Chinese manufacturers have been building factories in Mexico in order to evade US tariffs and also to lessen their supply chains which have throttled distribution since the pandemic. Some of what is happening is legal “avoidance”, However, in some cases, products are shipped from China to their factories in Mexico and few changes are made before they are delivered to the United States. The US-Mexico-Canada Afreement that replaced NAFTA requires a higher propeortion of the valua of any good must come from North America to qualify for tariff-free treatment. There are pending cases involving goods from Mainland China being sent through Mexico that shouldn’t qualify for tariff-free treatment.
According to published reports, Chinese investments in Mexico spiked from $154 million in 2016 to $271 Million in 2017. Investment in Mexico reached $500 million last year. With an influx of Chinese investment, the Hofusan Industrial Park near Monterrey, Mexico – a 120-mile trip by rail or truck to Texas – is booming. One study found that half of all new investors seeking industrial space in Mexico are from China. The United Nations estimated that the US-China trade war has boosted Mexico’s total exports by six percent.
U.S. steelmakers say Chinese steel companies are evading tariffs illegally by routing their shipments through Vietnam and Mexico. In April of this year, Six Southern California companies were ordered to pay $1.83 billion in restitution for participating in a conspiracy to defraud the United States through a scheme in which huge amounts of aluminum – disguised as “pallets” to avoid $1.8 billion in customs duties – were exported to the United States and were “sold” to fraudulently inflate a China-based company’s revenues and deceive investors worldwide.
Jeffrey Newman is a whistleblower lawyer with the firm Jeff Newman Law and he can be reached at jeff@jeffnewmanlaw.com or at 978-880-4758.
