Third countries sound alarm over Chinese tariff evasion tactics

Chinese exporters are increasing their efforts to conceal the true origin of their goods by shipping them through third countries to avoid tariffs imposed by US President Donald Trump.

According to a report by the Financial Times (FT), the influx of goods from China has sounded alarm bells in neighboring countries, which are reluctant to become transshipment points for trade directed at the US.

The increasing prevalence of this tactic highlights concerns that new tariffs of up to 145% imposed by Trump on Chinese goods will impede exporters’ access to one of their most important markets.

Sarah Ou, a salesperson at Baitai Lighting, an exporter based in the southern Chinese city of Zhongshan, told the FT, “The tariff is very high,” adding, “But we can sell the goods to neighboring countries, and the neighboring countries can sell them to the US, and thus the tariffs are reduced.”

US trade laws require goods to undergo a “substantial transformation” in a country, typically including processing or manufacturing that adds significant value, to be considered the country of origin for tariff purposes.

However, advertisements on Chinese social media platforms like Xiaohongshu offer exporters the option of sending their goods to countries like Malaysia, obtaining new certificates of origin there, and then shipping them to the US.

An advertisement posted this week on Xiaohongshu by an account called ‘Ruby — Third Country Transshipment’ read, “Did the US impose tariffs on Chinese products? Transit through Malaysia and ‘transform’ them into Southeast Asian goods!”

It added, “Did the US impose restrictions on Chinese-origin wood flooring and tableware? ‘Wash the origin’ in Malaysia and pass customs smoothly!”

South Korea’s customs service announced last month that it had found 29.5 billion won ($21 million) worth of foreign products with falsified countries of origin in the first quarter of this year, most of which came from China and were almost entirely destined for the US.

The agency said in a statement, “Due to changes in the US government’s trade policy, we are seeing a sharp increase recently in cases where our country is being used as a transit point for products to avoid different tariffs and restrictions.”

Vietnam’s Ministry of Industry and Trade last month called on local trade associations, exporters, and manufacturers to strengthen origin controls for raw materials and input goods and prevent the issuance of fraudulent certificates.

Thailand’s Department of Foreign Trade also announced measures last month to tighten origin controls on products shipped to the US to prevent tariff evasion.

Ou from Baitai said that, like many Chinese manufacturers, the company ships goods “free on board” (FOB), meaning responsibility passes to the buyer once the goods leave the port of departure, thus reducing the exporter’s legal risk.

She said, “Customers just have to find a port in Guangzhou or Shenzhen, and as long as the goods reach there, we have completed our task. After that it is not our business.”

Salespeople from two logistics companies said they could ship goods to Malaysia’s Port Klang, where they would transfer the goods to local containers and change their labels and packaging. The salespeople, who asked not to be named, told the FT that the companies had connections with factories in Malaysia that could help issue certificates of origin.

Malaysia’s Ministry of Investment, Trade and Industry stated that the country is “committed to upholding the integrity of international trade practices” and “views any attempt to circumvent tariffs through false or fraudulent declarations, whether related to the value or origin of goods, as a serious offense.”

It added, “If the veracity of these reports is established, we will initiate investigations in cooperation with the customs department and US authorities and take necessary measures.”

China’s foreign and commerce ministries did not respond to the Financial Times‘ requests for comment regarding Chinese exporters.