THE Philippines has been tagged by the Trump administration as a potential weak link in the rerouting of China-linked goods into the United States, putting the country under greater scrutiny as Washington ramps up its crackdown on tariff evasion.
In a report released last week, the White House placed the Philippines among more than 40 countries and economies it identified as potential links in what it called the ‘Great Transshipment Scam,’ a system allegedly allowing Chinese goods to slip into the US market through third countries under different national identities.
The Philippines was included in the report’s third tier, or the group of ‘Small, Opportunistic Chinese Targets,’ which the White House said have lower absolute volumes of potentially illegal transshipment but possess characteristics that could make them attractive rerouting points.
These include low-cost labor, free zones, port access, bonded warehousing, assembly capabilities, preferential US market access or limited customs enforcement, according to the report.
The report also specifically grouped the Philippines with Bangladesh, Cambodia, Laos and Sri Lanka as Southeast Asian ‘micro hubs’ for light assembly, export processing, relabeling and re-export of China-linked goods.
The White House’s classification does not by itself establish that Philippine companies are illegally transshipping Chinese goods. Rather, it identifies the Philippines as a potential node based on its trade and logistics characteristics.
For the US, the concern is that Chinese-origin inputs could undergo limited processing, assembly, testing, packaging or relabeling in a third country before being exported to the US, without undergoing the substantial transformation generally required to change their country of origin for customs purposes.
The report estimates that potential transshipment or related trade-transfer activity could involve between $40 billion and $303 billion worth of goods globally each year, potentially costing the US between $19 billion and $26 billion in tariff revenue annually.
The crackdown comes as Washington continues to target China-linked supply chains following the imposition of US tariffs on Chinese goods in 2018.
For the Philippines, however, the designation adds another layer of scrutiny to an already closely watched trade relationship with the US.
The country is separately subject to a 12.5-percent additional tariff under a US Section 301 action over its failure to prohibit and effectively enforce a ban on forced-labor imports, which took effect in July.
For its part, the Department of Trade and Industry (DTI) has been seeking the removal of the duty, while Philippine agencies have also moved to strengthen controls on goods produced using forced labor.
Also last month, the DTI, the Department of Labor and Employment and the Department of Finance signed a joint administrative order establishing rules for investigating and prohibiting the import of goods produced wholly or partly through forced labor.
On the other hand, during a visit to New Clark City in May, US Undersecretary of State for Economic Affairs Jacob Helberg told reporters that Washington would continue to push for fair competition and reciprocal trade while seeking stability in its relationship with China.
‘We want to make, we continue to stand for fair competition and for our companies’ reciprocal trade. And so our economic policies haven’t changed,’ Helberg said.