Small Chinese Exporters Have Found Ways to Bypass Trump's Tariffs

According to traders, logistics agents, and customs officials, Chinese exporters are routing goods through neighboring countries to hide their origins and evade taxes of up to 145% imposed by U.S. President Donald Trump. According to the Financial Times, many advertisements about “origin washing” to evade U.S. taxes have appeared on Chinese social media. Posts encourage shipping goods to other Asian countries like Malaysia to obtain new certificates of origin, helping Chinese goods enter the U.S. with lower taxes. This reflects the concerns of Chinese exporters about losing the U.S. market due to high tariffs. However, according to U.S. trade regulations, goods must undergo a “substantial transformation” to be recognized as having a new origin. Officials across Asia say that more and more companies are bypassing tariffs. Last month, South Korean customs discovered 21 million USD worth of counterfeit goods labeled “Made in Korea”, primarily consisting of Chinese products exported to the US. Vietnam and Thailand have strengthened the control of product origin to prevent fraud. Some logistics companies revealed to the Financial Times that they ship goods through Klang port (Malaysia), relabeling and re-documenting Chinese goods to carry a Malaysian designation before entering the U.S. One agent admitted that this is controlled in quantity, while Malaysian customs are “not too strict.” Some exporters are mixing expensive items with cheaper items in a shipment. An advisor said exporters are using two main tactics to evade U.S. taxes: “laundering the origin” and mixing expensive goods with cheap ones to declare an average price. These measures have raised concerns among American retailers. A senior executive from one of the top 10 retailers on Amazon stated that they had received goods with altered provenance documents, posing a risk of seizure. This person declined the Chinese supplier’s offer to handle the import procedures and pay taxes based on the ex-factory price due to concerns about high risks.