WASHINGTON — As U.S. President Donald Trump continues to implement tariffs on a growing number of imports, experts and industry insiders are stressing the importance of closing existing loopholes and workarounds that companies use to avoid trade taxes.
One such practice that has helped companies from China and other countries evade tariffs is transshipment, where goods are transferred to a second country and the “Made in China” label is replaced with another country’s label.
Berwick Offray, a ribbon manufacturer based in Pennsylvania, has recently filed a lawsuit against a U.S. importer for allegedly using this tactic to avoid tariffs on Chinese-made ribbons. The company, which has been in operation since 1945, takes pride in its commitment to keeping its products “Made in the USA” and is one of the largest ribbon manufacturers in the world.
According to the lawsuit, the U.S. importer, TriMar Ribbon, was buying ribbons produced in China and shipping them to the United States through India, falsely declaring them as Indian-made to avoid tariffs. This practice allows Chinese products to be sold at below-market prices in the U.S., giving them an unfair advantage over American-made products.
The U.S. Customs and Border Protection (CBP) has agreed to investigate the case, stating that the importer did not declare the correct country of origin upon entry. This is just one of many cases of transshipment that have been reported, particularly with products from China.
“We have assisted several clients in submitting allegations to CBP against importers of products that have been transshipped from China through third countries such as Thailand, India, and Canada,” said Daniel Pickard, an expert on international trade and an attorney at Buchanan Ingersoll & Rooney, which represents Berwick Offray. “Our clients are typically U.S. manufacturers who are competing against Chinese imports that are evading duties.”
According to CBP data, there are currently 221 ongoing investigations into Chinese-made products suspected of tariff evasion through transshipment.
As the Trump administration continues to implement tariffs, including an additional 10% on Chinese imports starting next week, efforts are being made to close loopholes and prevent companies from avoiding these fees.
In early February, the administration rolled out a 10% blanket tariff on all Chinese goods, and on March 4, Chinese imports will face an additional 10% tariff. However, there are still loopholes that need to be addressed, and lawmakers are taking action to ensure that foreign manufacturers comply with customs and duties.
Republican Senator Rick Scott introduced the Stopping Adversarial Tariff Evasion Act on January 31, which aims to strengthen enforcement mechanisms and hold foreign manufacturers accountable for tariff evasion. This legislation builds on previous efforts by Congresswoman Ashley Hinson, who introduced a bill in December to establish a task force and reporting mechanisms to address instances of financial crime related to tariff evasion.
Jayant Menon, a senior fellow at the ISEAS Yusof Ishak Institute in Singapore, believes that the second Trump presidency will lead to even more efforts to monitor tariff evasion and ensure compliance. He also notes that with increasing globalization and production under global supply chains, it is becoming more difficult to determine the true country of origin for products. However, increased scrutiny can help identify attempts to bypass tariffs.
“If bypass attempts are suspected, rightly or wrongly, then the country as a whole may be penalized with new tariffs,” Menon said.
Pickard also expects the new administration to launch more investigations and take action against discriminatory practices that harm U.S. companies.
“We anticipate CBP will increase its enforcement efforts as to the widespread customs fraud involving Chinese products,” he said.
Many stakeholders in the industry are hopeful that these issues will be met with criminal prosecutions and that the government will take a strong stance against tariff evasion. As the U.S. continues to navigate the complex world of international trade, it is crucial to address these loopholes and ensure fair competition for American businesses.
