US raises concerns at India’s duties on IP-intensive goods, source code, AI working paper

The USTR's 2026 Special 301 Report, released April 30, raises specific concerns about two areas of Indian policy beyond pharmaceutical patents: high import d...

What Happened

The USTR's 2026 Special 301 Report, released April 30, raises specific concerns about two areas of Indian policy beyond pharmaceutical patents: high import duties on IP-intensive goods and mandatory source code disclosure requirements.
The report flags India's tariff structure on technology products — including electronics, software, and medical devices — as creating disproportionate barriers to trade in goods that carry embedded intellectual property.
Source code access requirements refer to regulations or procurement conditions that compel foreign firms to share proprietary software code with Indian government agencies or domestic competitors as a precondition for market access.
India's position is that its tariff structure is WTO-compliant and that source code disclosure requirements reflect legitimate national security and regulatory oversight interests.
The USTR intends to engage "intensively" with India bilaterally during 2026 on these concerns.

Static Topic Bridges

Tariffs on IP-Intensive Goods: The WTO Information Technology Agreement (ITA)

The WTO Information Technology Agreement (ITA), concluded in 1996 and significantly expanded in 2015 (ITA-II), eliminates tariffs on a broad range of technology products including computers, semiconductors, telecommunications equipment, and scientific instruments. India is a signatory to ITA-I and has progressively reduced tariffs on covered products. However, India has not joined ITA-II in full, and has retained or raised duties on several electronics and technology products under its Make in India industrial policy — including mobile phones, printed circuit boards, and certain medical devices — arguing that targeted protection is necessary for domestic manufacturing development.

ITA-I (1996): India is a signatory; covers ~200 product categories, binding tariffs to zero.
ITA-II (2015, also called the Expansion of the ITA): covers an additional 201 product categories; India did not join.
India's Basic Customs Duty (BCD) on mobile phones was progressively raised from 0% in 2014 to 20% by 2018 as part of the phased manufacturing programme.
USTR classifies goods such as pharmaceuticals, medical devices, electronics, and software-embedded hardware as "IP-intensive" because their commercial value derives primarily from the embedded intellectual property.

Connection to this news: The USTR 2026 report identifies India's tariffs on IP-intensive goods — particularly where India has diverged from ITA commitments or applied new duties — as evidence of a broader pattern of market-access barriers tied to intellectual property, adding a trade-in-goods dimension to what has traditionally been a patent-and-enforcement dispute.

Source Code Disclosure and Digital Trade Policy

Source code disclosure requirements — sometimes called "forced technology transfer" conditions — arise when a government mandates that foreign companies share proprietary software code, algorithms, or technical data as a condition for regulatory approval, government procurement, or market access. Several countries, including India, have faced criticism for policies that, in effect, require disclosure of trade secrets under the guise of security audits or localisation requirements.

The WTO does not have a binding agreement on digital trade or source code; negotiations under the Joint Statement Initiative on E-Commerce remain incomplete.
The US-Mexico-Canada Agreement (USMCA, 2020) and several US bilateral FTAs explicitly prohibit mandatory source code disclosure (Article 19.16 in USMCA), treating it as a non-tariff barrier.
India's IT Act 2000 and related regulations allow government agencies to demand access to decryption keys and certain technical details; critics argue this can extend to source code in practice.
India has also proposed data localisation norms under its Digital Personal Data Protection Act 2023, which indirectly affects how foreign technology firms structure their India operations.

Connection to this news: The USTR report categorises source code access requirements alongside high tariffs as twin pillars of India's restrictive digital trade environment. This concern is particularly acute for US software, cloud computing, and cybersecurity firms operating in India.

India-US Trade Relations: Structural Frictions

The US is one of India's largest trading partners. While bilateral merchandise trade has grown substantially — exceeding $120 billion annually in recent years — persistent structural disagreements exist over market access, IP standards, and regulatory barriers. India was the largest beneficiary of the US Generalised System of Preferences (GSP), which was terminated in 2019 and has not been fully reinstated. Negotiations over a limited bilateral trade agreement have continued intermittently.

India-US bilateral goods trade: approximately $120–130 billion per year (recent figures).
India's GSP benefits (covering approximately $6.3 billion of exports) were suspended by the US in June 2019, citing market access concerns.
The US has consistently pressed India on non-tariff barriers including price controls, mandatory standards certification (BIS), and regulatory approval delays.
India and the US conduct annual Trade Policy Forum (TPF) meetings to resolve bilateral trade disputes through dialogue.

Connection to this news: The 2026 Special 301 Report's specific focus on IP-intensive goods tariffs and source code requirements reflects a broadening of the US-India trade dispute beyond pharmaceuticals into digital economy and technology sectors — increasingly the most commercially significant battleground between the two economies.

Key Facts & Data

USTR Special 301 Report 2026 released: April 30, 2026.
Countries on Priority Watch List: Chile, China, India, Indonesia, Russia, Venezuela.
India's specific 2026 concerns include: pharmaceutical patent rules (Section 3d), medical device price controls, tariffs on IP-intensive goods, source code disclosure requirements, and IP enforcement gaps.
ITA-I (1996): India signatory; binds tariffs on ~200 technology product categories to zero.
ITA-II (2015): India did not join; covers 201 additional product categories.
India-US bilateral goods trade: approximately $120–130 billion annually.
India's GSP benefits (approx. $6.3 billion) revoked by the US in June 2019.
WTO Joint Statement Initiative on E-Commerce: ongoing negotiations; no binding outcome yet.
USMCA (2020) Article 19.16 explicitly prohibits mandatory source code disclosure.