MIDDLE EAST TAX ALERT | New US Forced Labor Tariffs: What Middle East Exporters Need To Know
Businesses across the Middle East that export goods to the US may face a material increase in import costs following the introduction of new forced labor-related tariffs.
Effective July 24, 2026, the Office of the United States Trade Representative (USTR) imposed additional tariffs of 10% or 12.5% on products originating in 60 jurisdictions. The measures were introduced under Section 301 of the US Trade Act of 1974, following investigations into whether the relevant jurisdictions had implemented and effectively enforced restrictions on importing of goods produced using forced labor.
This alert addresses the key implications for Middle East exporters. For a comprehensive analysis by the A&M US Trade team, see full article here, link.
Key Information for Middle East Exporters
The following are the key features of the new measures for businesses exporting from the Middle East to the US:
- Broad Product Coverage: The additional tariffs apply broadly to products originating in the covered economies unless a general or product-specific exemption applies. The tariff does not depend on whether a specific exporter, factory, or shipment has itself been linked to forced labor.
- Additional Duty of 10% or 12.5%: The tariff is imposed in addition to regular Most Favourite Nation (MFN) customs duty rates and any other applicable trade measures. This may result in a significant increase in the landed cost of US-imported products.
- Country of Origin Is Critical: The additional tariffs are based on the origin of the goods (i.e., where the most substantial manufacturing took place). Storage, repacking, or re-export operations through another country or free zone does not change the origin of the goods.
- The Measures Are Separate From Shipment-Specific Enforcement: The tariffs apply broadly based on country of origin and should be distinguished from other US forced labor enforcement measures that may target particular producers, products, or supply chains and result in goods being detained or refused entry.
- Commercial Costs May Flow Back To Exporters: Although the US importer of record is responsible for paying the duty, Middle East exporters may face requests for price reductions, contract renegotiations, lower order volumes, or changes in US customer sourcing decisions.
Which Countries Are Affected?
The new tariffs apply to goods originating in the following Middle East and North African jurisdictions:
| Jurisdictions Impacted | S.301 Tariff Rate |
|---|---|
| GCC | 12.5% |
| Algeria, Egypt, Iraq, Israel, Libya, Morocco, and Türkiye | 12.5% |
| Jordan | 10% |
Jordan is subject to the lower 10% rate following commitments concerning the introduction of a forced labor import prohibition. The remaining listed economies are subject to the 12.5% rate.
What Goods Are Exempt?
The USTR measures include general and product-specific exemptions. These include certain:
- Civil aircraft and aircraft parts
- Raw materials and critical inputs
- Products not available in sufficient quantities in the US
- Products where the additional tariff could cause wider economic disruption
- Informational materials
- Donations
- Goods for personal use contained in accompanied baggage
- Products already subject to certain tariffs under Section 232 of the US Trade Expansion Act
Section 232 is the US legal mechanism used to impose national security-related tariffs on products including steel, aluminium, automobiles, and certain automotive parts. Products already subject to these measures are excluded from the new forced labor-related tariff. However, businesses should confirm whether the relevant Section 232 measure applies to their specific product and whether it covers the full customs value or only the steel or aluminium content.
What Does This Mean for Middle East Businesses?
Middle East businesses exporting goods to the US should consider the following actions:
- Identify affected trade flows by mapping US-bound exports according to the country of origin, US tariff classification, customs value, and applicable tariff rate.
- Review available exemptions to determine whether any products fall within a general exemption or one of the specific US tariff classifications listed in the USTR notice.
- Validate customs origin positions, particularly where goods are manufactured using imported components or undergo assembly or processing in a Middle East country.
- Review free-zone and re-export models to ensure the country of export, invoicing location, or regional distribution hub is not incorrectly treated as the country of origin.
- Assess the interaction with existing US tariffs, including Section 232 steel, aluminum, and automotive tariffs, as well as any antidumping or countervailing duties.
- Quantify the commercial impact and determine whether the additional cost will be absorbed by the US importer, passed back to the exporter, shared between the parties, or passed on to customers.
- Review contractual arrangements to establish which party is responsible for additional customs duties and whether contracts permit pricing adjustments or renegotiation.
- Consider customs valuation and supply-chain opportunities, including whether existing related-party pricing, first-sale arrangements, or sourcing structures remain appropriate and supportable.
- Monitor further developments, as the applicable tariff rates may be modified if affected economies introduce or strengthen forced labor import prohibitions or make relevant commitments to the US.
How A&M Can Help
A&M’s Middle East Customs and International Trade team, working alongside our US Global Trade colleagues, can assist businesses with:
- Assessing exposure to the new tariffs.
- Reviewing product classifications and exemptions.
- Confirming the customs origin of goods manufactured or processed in the region.
- Assessing the interaction with existing US tariffs.
- Quantifying the financial and commercial impact.
- Reviewing customs valuation and supply-chain options.
- Supporting discussions with US importers and customers.
Businesses exporting from, or manufacturing in, the Middle East should assess the impact promptly, particularly where US sales contracts were priced before the additional tariffs were introduced.
Relevant Sources
