Chinese companies evade tariffs by shipping through third countries

In recent months, companies in China have adopted various strategies to circumvent tariffs imposed by the U.S. government under Trump’s administration. These tactics include routing products through third countries such as Malaysia and Vietnam, where they can affix new ‘made in’ labels before reaching the U.S. This method has raised significant concerns among neighboring nations, who fear their markets might be exploited for 'place-of-origin washing.' Malaysian officials have expressed their commitment to enforcing the integrity of trade practices and are prepared to investigate such activities alongside U.S. authorities. Meanwhile, Vietnamese exporters have been instructed to tighten scrutiny on goods to prevent misrepresentation of product origins. The issue has also caused alarm among businesses in the U.S., who are worried about the impact of these practices on fair competition. As part of its response to the evolving trade environment, Temu, a Chinese company, recently halted shipments of orders directly from China to American customers after the U.S. transitioned away from the de minimis loophole, which previously allowed low-value parcels to enter without duties. Following this change, Temu has begun fulfilling orders through its U.S. inventory instead. Analysts are now monitoring the situation closely, as the effectiveness of U.S. Customs and Border Protection's enforcement of these new policies will play a critical role in determining how these tactics will unfold in the coming months. In addition to 'place-of-origin washing,' firms are utilizing legitimate methods to mitigate tariffs, such as using bonded warehouses and taking advantage of various harmonized system codes to qualify for lower rates. These strategies require precise adjustments to products in order to meet tariff engineering standards, allowing businesses to reduced costs substantially. As the tariffs imposed range significantly—in some instances up to 145%—some American companies have sought to modify their products or resubmit them under different classifications to lessen financial burdens. The complexities surrounding international trade, especially with ongoing tensions and the evolving regulatory landscape, continue to shape how companies operate. While many firms are finding ways to adapt, the repercussions of tariff avoidance strategies are prompting discussions about the long-term implications for trade relations.