The imposition of tariff by the Trump administration 2.0 as a mechanism to address trade deficits, had sent shock waves around the world. The major aspect of this tariff war is the escalating U.S.-China trade tensions. As a result, the U.S. duties on Chinese imports which initially was imposed at 10% in February reached to 245% by May. On the other hand, China retaliated with tariffs up to 125% on U.S. goods along with imposition of restriction on both export of rare earth minerals and its separation technology; and blacklisting U.S. firms.<\/p>\n
Given the complex scenario, this has pushed Chinese companies to explore new ways to evade the tariff barriers. This has led to \u201corigin washing<\/a><\/span><\/span>\u201d, in which the Chinese companies ship their goods to Southeast Asia countries like Malaysia, Vietnam and Thailand, relabeled with a new country of origin or processed minimally and then re-exported to the U.S. The fact that these third countries are comparatively minimally affected by Trump\u2019s tariff war, makes them lucrative for \u201corigin washing\u201d.<\/p>\n The motive \u201corigin washing\u201d is to avoid tariffs by rerouting goods through a third country. It is also known as illegal transshipment<\/strong>. The key part of the process is the creation of fake documents of goods which shields the exporter from legal exposure.<\/p>\n There are reports which suggests that Chinese social media platforms like Xiaohongshu (RedNote) and Douyin (the Chinese counterpart of TikTok) have offered comprehensive options to exporters for re-export and freight forward services through third countries like Malaysia, Thailand and Vietnam for obtaining new certificates of origin and then shipping to the U.S.<\/p>\n Given the fact that to qualify for new origin under the U.S. law, products must undergo substantial transformation which adds material value. Therefore, the repacking and modifying of the origin of products offers a better escape route from the stringent tariff laws.<\/p>\n Moreover, as the US tariffs is intense for the small and mid-sized Chinese firms and they are dependent<\/a> <\/span><\/span>on the U.S. buyers, hence these companies have resorted to grey-areas workaround. As a result, the U.S. is losing out<\/a><\/span><\/span> on its intended protectionist policy outcomes, and other countries are being dragged in the situation. As the third countries have become a transshipment point for trade directed to the U.S., there is a probability that it might affect their respective bilateral relation with the U.S. in the longer run.<\/p>\n China\u2019s daily Global Times<\/span><\/span><\/a> in an article published in December 2024 has stated that there is a credible lack of evidence in regard to China\u2019s \u201corigin-washing\u201d. Rather, it is an excuse used by the U.S. to justify its increasing trade protectionism.<\/p>\n Given the scenario of \u201corigin washing\u201d and the risks associated, these third countries have resorted to adopting strict policies which aim to check cases of origin washing. For instance, Vietnam\u2019s<\/a> <\/span><\/span>Ministry of Industry and Trade in April called on local trade associations, exporters and manufacturers to strengthen origin controls for raw materials and manufactured goods and prevent the issuance of fraudulent certificates. Based on the new procedural restrictions, factories will supervise the release of \u201cMade in Vietnam\u201d labels.<\/p>\n Similarly, Thailand\u2019s<\/span> <\/span><\/a>Department of Foreign Trade has also announced new-verification measures and monitoring the high-risked products shipped to the U.S., as a mechanism to prevent tariff evasion. In addition, this department is entrusted with the responsibility to actively review 65-high risk product categories (244 tariff codes) for potential origin misrepresentation.<\/p>\n Malaysia<\/span> <\/span><\/a>has also urged Chinese companies to refrain from using it as a base to \u201crebadge\u201d products to avoid U.S. tariffs. On the other hand, Taiwan\u2019s Bureau of Foreign Trade<\/span><\/a> on 7th May announced that all products manufactured in Taiwan and exported to the U.S must include a signed declaration of origin.<\/p>\nA Risky work around<\/h3>\n
Responses from these third countries<\/h3>\n
Singapore-washing<\/h3>\n