Select Committee Chairman Accuses Qingdao Sunsong of Transshipment Through Thailand
The sole member of the Ways and Means Committee who sits on the House Select Committee on China, along with the committee's chairman, are asking the Department of Homeland Security to brief them on how it's investigating allegations of trade fraud, and to allay their concerns that customs fraud is not being enforced.
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Chairman Rep. Mike Gallagher, R-Wis., and Rep. Darin LaHood, R-Ill., asserted that Qingdao Sunsong is circumventing 25% Section 301 tariffs on its power steering hose assemblies by doing simple assembly in Thailand but saying the country of origin is Thailand.
"Reviews of Qingdao Sunsong’s public disclosures lay out a case of blatant trade fraud that is having a catastrophic impact on American manufacturers," they wrote Sept. 29.
"The use of transshipment to evade United States tariffs is a serious violation of U.S. law and undermines American economic and national security. To evade Section 301 tariffs and duties, many [Chinese] companies -- including Sunsong -- ship their Made in China products to countries that do not face tariffs at the same level as those imposed on the [People's Republic of China] by the United States. Without fundamentally transforming the product, the companies will then ship their Made in China products to the United States under the guise that the products were made in a country other than China."
The letter did not name the American company it said had to lay off one-quarter of its workforce because of pressure from Sunsong's imports, but David Rashid, a senior executive with Plews & Edelmann, said his firm, which makes aftermarket power steering parts, testified in front of the committee that Sunsong engages in predatory pricing, which is 30% cheaper than what he can sell for. He alleged the company shipped through Thailand to avoid Section 301 tariffs, and said then that he had layoffs as a result, though he didn't quantify the damage (see 2308310052). Rashid said he'd tried to get CBP to investigate transshipment and hadn't had success.
The letter cited documents submitted by Qingdao Sunsong last year, as it was seeking to become a publicly listed company on the Beijing Stock Exchange. Gallagher and LaHood said that the company said the processing in Thailand added between 12 and 23 cents to the cost of the hose assemblies. They inferred from that number that the assembly in Thailand is less than 10% of the value of the good, "far below the threshold expected to qualify as 'substantial transformation.'" They added: "Indeed, the Qingdao Sunsong disclosure indicates that Viayont’s added value is “assembly processing, and the process is relatively simple.”
They also noted that Wei Zengxiang, the controlling shareholder, wrote in the prospectus that if the company or its subsidiaries were to be subject to penalties for violating trade regulations of countries it exports to, "I will unconditionally bear all the aforementioned fines, compensation and other economic losses on behalf of (Sunsong) and its subsidiaries, or if (Sunsong) and its subsidiaries must bear them first, I will give full compensation to (Sunsong) and its subsidiaries in a timely manner."
Because of this language, they conclude, "It appears that Mr. Wei understands that his company is circumventing Section 301 tariffs."
A person who answered the phone at Sunsong North America, said she couldn't say who could speak to a reporter. The director of purchasing of hose manufacturer Harco Manufacturing, which is owned by Sunsong, didn't respond to a voice mail message left requesting comment on the allegations.