Chinese exporters are looking to third countries to bypass US tariffs

Chinese exporters are rerouting shipments through third countries in an attempt to avoid the steep US tariffs of up to 145% imposed on incoming Chinese goods, the Financial Times reports. The tactic — known as place-of-origin washing — conceals where shipments actually come from by shipping goods to another country, repackaging them, and then issuing a new certificate of origin before being sent to the target market.

Social media sites in the world’s factory are full of posts advertising export washing services, indicating that this hard-to-quantify issue may be larger than we think. “The US has imposed tariffs on Chinese products? Transit through Malaysia to ‘transform’ into Southeast Asian goods,” the salmon-colored paper quotes one online advert as saying.

Some of these third countries are already fighting back, including South Korea, which uncovered USD 21 mn worth of falsely labeled products — the majority of which came from China — in the last month alone. Vietnam and Thailand are also ramping up efforts to introduce stricter measures to prevent this practice.

But the problem seems to be getting worse, with South Korea’s customs agency “seeing a sharp increase in recent cases…because of the US government’s trade policy change.”

There are also other schemes exporters are using to get around US tariffs, including putting higher cost items with lower cost items in a bid to falsely claim a lower overall shipment cost, a shipping consultant told the paper.

The practice is also causing concern for US importers, as they will be the ones having to pick up the tab if US customs picks up on a mislabeled shipment. One senior executive at a major Amazon seller said they had seen altered origin documents and are now reluctant to work with Chinese suppliers.

MARKETS THIS MORNING-

Asian markets are in the green this morning — the Shanghai Composite is up 0.6% and the Hang Seng is up 0.4%. Korea’s Kospi is closed in observance of Vesak Day and Japan’s Nikkei is closed as the country observes Greenery Day.

THE CLOSING BELL-

The DFM rose 1.0% yesterday on turnover of AED 377.1 mn. The index is up 3.6% YTD.

In the green: National Cement (+7.4%), Commercial Bank of Dubai (+6.9%) and Emirates Reem Investments (+4.0%).

In the red: Agility The Public Warehousing Company (-5.7%), National International Holding Company (-5.1%) and Orascom Construction (-3.4%).

Over on the ADX, the index fell 0.1% on turnover of AED 2 bn. Meanwhile, Nasdaq Dubai was up 0.2%.