New Forced-Labor Tariffs: Why Supply-Chain Due Diligence Is Becoming a Trade-Compliance Issue for Midwest Businesses
For Midwest businesses that rely on overseas manufacturing, the question “Who is our supplier?” is no longer enough. Companies increasingly need to know who made the components their supplier purchased, where raw materials originated, whether subcontractors were used, and whether labor risks exist several layers down the supply chain.
That became even more important this summer. On July 23, 2026, the Office of the United States Trade Representative announced new Section 301 tariff actions involving 60 major U.S. trading partners, following investigations into whether those economies had adopted and effectively enforced prohibitions on importing goods produced with forced labor. USTR says the economies covered by the investigations account for approximately 99.4% of U.S. imports.
The resulting tariffs generally range from 10% to 12.5%, subject to country-specific treatment and significant product exemptions. The new duties began applying to covered entries in July 2026. For Illinois and Midwest manufacturers, distributors, retailers, food businesses, importers, and growing companies using international suppliers, the larger message is clear: supply-chain due diligence is becoming part of trade compliance.
If your business imports products, components, ingredients, raw materials, or finished goods from overseas, now is a good time to determine how far you can actually trace your supply chain. TEIL Firms can help businesses review supplier relationships, international contracts, sourcing risks, and trade-compliance obligations before a problem reaches the border.
What Are the New Forced-Labor Tariffs?
The new measures were imposed under Section 301 of the Trade Act of 1974, which allows the United States to respond to certain foreign government acts, policies, or practices determined to be unreasonable, discriminatory, or burdensome to U.S. commerce.
In March 2026, USTR initiated investigations into 60 economies concerning their failure to impose and effectively enforce prohibitions against importing goods produced with forced labor. After hearings, public comments, consultations with foreign governments, and further review, USTR determined in June that the practices were actionable under Section 301 and announced final tariff action in July.
Countries that USTR determined had adopted certain forced-labor import restrictions, committed to doing so through trade agreements, or established qualifying partial regimes generally received a 10% additional tariff rate. That group includes major U.S. trading partners such as Canada, Mexico, India, Indonesia, Malaysia, Bangladesh, Cambodia, Pakistan, the United Kingdom, and several Central and South American countries.
Most other investigated economies are generally subject to a 12.5% Section 301 duty, while the European Union, Taiwan, Japan, Korea, and Switzerland receive somewhat different treatment tied in part to existing Most-Favored-Nation tariff rates. The exact treatment of a shipment therefore depends on more than simply identifying the exporting country.
These Are Not Tariffs Only on Goods Proven to Use Forced Labor
This distinction is important. The new Section 301 tariffs are aimed at the trade policies of the 60 investigated economies—specifically, what USTR determined was their failure to adequately restrict forced-labor goods from entering their own markets.
That means the additional tariff can apply to covered goods from an affected country even where there has been no finding that the individual shipment itself was produced with forced labor. USTR also created numerous product exemptions, including certain goods where additional duties could create shortages, disrupt the broader economy, involve products that cannot reasonably be obtained domestically or elsewhere, or otherwise would not materially advance the purpose of the trade action. Products already subject to certain Section 232 tariffs are also outside the new action.
But there is a second and separate compliance issue businesses need to understand. The United States already prohibits imports of goods produced wholly or in part with forced labor under 19 U.S.C. § 1307.
So a business may face two different questions: Does a new Section 301 tariff apply because of the country from which the product originates? And separately, could the product itself face detention or exclusion because forced labor may exist somewhere in its supply chain? Those are not the same analysis.
Forced-Labor Compliance Already Applies Directly to Importers
U.S. Customs and Border Protection has made clear that importers are expected to understand their supply chains. CBP's guidance states that importers must exercise reasonable care and understand where and how their products are manufactured or produced, in whole or in part. CBP also points importers toward Department of Labor forced-labor resources and its own Withhold Release Orders and Findings when developing compliance programs.
That phrase—“in whole or in part”—is significant. A company may purchase a finished product from a factory that does not itself use forced labor, but questions can still arise about the cotton in the fabric, the aluminum inside an automotive component, the mineral used in a battery, the rubber in a product, the agricultural ingredient in a processed food, or the raw material sold to the manufacturer's supplier.
Forced-labor risk can therefore exist much farther upstream than the business issuing the purchase order. That makes supplier visibility increasingly important.
Why This Matters for Midwest Businesses
It would be easy to think of forced-labor compliance as an issue limited to major retailers or multinational companies with enormous global sourcing departments. It is not.
Illinois alone exported $74.4 billion in manufactured products in 2025, including chemicals, machinery, electronics, transportation equipment, and food products. And of the more than 20,000 companies exporting from Illinois locations in 2024, approximately 88% were small and medium-sized businesses.
