produced with forced labor. In practice, administration officials have described them as the successor to the country-specific tariff program invalidated by the Supreme Court in February and to the temporary 10 percent global surcharge, imposed under Section 122 of the Trade Act of 1974, that expired at the same minute the new duties took effect.
“The specific authorities this administration is using have changed, but the trade strategy has not,” U.S. Trade Representative Jamieson Greer told the Senate Finance Committee on July 22, two days before the new duties began collecting. “We are committed to continuing to use tariffs and to negotiate deals to support the reindustrialization of our economy, protect American workers and increase their wages and shrink our trade deficit.”
Greer described tariffs as the enforcement mechanism for the non-binding trade agreements the administration concluded with various countries in 2025 and earlier this year, an unusually candid acknowledgment that the forced labor rationale sits atop a broader strategic architecture.
How the rates break down
The final action sorts the 60 investigated economies into four tiers. The European Union and Taiwan received the most favorable treatment: a 10 percent total rate that is inclusive of existing most-favored-nation duties. A second group of 17 economies, including Canada, Mexico, India, Indonesia, Malaysia, Bangladesh, Pakistan, and the United Kingdom, pays 10 percent on top of MFN rates.
Japan, South Korea, and Switzerland occupy a third tier at 12.5 percent total, inclusive of MFN. The largest group, 38 economies assessed 12.5 percent in addition to MFN rates, includes China, Brazil, Vietnam, Thailand, Turkey, Australia, Norway, Israel, Saudi Arabia, and Russia, among others. For China, which entered the summer under the tariff ceilings negotiated in last November’s Kuala Lumpur joint arrangement, the practical effect is an increase of roughly 2.5 percentage points in the overall tariff burden on Chinese goods.
Several countries saw their rates improve between the preliminary announcement on June 2 and the final action. The European Union and Taiwan were both moved from 10 percent plus MFN to 10 percent total. Honduras, India, Jordan, Sri Lanka, and Trinidad and Tobago each dropped from 12.5 percent to 10 percent, and Japan, South Korea, and Switzerland shifted from 12.5 percent plus MFN to 12.5 percent total.
Those adjustments were not random. Trade lawyers at Kelley Drye and Warren noted that Cambodia, Guatemala, Honduras, India, Sri Lanka, and Trinidad and Tobago all implemented forced labor import prohibitions during the course of the investigation and were rewarded with lower rates, while Jordan’s reduction recognized commitments made in the trade agreement it finalized with Washington on July 21. Vietnam announced its own forced labor import prohibition on July 22, apparently too late for inclusion in the final action, and observers expect USTR may adjust Vietnamese rates in a future modification. When the investigation began on March 12, only three countries in the world had forced labor import prohibitions on the books: the United States, Canada, and Mexico. Today there are 13.
Exemptions, exclusions, and quotas
The country-wide rates come with significant carve-outs. Goods already subject to Section 232 national security tariffs, including steel, aluminum, and copper articles and their derivatives, are excluded from the new duties, preventing stacking across the two programs. Goods from Canada and Mexico that qualify under the USMCA are exempt, as are textiles and apparel entering duty-free from Costa Rica, the Dominican Republic, El Salvador, Guatemala, Honduras, or Nicaragua under the CAFTA-DR agreement, along with informational materials, donations, and accompanied baggage.
Beyond those structural exemptions, USTR published lists of products excluded globally and on a country-specific basis. The global exclusions cover raw materials whose taxation could choke off domestic supply, products whose tariffing could cause what the agency called economy-wide disruptions, goods that cannot be grown or produced in sufficient quantities or at reasonable prices in the United States, and products for which tariffs would not advance the investigation’s objectives. In total, the final action excluded 471 more products than the June preliminary version.
The announcement also formalized a novel instrument: tariff-rate quotas for textiles and apparel from Bangladesh, Cambodia, Indonesia, and Malaysia. Volumes within each country’s quota will escape the new Section 301 duties entirely, with quota levels to be set, in USTR’s words, as soon as feasible and calibrated to each economy’s use of American inputs. The TRQs will run for an initial three years. Until they are established, the standard rates apply, leaving apparel importers in a planning limbo that industry groups have already flagged as commercially painful heading into spring 2027 buying seasons.
