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Chinese freight firms are finding ways around rising tariffs

Container ship CSCL Venus of the China Shipping Line outgoing Hamburg in April 2014. (Buonasera/Wikimedia Commons)
December 23, 2018

This article was originally published by Radio Free Asia and is reprinted with permission.

Freight companies in mainland China are openly offering tariff-dodging services to reduce the cost of rising tariffs on Chinese goods imposed by Washington as part of the Sino-U.S. trade war, RFA has learned.

Many say they are able to do this by transhipping, repackaging and providing goods with Malaysian documents before they make their final journey to U.S. ports.

A Hong Kong business owner with a factory in the Pearl River Delta area of southern China said the falsification of country-of-origin documentation — crucial to deciding which, if any, tariffs must be paid — is no easy matter.

“The only way you can avoid tariffs is by unpacking an entire container of stuff made in China and changing its country of origin to a different country,” said the business owner, who gave only a nickname Jess. “But that greatly increases the cost of producing them.”

“Also, they will ask you to show certificates of origin for some of the goods, which for a lot of plastic goods is already on the mold,” he said.

He said that U.S. authorities would likely take retaliatory action against any countries participating in such scams at such a politically sensitive time.

“They could put their tariffs up, or they could tell the country concerned to pick a side [in the trade war],” he said.

Shouldering additional costs

But some mainland Chinese exporters seem willing to shoulder the additional costs in the face of the trade war.

The manager of a mainland Chinese freight forwarding company who gave only his surname Chen said his customers could enjoy preferential tariffs by re-exporting their goods to disguise the country of origin, through what he claimed was a “legal” process.

“We are exporting to other countries via Malaysia, because the … tariffs there are pretty low,” Chen told RFA. “It costs roughly U.S. $2,000 extra to re-export a single container, compared with exporting it normally.”

When the goods arrive in Malaysia, they are repackaged, Chen explained.

“We put the goods in another container, and then they are exported as normal to the United States by Malaysia, with a full set of customs documentation to clear customs,” he said.

“We know some of the officials there, so they help us out by stamping the country of origin certificates,” Chen said.

Chen said his company is sending out around 300 containers a quarter since the trade war started.

He said the risks are low, as long as there is no Chinese printed on any of the goods or packaging.

“If there is no Chinese writing on it, there’s nothing they can say about it,” Chen said. “If the volume of goods is very high, we are also able to ask Malaysian factories to help out by saying that the goods were manufactured by them in Malaysia, should the U.S. customs officials ask to see documentation from the factory.”

Openly advertised services

Many companies, like Chen’s, openly advertise such services in Chinese on their company websites, according to a brief survey of such sites carried out by RFA on Friday.

“Through entrepôt trade via third countries … [clients] can continue to export and maintain customers in the destination countries … and avoid high tariffs,” according to the website of the Shenzhen Shengbao International Freight Forwarding Company, Ltd.

The Shenzhen Shengshi Yuntong International Freight Forwarding Company offers to ship goods from any port in China, including Tianjin, Qingdao, Shanghai, Ningbo, Shenzhen, and Guangzhou by container vessel or air.

The company will then “arrange the one-for-one exchange of containers in the bonded area … and issue an original bill of lading and certificate of origin,” the website says.

And Shenzhen Top Profit freight forwarding firm offers to obtain certificates of origin for clients from Indonesia and Malaysia, legalized by embassies in the importing country, as well as production reports and factory certificates.