The same types of companies frequently rely on imported components and materials. A Midwest machinery manufacturer may purchase castings, electronic controls, bearings, wiring, or finished assemblies overseas. An automotive supplier may receive a Mexican component containing materials sourced from Asia. A consumer-products company may buy packaged finished goods from an overseas contract manufacturer. A food company may rely on internationally sourced agricultural ingredients. A clothing brand may contract with a factory while having very little visibility into where the factory obtains its cotton or textiles.
None of these businesses needs to own a foreign factory to have forced-labor exposure. They simply need to participate in a supply chain where the risk exists somewhere upstream.
The First-Tier Supplier Is No Longer the Whole Story
This may be the most important operational lesson. Businesses traditionally perform due diligence on the company they are directly contracting with. They may confirm the supplier's legal existence, ownership, financial condition, manufacturing capacity, pricing, quality standards, delivery history, and perhaps sanctions or litigation history.
Those are still important, but modern trade compliance increasingly requires a second question: Who supplies the supplier?
Suppose an Illinois company purchases aluminum components from a manufacturer in Southeast Asia. The factory itself may be compliant, but where did the aluminum originate? Was it refined somewhere else? Who provided the raw material? Did the supplier change sources after the contract was signed? Could the material be connected to a region or entity presenting elevated forced-labor risk?
The U.S. Department of Labor's current forced-labor resources identify risks across a wide range of commodities and countries. Its List of Goods Produced by Child Labor or Forced Labor includes 204 goods from 82 countries and areas, covering agricultural products, manufactured goods, and mined commodities. DOL specifically describes the list as a resource companies can use for supply-chain risk assessment and labor-rights due diligence.
Commonly identified categories include cotton, sugarcane, coffee, fish, garments, textiles, footwear, bricks, gold, coal, and diamonds, among many others. The point is not that every supplier in a listed country presents a problem. The point is that companies need a method for identifying where additional diligence may be necessary.
China Presents an Additional Layer of Risk
Businesses sourcing from China—or from manufacturers using Chinese-origin materials—also need to understand the Uyghur Forced Labor Prevention Act, or UFLPA.
The UFLPA creates a rebuttable presumption that goods mined, produced, or manufactured wholly or in part in China's Xinjiang Uyghur Autonomous Region, or by entities appearing on the UFLPA Entity List, are prohibited from entering the United States under Section 1307.
Again, “wholly or in part” matters. A finished product manufactured outside Xinjiang—or even outside China—can raise compliance questions if an upstream material or component is connected to a covered entity or region.
CBP has emphasized supply-chain traceability in implementing the law and has encouraged companies to use tools such as origin verification where appropriate as part of broader due-diligence programs. This is another reason companies should be cautious about assuming that moving final assembly to another country automatically eliminates China-related trade risk. The location of the final factory may be only one part of the analysis.
What Happens if CBP Questions a Shipment?
Forced-labor enforcement can have immediate business consequences. CBP may issue a Withhold Release Order, commonly called a WRO, when information reasonably indicates that imported merchandise is being produced with forced labor.
Goods subject to a WRO may be detained. The importer may then need to provide information establishing that the merchandise is admissible or choose to export the shipment. Where CBP has issued a formal Finding, merchandise may be subject to seizure unless the importer can establish that the goods are admissible.
This can turn a supply-chain problem into an operational problem very quickly. Inventory can be delayed, production schedules can be affected, warehousing and storage expenses can increase, customer deadlines can be missed, and a business may suddenly need records from multiple foreign companies that it never expected to produce.
CBP rulings demonstrate just how detailed the documentation can become. In one matter, an importer provided certificates of origin, contracts, invoices, proof of payment, supply certificates, transaction records, maps, and other tracing information to establish where cotton moved through the supply chain. CBP ultimately determined that the evidence was insufficient because of a connection between part of the supply chain and an entity subject to a forced-labor restriction.
That provides a practical lesson: trying to reconstruct the supply chain after a shipment has already been detained is far more difficult than building traceability into the supplier relationship from the beginning.
Contracts Need to Address Forced-Labor Compliance
Supplier due diligence should also be supported by the contract. An international supply or manufacturing agreement can address representations that goods are not produced with prohibited forced labor, compliance with applicable labor and trade laws, disclosure of manufacturing locations and significant subcontractors, identification of critical raw-material sources, country-of-origin documentation, supplier recordkeeping, audit and inspection rights, notification before changing suppliers or sourcing regions, cooperation with customs inquiries, access to tracing documentation, indemnification where appropriate, termination rights following serious compliance violations, and transition obligations if the buyer must move production.
A contract cannot guarantee that misconduct will never occur. But it can determine whether the purchaser has the right to ask questions, inspect records, require corrective action, or exit the relationship.
Without those provisions, a business may find itself legally responsible for importing the product while having very little contractual power to obtain the information needed to prove where the product came from.
“Our Supplier Certified It” May Not Be Enough
Supplier certifications can be useful, but they should not necessarily be the entire compliance program. A one-page statement saying that a supplier “does not use forced labor” may tell the purchaser very little about the upstream supply chain.
