Tougher transshipment penalties not expected immediately as Trump tariffs kick in, sources say

Tougher U.S. trade penalties on goods originating in one country being re-shipped from another are not expected to immediately follow new U.S. tariffs, three people in Southeast Asia with knowledge of the matter said, easing a major cause of concern.

Southeast Asian countries including Vietnam and Thailand have been explicitly targeted by White House officials for their alleged role in facilitating the so-called transshipment to America of Chinese goods, which would face higher tariffs if shipped directly from China.

The Trump administration imposed tariffs on goods from dozens of countries from Thursday, and in an executive order said products determined to have been illegally rerouted to conceal their country of origin would face additional duties of 40%. But it did not clarify what constitutes transshipment.

U.S. imports from Southeast Asia's biggest economies, which rely heavily on exports, are now subject to tariff rates of about 19%, most of those significantly reduced from earlier threatened rates.

Existing U.S. customs guidance states goods from countries with no free trade agreements with Washington, such as Southeast Asian nations, can be labelled as made in the country where they undergo a "substantial transformation" of components, even if those parts entirely come from another country, such as China.

And with no new U.S. guidance on rules of origin or specification on what transshipment means, some officials in Southeast Asia have told exporters existing rules apply.

That effectively limits cases of transshipment to illegal activities, like the use of forged export certificates or documents obtained illicitly.

"Currently, all exported goods (from Thailand) are subject to a 19% rate because there are no rules on transshipment yet," Arada Fuangtong, head of the Thai Commerce Ministry's foreign trade department, told Reuters on Thursday.

Her message was echoed by U.S. officials in Vietnam who told businessmen the tariff of 20% would apply to Vietnamese goods, even if they are entirely made with Chinese components and only assembled in Vietnam, according to one person familiar with those talks.

Trade consultants have said rules are vague and they have advised clients, even before the new wave of U.S. tariffs, to have at least 40% of local content for their exports to the U.S. That is "to be on the safe side", one of them said.

The U.S. embassy in Vietnam did not immediately reply to a request for comment. The Office of the U.S. Trade Representative did not immediately respond to a request for comment outside U.S. working hours.

Source: Reuters

• USTR Makes Findings and Proposes Action in 60 Section 301 Investigations Relating to Failures to Take Action on Trade in Forced Labor Goods
• [VCCI] The US officially initiates a Section 301 Investigation into Vietnam on Intellectual property
• General Secretary and President To Lam's working visit to three ASEAN countries: Demonstrating the stature of proactive and constructive diplomacy.
• Viet Nam accelerates innovation drive as skilled workforce becomes key to science and technology growth
• The US is increasing controls on AI chip exports