U.S. companies are now getting bombarded with unsolicited proposals from foreign logistics companies. These firms seek to assist them in bypassing tariffs on products brought in from China. It’s a common refrain these days, as dozens of leading companies plan and execute strategies that rethink how they import goods. This change marks a departure from the strong tariffs enacted by former President Donald Trump.
One prominent example is Aaron Rubin, founder of logistics software company ShipHero. They had gotten an offer from a freight brokerage who wanted to pay him a lower value for one of his China shipments. The brokerage recommended only declaring the shipment’s value at $10,000, even though the actual merchandise value was well over $30,000. This undervaluation would lead to a huge $29,000 cut in the tariff bill.
The increase in such shameless bids has not been restricted to Rubin’s instance. Retailers in athletic apparel, furniture and home health care are on the front lines of a troubling trend. Unscrupulous logistics companies have been preying on them with the promise of underreporting shipment values to evade tariffs. These companies recommend rerouting those shipments through other countries that have lower tariffs in comparison to China. Malaysia has a tariff rate of 24%, and Malaysia’s import tariffs from China are an incredible 145%.
One China-based freight broker said that an increasing number of his customers are choosing to redirect their goods through Malaysia instead. This smartly conceived tactic is symptomatic of a bigger trend as companies try to find creative ways to offset the operational costs created by climbing tariffs.
“There are companies offering to do this as a service,” – Aaron Rubin
Rubin, instead of accepting the brokerage’s offer, reported the company to U.S. Customs and Border Protection (CBP). He shared our concern for businesses that have shell operations in the U.S. Or they could take advantage of these loopholes to escape enforcement and participate in illicit trade activities.
The new norm has turned into a death knell for numerous firms as they continue to deal with the fallout from huge tariffs. As Import Genius Research Director William George emphasized, firms accepting these realities are undergoing an existential crisis. At stake are their jobs, which they are weighing against the risk of facing legal penalties.
“Businesses are looking at existential crises and could be weighing the risk of paying some fines over losing their livelihoods,” – William George
The economic impact of these tariff evasion schemes are vast. Even just starting if industries start realizing $10,000 per container saved by avoiding tariffs quickly, cumulative savings could be in the billions cited Rubin. This massive opportunity for financial return is causing some of these companies to risk noncompliance with U.S. trade laws.
In short, over the past few months, most ecommerce merchants have been flooded with potentially fraudulent orders. These promises purport to shield them from U.S. tariffs on foreign-made goods imported from China. These unsolicited proposals spawn acute concerns regarding the probity of international trade norms. Businesses should do the right thing and follow the law.
“We can provide the solution to help you save your cost,” – Unattributed logistics firm
Businesses are still sailing in dangerous economic currents. Many have chosen to delay shipments while they look for curves from tariff regulations to be changed. The ongoing uncertainty about future tariff policies has put many companies in a position where they are racing to find solutions that risk violating their own ethical sourcing commitments.
“CBP does not publicly disclose investigative methods, sources of information, or any other information that may jeopardize the safety of witnesses or otherwise affect ongoing investigations,” – Jeffrey Quinones
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