A stronger approach asks where the goods are actually manufactured, where major raw materials originate, whether subcontractors are permitted, who the critical Tier 2 suppliers are, whether the supplier can trace materials to their source, whether the company conducts labor-risk assessments, whether it maintains purchase and production records, and whether those records can be provided if CBP requests them.
Businesses should also ask whether suppliers notify customers when sourcing changes and whether the company has checked relevant government lists and enforcement actions.
The level of diligence should be proportionate to the risk. A low-risk office product purchased from a transparent supplier may not require the same investigation as cotton textiles, seafood, minerals, batteries, solar components, aluminum-intensive products, or goods sourced through complicated multi-country manufacturing chains.
Supplier Due Diligence Is Also Becoming a Pricing Issue
The July Section 301 action adds another dimension. Companies now need to understand not only whether a supplier's goods can legally enter the United States but also what tariffs apply because of the country involved.
That can change sourcing economics. Suppose two suppliers offer the same product at nearly identical factory prices. Supplier A operates in an economy subject to a 10% additional Section 301 tariff. Supplier B operates in an economy subject to a 12.5% rate. One product may fall within an exemption, while the other may not. One supplier may have excellent upstream traceability, while the other provides very little information about component or raw-material origin.
The lower purchase price may therefore not represent the lower-risk or lower-cost transaction. Businesses should increasingly evaluate landed cost and compliance risk together.
What Midwest Businesses Should Be Doing Now
Companies do not need to investigate every supplier with the same intensity, but they do need a process for identifying where greater diligence is warranted.
A practical review should include:
Map your international suppliers. Identify where finished products, components, and significant raw materials originate.
Look beyond Tier 1. For higher-risk products, determine whether the direct supplier can identify important upstream suppliers and production locations.
Review the new Section 301 tariffs. Determine whether imports from affected economies are subject to the new 10% or 12.5% duties and whether an exemption applies.
Confirm HTS classifications. Tariff treatment and product exemptions frequently depend on accurate classification.
Screen forced-labor resources. Review relevant CBP Withhold Release Orders, Findings, UFLPA information, Entity Lists, and Department of Labor resources.
Identify high-risk commodities. Certain agricultural products, textiles, minerals, metals, seafood, and manufactured goods may warrant deeper review depending on their source.
Strengthen supplier contracts. Include compliance representations, tracing obligations, audit rights, sourcing-change notifications, documentation requirements, and appropriate remedies.
Preserve documentation. Supply-chain records are most useful when they exist before CBP asks for them.
Create an escalation process. Employees should know what happens when a supplier cannot answer an origin question or when a potential labor-risk issue appears.
Reassess suppliers periodically. Supply chains change. A supplier considered low-risk two years ago may have changed factories, raw-material sources, subcontractors, or ownership.
The TEIL Perspective
The broader lesson is that knowing the name of your overseas supplier is no longer the same as knowing your supply chain. International trade compliance increasingly requires businesses to understand how products are made, where significant materials come from, who participates in production, and whether the company can document that information if a regulator asks.
For Midwest companies, this does not mean every international supplier relationship requires an expensive investigation. It means diligence should be structured around risk. A company importing a high-risk commodity from a complex multi-country supply chain should conduct a different level of review than a company purchasing a straightforward product from a transparent and established source.
The goal is not merely to create more paperwork. The goal is to avoid discovering—after inventory has been detained, tariffs have been assessed, a customer deadline has been missed, or a supplier relationship has failed—that the business never actually knew how its product was being made.
TEIL Firms assists Illinois and Midwest businesses with international trade and regulatory compliance, supplier and foreign-partner due diligence, cross-border contracts, customs and sourcing strategy, intellectual property protection, and global expansion. If your company relies on overseas suppliers, we can help identify where additional supply-chain diligence may be appropriate and build those protections into the legal structure of the relationship.
Current Status & Sources
On July 23, 2026, USTR announced final Section 301 action following investigations involving 60 economies and their policies concerning imports produced with forced labor. The action generally imposes additional duties of 10% or 12.5%, subject to country-specific calculations and product exemptions.
The Section 301 tariffs are separate from the United States' longstanding prohibition under 19 U.S.C. § 1307 on importing merchandise produced wholly or in part with forced labor, as well as the additional enforcement framework created by the Uyghur Forced Labor Prevention Act. CBP advises importers to exercise reasonable care over their supply chains and understand where and how their merchandise is produced.
This article is provided for informational purposes only and does not constitute legal advice.
If your business is unsure how well it can trace its overseas suppliers, raw materials, or manufacturing chain—or whether the new forced-labor tariffs and compliance rules could affect its imports—TEIL Firms can help you evaluate your exposure and strengthen your supplier due-diligence and trade-compliance strategy. Click the button below to get our support with your international supply chain.