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PracticalESG

PracticalESG.com

Keeping you in-the-know on environmental, social and governance developments

Recently, John and I blogged about the increasing risk of regulatory enforcement against companies that try to avoid the new US tariffs. The Financial Times wrote that companies are already trying this tactic:

“Chinese businesses are sending increasing volumes of goods to the US via south-east Asia in a bid to evade the tariff wall erected by Donald Trump as part of his trade war.

What is the evidence? The value of Chinese exports to the US dropped by 43 per cent year on year in May, according to figures published by the US census bureau — equivalent to $15bn-worth of goods. But the country’s overall exports rose by 4.8 per cent in the same period, official Chinese data showed.

Why this matters: Last week, Washington struck a trade deal with Vietnam that includes a 40 per cent levy on goods that are trans-shipped through the country, in a move that was widely thought to be targeting Chinese re-exports to the US.”

As more data like this becomes available, the more likely the US government will be to investigate and enforce for tariff evasion. “Tariff evasion” may be too strong a term, however, as future trade deals for Asian countries will probably include trans-shipment levies similar to Viet Nam. Even so, companies will seek lowest cost options.

Those involved in managing social and quality audits of suppliers and industry initiatives for traceability should remind your clients or company leaders that these programs provide evidence of supplier locations and what happens there. Governmental agencies may drill into supplier social audits and sustainability certification programs for evidence during country of origin investigations related to tariff avoidance. It isn’t prudent to make country of origin claims for tariff purposes that are inconsistent with existing evidence that may go back years.

Members can read more about supplier due diligence here.


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Practical Guidance for Companies, Curated for Clarity.

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The Editor

Lawrence Heim has been practicing in the field of ESG management for 40 years. He began his career as a legal assistant in the Environmental Practice of Vinson & Elkins working for a partner who is nationally recognized and an adjunct professor of environmental law at the University of Texas Law School. He moved into technical environmental consulting with ENSR Consulting & Engineering at the height of environmental regulatory development, working across a range of disciplines. He was one of… View Profile