A House China Panel Calls for Investigation into Chinese Trade Fraud
A House China panel has demanded an explanation from the Department of Homeland Security (DHS) on how it tackles trade fraud committed by Chinese companies to evade tariffs. The panel, led by Chair Mike Gallagher and member Rep. Darin LaHood, specifically pointed out Qingdao Sunsong, a Chinese manufacturer of automotive fluid transfer hoses and lines, as one of the culprits.
Gallagher and LaHood wrote a letter to DHS Secretary Alejandro Mayorkas, stating, “Reviews of Qingdao Sunsong’s public disclosures lay out a case of blatant trade fraud that is having a catastrophic impact on American manufacturers. Indeed, one American company has been compelled to accumulate significant debt, divest itself of two business divisions, and most recently lay off one-quarter of its workforce due to Sunsong’s trade fraud.”
“If swift action is not taken, the affected company will be forced to permanently cease its operations,” warned the congressmen.
When Sunsong attempted to go public on the Beijing Stock Exchange (BSE) last year, the company openly discussed its methods of evading U.S. tariffs on its exports.
According to a disclosure document (pdf) filed with BSE in October 2022, Sunsong revealed that its auto parts manufactured in China had been subjected to a 25 percent tariff since 2018. To lower tariff costs, the company expanded its production in Thailand and has been exporting to the United States from there since 2021.
Furthermore, the filing indicates that the value-added by the Thailand step in the journey of a Sunsong product from China to the United States is below 10 percent. This is significantly lower than the minimum 35 percent required for a “substantial transformation” of products originally from China to be considered “made in Thailand” for tariff purposes.
The Epoch Times reached out to Qingdao Sunsong for comment.
Shipping containers wait to be transferred from the ports of Los Angeles and Long Beach on Oct. 14, 2021. (John Fredricks/The Epoch Times)
The tariffs, commonly known as “Section 301 tariffs,” were initiated by the Trump administration using Section 301 of the Trade Act of 1974 to investigate and address unfair trade practices. The Biden administration has maintained these tariffs.
“We are concerned that this type of trade fraud is widespread in today’s economic environment, with companies resorting to such practices to effectively evade the United States’ tariff regime,” stated the lawmakers in their letter to DHS.
During an August hearing on China’s threat to American manufacturing, Mr. Gallagher emphasized, “China underprices and dumps, and that has had devastating consequences for manufacturing, American workers, and economic security. Tariffs, when strategically applied to China, reduce reliance on China and promote domestic manufacturing.
“Targeted economic incentives for specific sectors can strengthen our economy and national security, and countervailing duties can level the playing field.”
The Epoch Times has reached out to DHS for comment.
What are the potential consequences for American businesses and workers due to Sunsong’s trade fraud?
D Malaysia, and falsely labeled the products as originating from those countries. By doing so, Sunsong was able to avoid paying the higher tariffs imposed on Chinese imports.
The House China panel expressed deep concern over the lack of action taken by the DHS to address this issue. In their letter to Secretary Mayorkas, Gallagher and LaHood requested a detailed explanation of the department’s current strategy to combat trade fraud, specifically referring to Chinese companies evading tariffs.
Furthermore, the congressmen urged the DHS to initiate an investigation into Qingdao Sunsong and other Chinese companies engaged in similar fraudulent practices. They emphasized the urgent need to hold these companies accountable for their actions and protect American manufacturers from unfair competition.
The impact of Sunsong’s trade fraud on the affected American company has been severe. The accumulation of significant debt, divestment of business divisions, and layoff of one-quarter of its workforce are clear indications of the devastating consequences of such fraudulent activities. Immediate action is imperative to prevent further harm to American businesses and workers.
The House China panel’s call for a thorough investigation into Chinese trade fraud is a necessary step in safeguarding the integrity of international trade. China’s practice of evading tariffs not only undermines fair competition but also poses a threat to economic stability and national security.
In recent years, concerns about China’s unfair trade practices and intellectual property theft have been on the rise. It is crucial for the United States to take proactive measures to address these issues and protect its domestic industries. By investigating and penalizing companies like Qingdao Sunsong, the U.S. can send a strong message that trade fraud will not be tolerated.
The House China panel’s action serves as a reminder of the importance of maintaining fair trade rules and holding accountable those who seek to undermine them. It is essential for the DHS to promptly respond to the panel’s request for an explanation and initiate a thorough investigation into Chinese trade fraud.
Ultimately, the goal should be to create a level playing field for American businesses and ensure that international trade is conducted in a transparent and fair manner. The House China panel’s efforts are a step in the right direction, and it is crucial for the DHS and other relevant authorities to take appropriate action to address trade fraud by Chinese companies and protect the interests of American manufacturers.
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