India has officially moved to prohibit the import of goods produced using forced labor, a significant policy shift enacted through a new paragraph in its Foreign Trade Policy. The Directorate General of Foreign Trade (DGFT) issued the notification on July 13, with the new provisions set to become effective 30 days from its publication.
This development unfolds amidst an ongoing Section 301 investigation by the United States, which is scrutinizing imports from approximately 60 economies, including India, for links to forced labor. The US has proposed a 12.5% tariff on goods from most of these countries under review, while offering a lower 10% tariff to the European Union and Pakistan after they introduced domestic measures against forced labor imports.
Aligning with International Standards
The DGFT notification defines "forced labour" as "all work or service which is exacted from any person under the menace of penalty and for which the said person has not offered himself voluntarily," in line with the International Labour Organization (ILO) Forced Labour Convention, 1930. The Central government reserves the right to specify which goods will be prohibited based on inquiries or emerging evidence.
According to Ajay Srivastava, founder of Global Trade Research Initiative, India's move signals a strengthening of its domestic legal framework to align with international standards. This step could bolster India's position in future trade negotiations and market access discussions.
Challenges and Implications
Manoj Mishra, Partner and Tax Controversy Management Leader at Grant Thornton Bharat, highlighted that this marks a crucial policy shift for India. Previously, India primarily relied on labor and criminal laws to address forced labor domestically. Now, the foreign trade policy explicitly incorporates a dedicated trade measure.
Experts note that while the order establishes a legal framework, its effectiveness will depend on the government's investigation processes, the evidence required to establish forced labor, and the specific products targeted. The US authorities have identified products like cotton, textiles, solar-panel polysilicon, seafood, metals, batteries, and electronics as particularly vulnerable to forced-labor risks, especially those linked to China's Xinjiang region.
The enforcement of such rules remains challenging, even as major economies like the US and EU continue to import many of these products from regions with documented forced labor concerns.