Companies Dodge U.S. Tariffs on China by Rerouting Goods



Chuin-Wei Yap | The Wall Street Journal

Billions of dollars worth of China-made goods subject to tariffs by the Trump administration in its trade fight with Beijing are dodging the China levies by entering the U.S. via other countries in Asia, especially Vietnam, according to trade data and overseas officials.

The Trump administration has for more than a year sought to weed out the practice known as transshipment, in which Chinese exports typically are minimally processed or altered during a brief stop in a third port and then re-exported as a product originating from the third port. Such circumvention threatens to crimp U.S. plans as it prepares to add tariffs on to $300 billion of Chinese exports, from toys to electronics, essentially covering all its China trade. The U.S. already has placed 25% tariffs on some $200 billion of Chinese exports.

In the first five months this year, exports to Vietnam from China of electronics, computers, and machinery and other equipment have sharply increased compared with a year earlier. In turn, so have exports of such goods from Vietnam to the U.S., Vietnamese trade data show.

“The phenomenon of trade fraud through labeling of the origin of goods as being produced in Vietnam is increasing,” the Vietnamese Ministry of Industry and Trade said. “Such fraudulent labeling not only directly affects products and consumers, but also significantly reduces the reputation and competitiveness of goods manufactured in Vietnam.”

Vietnam’s customs agency said this month that it instructed its provincial and municipal branches to step up inspection and verification of certificates of origin, a document that accompanies all international shipments, according to state media. The regulator said companies, which it didn’t identify, had been importing Chinese goods, replacing the labeling to say “Made In Vietnam,” then re-exporting the goods to the U.S., Europe or Japan.

Vietnam, which abuts China’s southern fringe, last year was at the center of a Trump administration effort to curb transshipment of Chinese exports of steel and furniture via Southeast Asian countries, including Thailand and Malaysia.

[To read the original article, click here]