Although shifting manufacturing operations to change a product’s country of origin has long been a legitimate way to mitigate tariffs on goods imported into the U.S. However, in an effort to mitigate their exposure to the additional tariffs imposed on goods from China, some U.S. companies and those in their supply chains have taken illegal shortcuts by simply transshipping goods from China and labeling them as products of a third country, primarily from Vietnam and other Southeast Asian countries.
The U.S. has already fined several companies for transshipping Chinese good to a third country and labeling them as products of those countries. Other sources say that the U.S. Customs and Border Protection has vowed to impose civil and criminal penalties or other enforcement actions if this problem continues.
Importers should take steps to ensure that their supply chain partners are following applicable rules when shifting production as a legitimate means of reducing tariff liability. It is also important that efforts to comply with applicable rules are also well documented.
Source: Sandler, Travis & Rosenberg, P.A. (ST&R)