Chinese exporters circumvent steep duties by routing goods through third countries

Chinese exporters are increasingly routing goods through third countries to evade steep US tariffs, according to a recent Financial Times investigation. This practice, known as “place-of-origin washing,” has gained significant momentum since tariffs on Chinese imports to the US reached as high as 245 percent under the Trump administration’s trade policies.

Freight brokers are openly promoting these tariff-evasion services on Chinese social media platforms, with Malaysia emerging as a particularly popular transit hub due to its relatively low 24 percent tariff rate.

“The tariff is too high,” Sarah Ou, a salesperson at Baitai Lighting, an exporter based in the southern Chinese city of Zhongshan, told the Financial Times. “But we can sell the goods to neighboring countries, and then the neighboring countries sell them on to the United States, and it will reduce.”

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How ‘place-of-origin washing’ enables tariff evasion

This sophisticated process involves routing Chinese goods through third countries like Vietnam or Malaysia, where products undergo minimal processing or repackaging. New certificates of origin are then issued, falsely labeling items as locally made. This practice exploits loopholes in customs regulations, allowing goods to enter the US under reduced tariffs, thereby undermining trade policies and posing challenges for enforcement agencies.

The process typically includes:

• Creating false documents
• Using third-country warehouses
• Collaborating with proxy factories
• Obtaining new certificates of origin

Growing concern across Asia

According to Malay Mail, the practice of transshipment has raised alarms about Malaysia’s trade reputation, prompting calls from trade groups for investigations into fraudulent origin declarations. Malaysian Deputy Minister Chan Foong Hin has urged businesses to refrain from such practices, emphasizing strengthened oversight in key industries like rubber gloves.

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“The US has imposed tariffs on Chinese products? Transit through Malaysia to ‘transform’ into Southeast Asian goods!” said one advertisement posted this week on Xiaohongshu by an account under the name of “Ruby – Third Country Transshipment”.

“The US has set limits on Chinese wooden flooring and tableware? ‘Wash the origin’ in Malaysia for smooth customs clearance!” it added. A person contacted through the details supplied in the advert declined to comment further.

South Korea has also reported significant violations, with its customs agency uncovering 29.5 billion won ($20.81 million) in country-of-origin fraud in the first quarter of 2025, predominantly linked to US-bound goods. A special task force has been established to combat these illegal exports.

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Economic implications

As Chinese firms struggle to redirect products originally intended for US markets, the Chinese government is encouraging local consumption instead. However, offloading excess inventory could exacerbate China’s deflationary pressures and affect hiring. Analysts caution that if negotiations between China and the US do not progress, price increases and shortages may occur in the US market.

The continued practice of origin washing threatens to undermine the intended impact of tariff policies while raising broader questions about enforcement mechanisms in global trade.

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