The legal shadow
The new regime was born of legal necessity, and legal risk still hangs over it. On February 20, 2026, the Supreme Court held in Learning Resources, Inc. v. Trump and Trump v. V.O.S. Selections, Inc. that the International Emergency Economic Powers Act does not authorize the president to impose tariffs, demolishing the original architecture of the administration’s worldwide and country-specific duties. The ruling has already produced refunds of tens of billions of dollars to importers who paid the invalidated tariffs.
The administration’s stopgap response, a temporary 10 percent global surcharge under Section 122, fared little better. On May 7, the Court of International Trade ruled that the proclamation imposing those duties was invalid because it failed to identify the balance-of-payments deficits the statute requires, as Congress understood that concept when it wrote the law in 1974. The court limited relief to the three importer plaintiffs before it, and the government has appealed, with further proceedings scheduled for August. If the administration ultimately loses, importers who paid Section 122 duties between February and July could see another refund opportunity.
Section 301, by contrast, is a mature and repeatedly litigated authority, the same statute that underpinned the China tariffs sustained by the courts during the first Trump administration. Most trade lawyers regard it as far more defensible than either IEEPA or Section 122. But the novel application here, predicating duties on 60 trading partners’ domestic labor enforcement regimes rather than on practices directly burdening American commerce in the traditional sense, is untested, and importers’ counsel are already studying whether the investigations’ speed and breadth left procedural openings. Grant Thornton’s Washington National Tax Office cautioned clients this week that the new tariffs “could still be subject to legal challenge” and that businesses should preserve documentation supporting potential refund claims.
Eighteen months, three legal foundations
To understand why the July 24 tariffs look the way they do, it helps to trace the improvised legal journey that produced them. The administration’s first-generation program, launched in 2025, rested on the International Emergency Economic Powers Act, a 1977 statute written for sanctions and asset freezes that no previous president had used to impose tariffs. That architecture supported both a worldwide baseline duty and steep country-specific rates, and it survived long enough to reshape global supply chains before the Supreme Court dismantled it in February.
The government’s fallback was Section 122 of the Trade Act of 1974, a provision allowing temporary import surcharges of up to 15 percent for up to 150 days to address balance-of-payments deficits. Proclamation 11012 invoked it four days after the Supreme Court ruled, imposing a 10 percent global surcharge effective February 24. But Section 122 came with two built-in expiration dates: the statutory 150-day clock, which ran out at 12:01 a.m. on July 24, and a legal vulnerability that the Court of International Trade exposed in May, when it held that the proclamation had identified trade deficits and current account deficits but never the balance-of-payments deficits that Congress, legislating in 1974, actually meant, a concept measured by liquidity, official settlements, and basic balance. The ruling’s direct relief was limited to the three plaintiffs, but its reasoning hangs over every dollar collected under the program.
Section 301 is the third foundation, and it was prepared with more care. USTR initiated the forced labor investigations on March 12, barely three weeks after the Supreme Court decision, ran a public comment process off the June 2 preliminary determination, and issued its final action within five months, a pace without precedent for an investigation covering 60 economies simultaneously. The speed served an obvious purpose: the final tariffs took effect at the exact minute the Section 122 surcharge expired, ensuring not a single day’s gap in coverage. Critics see in that seamlessness the evidence that the forced labor rationale is a legal costume for a predetermined policy; the administration’s answer, delivered by Greer to the Finance Committee, is that the strategy was never hidden and the authorities are interchangeable tools in its service.
Trading partners weigh their options
Formal foreign responses to the new regime are only beginning to take shape. Brazil moved first and hardest: on July 27 it requested WTO dispute consultations covering both the 12.5 percent forced labor tariff and the separate 25 percent Section 301 tariff imposed on Brazilian goods on July 22, arguing the measures are unjustified and inconsistent with American obligations under the GATT. Brazilian officials say the American duties touch some 6.6 billion dollars of their exports.
The European Union, which negotiated its way into the most favorable tier, has nonetheless called tariffs imposed on these grounds unjustified, and now faces the fresh threat of a separate Section 301 investigation over its digital fines against American technology companies. Japan and South Korea, whose 2025 framework agreements with Washington included substantial investment pledges, obtained total rates inclusive of MFN duties, an outcome their negotiators are presenting domestically as vindication of the deal-making approach. China has so far responded within the confines of the Kuala Lumpur arrangement, under which it committed to purchase 200 Boeing aircraft and 17 billion dollars per year of American agricultural products from 2026 through 2028; whether a 2.5 point tariff increase justifies, in Beijing’s eyes, disturbing that fragile truce is one of the more consequential open questions in the global economy.
