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Trade War Creates Flourishing Transshipment Market for Chinese ProductsWednesday, January 02, 2019 > 11:34:47
Because of the Sino–U.S. trade war, large amounts of Chinese products are being transshipped to intermediate destinations before being exported to the United States, in order to avoid high tariffs imposed by Washington.
Transshipping products via countries such as Malaysia, the Philippines, or Thailand mean double costs, but that’s still much lower than the penalties associated with the tariffs themselves.
Using “transshipment” and “export to the U.S.” as keywords, searches reveal many Chinese-language advertisements for transshipment services.
Companies engaged in transshipping introduce the process in some detail. Different kinds of products are recommended to be shipped via different countries. Malaysia, Thailand, Taiwan, India, Bangladesh, Indonesia, Hong Kong, the Philippines, Sri Lanka, the Virgin Islands, Cayman Islands, and Bermuda are intermediary countries and territories that are usually listed by the companies.
Kingstans, a company based in Shenzhen, China, does transshipments of solar panels, a product that is on the first list of products that had 25-percent tariffs imposed on them by the United States on Jan. 22 this year.
The company says in its advertisement that it can accept containers of Chinese-built solar panels from any Chinese port, including Tianjin, Qingdao, Shanghai, Ningbo, Shenzhen, or Guangzhou, and ship them to Port Klang in Malaysia. There, the solar panels are moved to Malaysian containers, and documents will be prepared to confirm that they were manufactured in Malaysia. The new “Malaysian” solar panels are then exported to the United States.
Another transshipment company is Baosheng International, which boasts 15 years of experience on its website.
Baosheng’s site makes it clear that transshipped products can’t sport any Chinese wording, and that a contract must be signed by the U.S. importer and a third-nation exporting party. After a successful deal, the exporter takes a service fee and transfers the rest of the earnings to the Chinese manufacturer.
Prior to the China–U.S. trade war, Hong Kong was the main intermediary in transshipping, a business that has existed for about a quarter-century.
Data collected by the Hong Kong Census and Statistics Department shows that in 1993, there were HK$823 billion (US$105 billion) of re-exports (transshipments), or almost four-fifths of Hong Kong’s total exports.
By 2003, there was HK$1,621 billion worth of re-exports, at 93 percent of Hong Kong’s total exports. In 2013, that had grown to HK$3,505 billion, or 98.5 percent of the total, and in 2017, the percentage of re-exports to total exports from Hong Kong was almost 99 percent.
While the legality of re-export via Hong Kong is in dispute, transshipping through Taiwan is unambiguously banned.
According to the Customs Administration of the Republic of China’s (Taiwan) Ministry of Finance, in the first half of September, 2,319 products, valued at a total of about US$1.77 million, were flagged on suspicion that their places of origin had been “laundered.” According to Customs Administration Director Hsieh Ling-Yuan, the goods were shipped from China with the aim of being exported to the United States and belong to the categories of goods subject to 25 percent tariffs.
A transshipment agent in China surnamed Wang, who didn’t provide his full name to protect his identity, told The Epoch Times on Dec. 25 that transshipment adds significantly to the cost of transport and comes with risks of discovery, but is still profitable in the face of tariffs.
“To ship a 40GP (40 feet, general purpose) container to Los Angeles from Tianjin costs a little bit more than $1,500. It costs $2,000 more for transshipment,” Wang said.
However, if the transshipment is discovered, the supplier is responsible for paying the tariff on top of the existing costs.
“We try our best to make it look perfect and not be outed [as being from China] during customs. But we can’t guarantee 100 percent [success],” Wang said.
The U.S. government is aware that many Chinese exporters engage in transshipping.
On March 6, U.S. President Donald Trump responded to a reporter: “If you talk China, I’ve watched where the reporters have been writing, 2 percent of our steel comes from China. Well, that’s not right. They transship all through other countries. And you’ll see that a country that doesn’t even have a steel mill is sending us 3 percent steel for our country. And many countries are doing it, but it comes from China.”
Detecting transshipped Chinese products is notoriously difficult, as exporters and transportation agencies can usually provide complete documents to demonstrate that products were produced in Southeast Asia or elsewhere.