South Korea uncovers massive export violations to evade U.S. tariffs

In South Korea, the Korea Customs Service reported a significant increase in attempts to mislabel foreign products as Korean exports, primarily from China, to circumvent U.S. tariffs. The customs agency unveiled that from January to March 2025, violations related to country of origin totaled 29.5 billion won ($20.81 million), with an overwhelming 97% of these exports directed towards the United States, emphasizing the trend that emerged during the initial presidency of Donald Trump. This revelation follows a special probe conducted by customs officials, aiming to preemptively tackle illicit export operations. The investigation highlights a growing concern among South Korean officials regarding possible abuse of their country’s favorable trade position amid escalating U.S.-China trade tensions. South Korea, being a key U.S. ally with a free-trade agreement, may be exploited by foreign companies attempting to bypass U.S. tariffs and regulations. In March 2025, another troubling discovery emerged, where surveillance cameras imported from China were shipped to the U.S. after being reassembled in South Korea, illustrating the lengths to which businesses might go to avoid stringent tariffs on Chinese goods, including a staggering 145% duty under current regulations. The penalties for these violations will be severe, with the Korea Customs Service planning to refer the cases to prosecutors. The customs agency has also initiated a special task force dedicated to halting illegal export activities, which indicates a ramped-up effort to secure the integrity of the nation’s export practices. Moreover, during a media briefing, Lee Kwang-woo, investigation planning director at the Korea Customs Service, noted the increasing frequency of these export violations, and projected continued growth in disguised export attempts as the political landscape surrounding trade evolves. In the backdrop of these findings, another aspect of the trade impact has come from U.S. policies that have led companies to utilize foreign trade zones (FTZs) in order to defer tariff payments. The rise in interest for FTZs has been observed among businesses of varying sizes, with some moving their imports to these tariff-free zones or bonded warehouses while they assess the market consequences of Trump's ongoing tariff strategy. This strategic measure allows companies to manage their cash flow better amidst the uncertainty created by the trade war with China, thus enabling them to thrive despite the rising tariffs that have significantly altered the landscape of international trade engagement.