The stricter US trade penalties for goods born from one country are being resent from another country, so we are not expected to immediately follow new US tariffs.
Southeast Asian countries, including Vietnam and Thailand, have been explicitly targeted by White House officials for their alleged role in promoting the so-called transport of Chinese products to the United States.
US President Donald Trump’s administration has imposed tariffs on goods from dozens of countries since Thursday, and in an executive order, products determined to have been illegally re-routed to hide the country of origin will face an additional 40% obligation. However, it did not clarify what constitutes loading.
US imports from Southeast Asia’s largest economy rely heavily on exports, and are now subject to a tariff rate of around 19%, many of which have been significantly reduced from previously threatened rates.
Existing US Customs Guidance says goods from countries that do not have a free trade agreement with Washington can be labelled as being made in countries that are fully from other countries such as China, such as Southeast Asian countries, but undergo “substantial transformations” of their components.
Additionally, there is no new US guidance on rules of origin or specifications for transshipment meaning, so some Southeast Asian officials are telling exporters that existing rules apply.
This effectively limits cases of transportation to illegal activities, such as the use of illegal export certificates and documents.
“Currently, all export goods (from Thailand) are subject to a 19% fee as there are no rules on transshipment yet,” Arada Fuangtong, head of the Ministry of Foreign Trade in Comerce, told Reuters on Thursday.
Her message was echoed by US officials in Vietnam. Vietnam has reported that a 20% tariff will apply to Vietnamese goods.
The trade consultant says the rules are vague, advising clients that even before a new wave of US tariffs, they have at least 40% of their local content for exports to the US. It’s about being “on the safe side,” one of them said.
The US Embassy in Vietnam did not immediately reply to a request for comment. The US Trade Representative did not immediately respond to requests for comment outside of US working hours.
“The goods defined by US customs as transships are subject to a 40% obligation, but the new definition is pending, but that is limited to the old definition,” said a Vietnam-based consultant.
Both people refused to be named to speak more freely.
China’s dependence
According to US Customs guidance, repackaging does not usually cause “substantial transformation,” but Congress could do so depending on the complexity of the operation.
It is unclear whether this narrow interpretation of transportation could be enforced by other countries.
Economic ministries in Indonesia, Malaysia, the Philippines, Vietnam and Singapore did not immediately respond to requests for comment on the issue.
Southeast Asian manufacturers, which rely heavily on Chinese components, have been in the darkness for months on what Washington considers transport.
It remains questionable whether it contains large but undefined proportions of components or raw materials, even when legally transformed in Southeast Asian countries.
A strict definition of transshipment may come later, several investment consultants warned.
An executive order signed by Trump last week said the US will “publish every six months the list of countries and specific facilities used in evasion plans.”
It said it “informs public procurement, national security reviews and commercial due diligence.”
“The message from Washington is deterrent,” said Marco Forster, director of Southeast Asia at investment consultant Desan Sila and Associates.
“If the supply chain cuts a corner, it’s not treated as a technical error. It’s treated as a scam.”
