Vietnam Says Some Chinese Exporters Are Using Fake ‘Made-In-Vietnam’ Labels To Avoid US Tariffs

Some Chinese exporters are putting fake “Made in Vietnam” stickers to try and avoid the U.S. tariffs, Vietnam alleged on Sunday.

Vietnam said in a government statement that they have found dozens of cases where Chinese exports, including textiles, iron, steel, and aluminum, are being illegally transferred to Vietnam where fake stickers are then placed so that China can skirt the recent tariffs imposed by the U.S. Vietnam also stated that they are planning to increase the penalties on trade fraud and are developing an inspection process for goods that are particularly at risk.

U.S. customs officials have uncovered Chinese plywood shipped to America through a Vietnamese company with “Made in Vietnam’ stickers according to the statement. These shipments are “relatively small” when compared to China’s overall exports, Bloomberg reported.

“A cottage industry for circumventing U.S. tariffs will likely bloom, given the high tariff rates and huge potential profit,” said Chua Hak Bin, a senior economist at Maybank Kim Eng Research Pte. in Singapore, according to Bloomberg.

Goods from China now have a 25% tariff. The U.S. raised the tariffs from 10% to 25% in May, on about $200 billion in Chinese goods. Beijing then increased tariffs on $60 billion worth of U.S. goods. This follows a short truce between U.S. and China where they agreed to not have any new tariffs.

Vietnam was recently put onto a currency manipulation watchlist last month by the U.S. Treasury Department, and Do Van Sinh, a standing member of the National Assembly’s economic committee, said in the government statement that Vietnam is worried that the U.S. may punish them because of incorrectly-labeled Chinese goods that have entered America.

Vietnam pushed back on being place on being added to the watchlist, saying that the exchange rate wouldn’t create an unfair advantage in trade. Deputy Prime Minister Pham Binh Minh said that gross domestic product may even decrease by $256 million over the next five years, Bloomberg reported.

China’s shipment to the U.S. this year has decreased, and Vietnam’s shipments have shown a big increase. This could be due to changing supply chains, but some believe that more of the increases may be fraudulent, according to Bloomberg.