Analysis by Energy Workforce President Tim Tarpley
After the initial round of IEEPA tariffs were ruled unconstitutional by the Supreme Court in February, USTR indicated it would work to replace the IEEPA tariff rates with new, more legally sustainable tariff lines that could continue to be used as leverage to negotiate out individual trade deals with multiple countries. The first of the two major investigations was released along with a proposed rule on Tuesday night. If finalized, this proposed rule could have significant impacts on OFS supply chains.
The report titled “Acts, Policies, and Practices of Various Economies Related to the Failure to Impose and Effectively Enforce a Prohibition on the Importation of Goods Produced with Forced Labor,” which investigated over 60 countries. In summary, the ruling made the following findings:
- The ruling finds that Canada, Ecuador, the European Union, Indonesia, Mexico and Pakistan have failed to enforce existing laws prohibiting goods made with forced labor effectively and calls for a 10% duty.
- Countries that have signed agreements on reciprocal trade to address forced labor, including Malaysia, Cambodia, El Salvador, Guatemala, Argentina, Bangladesh, Taiwan, Indonesia, Ecuador, and the United Kingdom (partial agreement), are recommended to have a 10% duty.
- The report recommends that the other countries investigated by USTR in the probe also have failed to meet the standard and are recommended to have a 12.5% tariff rate. Algeria; Angola; Australia; the Bahamas; Bahrain; Brazil; Chile; China; Colombia; Costa Rica; Dominican Republic; Egypt; Guyana; Honduras; Hong Kong, China; India; Iraq; Israel; Japan; Jordan; Kazakhstan; Kuwait; Libya; Malaysia; Morocco; New Zealand; Nicaragua; Nigeria; Norway; Oman; Peru; the Philippines; Qatar; Russia; Saudi Arabia; Singapore; South Africa; South Korea; Sri Lanka; Switzerland; Thailand; Trinidad and Tobago; Türkiye; United Arab Emirates; Uruguay; Venezuela; and Vietnam.
There are a couple of things to keep in mind regarding this report. First, it is proposed and not final. Additionally, there will be an opportunity to submit written comments by July 6th and to testify at a public hearing on July 7th. EWTC will take both opportunities and use comments and preparations from the Tariff Task Force.
Second, this forced labor investigation is just one of two pending investigations. The proposed rule on excess manufacturing capacity has not been released and could be released soon. This probe involves: Bangladesh, Cambodia, China, the European Union, India, Indonesia, Japan, Malaysia, Mexico, Norway, Singapore, South Korea, Switzerland, Taiwan, Thailand and Vietnam.
It is entirely possible that this probe could recommend additional tariff rates on these countries, which could stack on the forced labor tariffs. One bit of good news is that there is an annex (starting on page 18) of excluded products, and it states that products that fall under section 232 or are USMCA-compliant will not be included.
It is also key to remember that the findings for each of these countries could be litigated, given how many similar findings there are. Countries like India have already indicated they will be filing legal challenges to the findings. It is possible that we could end up with a patchwork of rates as some countries are removed or altered due to legal challenges and/or the signing of forthcoming trade deals with the US.
Tim Tarpley, Energy Workforce President, analyzes federal policy for the Energy Workforce & Technology Council. Click here to subscribe to the Energy Workforce newsletter, which highlights sector-specific issues, best practices, activities and more.
