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.
DID YOU KNOW … we are much more than just blogs. PracticalESG provides tools and guidance for in house staff and outside advisors – from beginners to senior practitioners. We scour third party resources, vetting and filtering them – saving you hours of your day. And we don’t use AI to produce any content or have annoying ads.
If you’re not already a member, sign up now and take advantage of our no-risk “100-Day Promise” – during the first 100 days as an activated member, you may cancel for any reason and receive a full refund. But it will probably pay for itself before then.
Are you a client of one of our Partners – SourceIntelligence, Kumi, Ecolumix, Elm Consulting Group International or Impakt IQ? Contact them for exclusive pricing packages for PracticalESG.
Practical Guidance for Companies, Curated for Clarity.
