Section 301 probes put India exports in focus in 2026

What triggered the latest US trade action

The United States has opened two separate investigations under Section 301 of the Trade Act, 1974, widening scrutiny of trade partners including India. One probe looks at alleged forced labour risks in global supply chains across 60 economies. The other examines whether industrial policies in 16 economies have created structural excess manufacturing capacity that burdens or restricts US commerce.

For India, the dual track matters because it combines supply chain compliance questions with a more traditional trade dispute over manufacturing capacity and industrial support. The USTR has framed both investigations as addressing practices that may give foreign producers cost advantages and harm American industries and workers.

Forced labour probe: scope and what the USTR will examine

The forced labour investigation is designed to assess whether countries have failed to prohibit and effectively enforce bans on the importation of goods produced using forced labour. The USTR has said it will examine whether such failures are unreasonable or discriminatory and whether they burden or restrict US commerce.

The review covers two pathways for forced labour risks. First, whether forced labour is used directly in production. Second, whether countries import materials produced with forced labour from other jurisdictions and use them as intermediate inputs in goods later exported to the US.

Excess capacity probe: why the USTR calls it “structural”

In the separate investigation into excess capacity, the USTR has described the issue as “structural excess capacity” in manufacturing. This refers to production capacity that exceeds demand and is sustained not by market forces but by government intervention.

The interventions highlighted include subsidies, state-directed financing, and regulatory frameworks that promote production while suppressing domestic consumption. The investigation targets a broad group of economies, including China, the European Union, Japan, India, Mexico, Korea, and several Southeast Asian jurisdictions, signalling a systemic approach rather than a single-country focus.

India’s response: government seeks granular industry submissions

Following the US request for consultations under the excess capacity probe, India has begun compiling granular industry data, according to people familiar with the matter. The commerce and industry ministry has asked industry to provide details on installed capacity, production, employment, policy support, export profiles, linkages with the US, and integration into global value chains.

Companies have also been asked to map where they operate across upstream, midstream, and downstream activities, including raw material sourcing, manufacturing, assembly, and distribution. Another information request focuses on ownership, including whether majority shareholding is private or public and the level of domestic and foreign participation.

An official said the government is “evaluating and examining the legal impact” of the Section 301(b) investigations launched by the US against India.

Sectors named: where the US alleges capacity issues or surplus

Under the excess manufacturing capacity investigation, the US probe claims India has created significant excess capacity in petrochemicals, steel, and solar modules. It also identifies sectors where India has a global trade surplus, including textiles, health, construction goods, and automotive goods.

For the forced labour investigation, the USTR’s focus includes supply chains involving imported intermediate goods. Examples cited include cotton and yarn in textiles, critical minerals used in solar panels and electronics, and palm fruit used in biofuels.

Why Indian exporters could be pulled into supply chain scrutiny

Think tank Global Trade Research Initiative (GTRI) has said India could face scrutiny even though forced labour is prohibited under the Bonded Labour System (Abolition) Act, 1976. The key risk flagged is dependence on imported intermediate inputs from China across several export-oriented sectors.

GTRI said exports of solar panels, electronics and garments to the US may face closer scrutiny. It cited exposures such as solar exports relying on imported polysilicon or solar cells linked to Chinese supply chains, electronics manufacturing depending on Chinese components and sub-assemblies, and textiles using Chinese yarns and fabrics.

Key dates, deadlines, and process under Section 301

The current Section 301 process includes consultations, evidence gathering, and hearings before any decision on remedies. In this probe cycle, the USTR has requested consultations with economies under investigation and plans to hold hearings on April 28, 2026. Interested parties can submit written comments or request to appear at the hearing by April 15, 2026.

USTR Jamieson Greer has said the forced labour-related investigations will determine whether foreign governments have taken sufficient steps to prohibit imports of goods produced with forced labour and how failures affect US workers and businesses.

Market and trade context: exports data and tariff backdrop

India’s February goods exports to the US fell 12.88% from a year earlier to $1.89 billion, according to the information cited. The decline was linked to the impact of high tariffs imposed on the country.

The broader US tariff environment has also been shaped by legal developments. Reuters reported that the move came after a US Supreme Court ruling on February 20 that struck down earlier worldwide tariffs as illegal. Reporting also referenced earlier tariff levels, including a 50% levy on India, and said the administration had ordered a 10% temporary tariff on all imports under a different law.

What India’s data exercise signals for listed sectors

The ministry’s request for capacity utilisation data from FY20 to FY25, as well as details of policy support such as the production-linked incentive scheme, tax subsidy, export incentive, and preferential credit, indicates India is preparing a fact-based defence. It also suggests exporters may need to document supply chain and ownership details more systematically.

For Indian listed companies and sectors with meaningful US exposure, the immediate watchpoints are compliance readiness and the ability to provide traceability and sourcing documentation, especially where inputs are imported. Separately, sectors named in the excess capacity probe may face higher questions on industrial policy support and capacity expansion plans.

Snapshot table: what is known from the probes

Conclusion

The USTR’s back-to-back Section 301 investigations put India in the frame on both supply chain compliance and manufacturing policy questions, with potential implications for exporters and trade ties. In response, India is collecting detailed industry data across capacity, utilisation, policy support, and supply chain linkages to prepare evidence-based submissions. The next procedural milestone is the USTR hearing scheduled for April 28, 2026, with comments and appearance requests due by April 15, 2026.