Malaysia Should Channel US Trade Representative Section 301 Pressure Into Forced Labour Compliance

The US Trade Representative (USTR) report on Section 301 findings, released on 2 June 2026, included Malaysia among the 60 economies to be sanctioned on grounds of forced labour. Specifically, the USTR asserted that these countries either failed to “impose a legal prohibition  for the importation of goods wholly or in part produced with forced labour and to effectively enforce such a prohibition”. Effective enforcement means that the government has taken measures to compel companies to observe the legal prohibition.

Consequently, the report proposes a 10 per cent tariff on all products imported from Malaysia, except for exempted goods such as goods already covered by other tariffs, essential raw materials that are difficult to source domestically, products whose tariffs could harm the US economy, and items that cannot be produced in sufficient quantities in the US. At-risk sectors include electronics, rubber gloves, garments and palm fruit, which have been listed in the Bureau of International Labor Affairs (ILAB) since September 2024. The ILAB maintains a list of goods and their source countries which it has reason to believe are produced by child labour or forced labour in violation of international standards. Some of Malaysia’s companies in these sectors have previously been found to use forced labour in their domestic operations, and there is growing awareness about the problem. However, it is unlikely that companies are scrutinising their imported inputs for forced labour.

The US’ latest action, though, implicates Malaysia as long as she imports inputs from countries that are linked with the use of forced labour, particularly in these four sectors. For example, Malaysia imports parts of electronics goods and textiles from China, which is also identified for the use of forced labour in the same sectors. Similarly, imports of natural rubber from Vietnam and palm oil from Indonesia are at risk for the use of forced labour in these sectors.

Malaysia has progressively strengthened its legislation against the use of forced labour. In 2021, Malaysia launched its first National Action Plan on Forced Labour (NAPFL) 2021–2025, developed by the Ministry of Human Resources (MOHR) with the support of the International Labour Organisation (ILO). The NAPFL focuses on awareness, enforcement, labour migration and access to remedy and support services, with the aim of eliminating forced labour in Malaysia by 2030.

Malaysia also officially ratified the Protocol of 2014 to the Forced Labour Convention on 21 March 2022, becoming the 58th country globally and the second ASEAN member state to do so. The legally-binding protocol requires states to implement concrete measures to prevent forced labour, protect victims, and provide access to remedy.

The Employment Act 1955 (Amendment) 2022, which took effect on 1 January 2023, introduced explicit prohibitions on using forced labour, with penalties for infringement.

Under the Agreement on Reciprocal Trade (ART) signed on 26 October 2025, Malaysia committed to adopt and implement a prohibition on the importation of goods mined, produced, or manufactured wholly or in part by forced or compulsory labour.

Malaysia is continuing to strengthen its response through the development of the next National Action Plan on Forced Labour (NAPFL) for 2026–2030. A workshop organised by the Ministry of Human Resources (KESUMA) on 20–21 November 2025, with ILO technical support, brought together government, employers, workers and civil society representatives to review the draft plan. Aimed at driving Malaysia toward eliminating forced labour by 2030, the plan includes renewed commitments to prevention, stronger governance of labour migration and recruitment, improved enforcement and compliance systems, and expanded protection and remedy for victims, including migrant workers.

Although these changes signal progressive improvements, what the US wants is not just stringent regulations for the use of forced labour in domestic production but equally stringent regulations on imported inputs with forced labour.

What the US requires, and what Malaysia has yet to demonstrate, is a functioning, end-to-end enforcement architecture, and not just  regulatory oversight.

The Ministry of Investment, Trade, and Industry (MITI), in response to the findings, has stated that the government is seeking to address the regulatory gap, referring to Malaysia’s lack of a specific import prohibition law to screen goods and raw materials entering the country from third countries with forced labour content.

This clearly understates the extent of the problem, as the Section 301 findings also emphasise effective enforcement. What the US requires, and what Malaysia has yet to demonstrate, is a functioning, end-to-end enforcement architecture, and not just  regulatory oversight.

The immediate policy priority for Malaysia is therefore threefold. First, MITI must move urgently to legislate the ART-committed import prohibition on the importation of goods that use forced labour. Indonesia, for example, issued Ministerial Regulation No. 9 of 2026 which regulates the import ban on products produced by forced labour, following the signing of the Reciprocal Trade Agreement (ART). Second, the Royal Malaysian Customs Department must be resourced and trained to administer detention of goods made with forced labour, with digital traceability tools embedded in its clearance processes. Third, beyond screening at customs, firms in Malaysia must embed digitised social compliance in their operations to include forced labour screening of their international vendors. Bursa Malaysia’s environmental, social and governance (ESG) reporting framework, while a useful signal for listed companies, needs improvements on reporting quality and depth. Importantly, it must be complemented by compliance monitoring for small- and medium-sized manufacturers, as 40 per cent have yet to adopt ESG practices.

Effectively closing the regulatory and enforcement gap will allow Malaysia to meet the standards of the US, as well as the EU’s Forced Labour Regulation which also strictly prohibits the import, sale and export of any products made with forced labour.

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