On July 7 (local time), as the United States implemented a new mutual tariff system by country, President Donald Trump's focus has turned to 'transshipment,' which he designated as a target of high-intensity sanctions. Although President Trump declared a crackdown on intentional transshipment, questions have been raised about the actual feasibility of enforcement.
According to Bloomberg, President Trump stated on June 31 through an executive order that he would impose an additional 40% tariff on corporations that intentionally deceive the origin of goods to evade tariffs. It is interpreted that the possibility of tariff evasion through 'origin washing' has increased following a sharp decline in exports from China to the U.S. this year and a surge in exports from Southeast Asian countries such as Vietnam, Malaysia, and Indonesia.
Global financial economists from firms like Nomura, Citigroup, and Barclays have noted that the phenomenon dubbed 'origin washing,' in which items previously supplied from China are imported and supplied with only the origin changed within weeks, has been observed. This involves transforming Chinese products to appear as local goods by undergoing minimal processing at third-country ports or obtaining false certificates of origin to evade tariffs.
The U.S. determination of origin follows the international trade norm known as 'Rules of Origin.' Agricultural and fishery products, minerals, and livestock produced in a country are categorized as 'wholly obtained' from that country, while in cases where parts and materials are supplied from multiple countries, the key issue becomes whether 'substantial transformation' has occurred.
According to the U.S. International Trade Administration (ITA), 'substantial transformation' refers to cases where 'the product's form, appearance, and characteristics have fundamentally changed through manufacturing or processing, resulting in a significant change in value,' with the World Trade Organization (WTO) HS code change being an important criterion for judgment.
For example, if a women's wool coat (HS code 62021100) is made in Italy using Chinese fur (HS code 430400), the likelihood of substantial transformation being recognized increases, leading to the origin being determined as Italy instead of China. However, if the cost composition of this coat is considered, and the 'manufacturing expense in Italy' is deemed excessively low compared to 'Chinese materials and supplies,' there is also a possibility that the coat's origin could ultimately be determined as China.
In fact, the U.S. Customs and Border Protection (CBP) previously ruled that a paintbrush manufactured in the Philippines was considered Chinese because all the core components, including bristles and metal, were sourced from China.
However, transshipment itself is not illegal and is actually used as a major logistics strategy in global trade, raising questions about the effectiveness of the so-called 'Trump sanctions.' Corporations utilize transshipment for various reasons, including cost reduction, route availability, and vessel constraints, which could also be considered as 'intentional transshipment.'
According to Bloomberg, in the case of the Singapore port, 90% of total container traffic consists of transshipment cargo, and if the U.S. were to crack down on transshipment itself, it could lead to significant disruptions in the global supply chain, starting with these logistics hubs.
Moreover, considering the manpower and volume at U.S. customs, it is practically impossible to verify the origin of every imported product. CBP processes about 60,000 people handling billions of items annually, utilizing ▲AI analysis, ▲database searches, and ▲anomaly detection to identify suspicious cases, which are then investigated through ▲supply chain document reviews, ▲manufacturing process tracing, and ▲overseas factory audits.
However, in a multi-layered supply chain with nuanced processing, it is practically difficult to secure clear evidence to verify intentional transshipment.
Experts are paying attention to whether this measure is merely aimed at 'blocking tariff evasion' or if it is part of a strategy to exclude China from the global supply chain. Frederic Neumann, Chief Economist at HSBC, analyzed, 'It remains unclear whether the U.S. truly wants to eliminate China from the global supply chain or simply prevent tariff arbitrage,' adding that 'the future enforcement approach could influence the flow of global trade.'