For the smaller economies on the list, the calculus is different. The rate structure explicitly rewards countries that adopt and enforce forced labor import prohibitions, and the mid-investigation rate reductions for India, Sri Lanka, Cambodia, Guatemala, Honduras, and Trinidad and Tobago demonstrated that the reward is real and attainable. Trade ministries across Southeast Asia and Latin America are now studying prohibition statutes, and Vietnam’s July 22 enactment, though it missed the final action, positions Hanoi for an early rate modification. In an unintended irony noted by labor advocates, an American tariff program widely criticized as pretextual may end up producing the largest coordinated expansion of forced labor import bans in history.
Congress grumbles, then mostly acquiesces
The new tariffs arrived amid the most visible congressional friction over trade policy in a year, though few observers expect it to amount to more than friction. At Greer’s July 22 hearing, senators from both parties pressed the trade chief over duties that now rank as the highest import taxes Americans have paid in decades. Senator Marsha Blackburn, Republican of Tennessee, said companies in her state are “nervous about the uncertainty of the tariffs landscape” and complained that “the whipsaw effect has made it difficult for some of our businesses to maintain their growth plans or to make big capital investments.”
On the same day as the hearing, Senator Ron Wyden of Oregon, the Finance Committee’s ranking Democrat, introduced the Congressional Trade Powers Reform Act, which would repeal most presidential tariff authorities and route new duties through a joint congressional committee with approval power. Wyden and Representative Richard Neal of Massachusetts, the top Democrat on House Ways and Means, had earlier issued a joint statement opposing provisions of the pending Sanctioning Russia Act that would expand presidential tariff power, authorizing duties of up to 100 percent on countries that are major purchasers of Russian oil, a category that includes China and India. “There is no question that the U.S. government must take stronger action against purchasers of Russian energy who are fueling the unjustifiable war against Ukraine,” the two wrote on July 14. “But the latest draft of the Sanctioning Russia Act is a prescription for bedlam and higher tariffs.”
Analysts note that any bill curbing presidential tariff authority would require two-thirds majorities in both chambers to survive a veto, a threshold no trade legislation is likely to clear in this Congress regardless of November’s midterm results.
Nor is the administration finished expanding the program. USTR has an open Section 301 investigation into structural excess manufacturing capacity covering 16 economies, including Mexico, China, the European Union, Japan, Korea, Vietnam, and India, that is widely expected to produce additional duties that would stack on top of the forced labor rates. Separate investigations target China’s Phase One commitments and Vietnam’s intellectual property practices. And on July 24, President Trump said in a social media post that the United States would open a new Section 301 investigation into the European Union over its recent fines against large American technology companies, writing that “the penalties will be entirely reversed and, we anticipate, a substantial TARIFF to be placed on them at the earliest possible moment.”
What it means for business
For importers, the end of the in-transit window converts a policy story into an operational one. Every entry filed from Tuesday forward must reflect the new Chapter 99 classifications, and the familiar rhythm of tariff mitigation work has resumed: scrubbing bills of material for excluded products, testing USMCA qualification for North American supply chains, modeling first sale valuation, and evaluating foreign trade zone and bonded warehouse strategies to manage cash flow.
The compliance dimension is newer. Because the tariffs are formally an instrument of forced labor enforcement, and because rate reductions have flowed to countries that adopt and enforce import prohibitions, companies face a world in which supply chain traceability is no longer just an American customs requirement but an emerging global norm. A dozen countries now operate forced labor import bans of their own, and their enforcement posture directly affects the tariff rates their exporters face at American ports. Multinationals are being advised to treat labor traceability documentation with the same rigor long applied to origin and valuation.
The macroeconomic effects will take longer to read. The new rates are, for most countries, equal to or modestly higher than the expired Section 122 surcharge, so the aggregate price shock should be smaller than last year’s initial tariff wave. But the differentiation across countries creates fresh distortions: a 10 percent total rate for the European Union against 12.5 percent plus MFN for Vietnam or Thailand will nudge sourcing decisions in ways that are already visible in freight bookings, and the unresolved textile quotas leave one of the most tariff-sensitive industries planning blind.
What is clear is that the administration has rebuilt, on its third legal foundation in eighteen months, substantially the tariff wall it first erected in 2025, and has done so on a statute the courts have historically respected. The refunds from the last two rounds are still being processed even as the new duties are collected. For American businesses, the lesson of the past year and a half is uncomfortable but unavoidable: the tariffs keep changing their legal clothes, but they are not going away.