A major decline in the U.S.-China trade deficit is being directly caused by major tariff evasion for imported Chinese goods say economists at the Federal Reserve Bank of New York and Board of Governors of the Federal Reserve System. While U.S. trade data appeared to show a narrowing of trade volume between China and the United States, the analysis proposes that this narrowing is overstated due to U.S. importers underreporting Chinese imports and, to a lesser extent, Chinese exporters reporting higher exports to take advantage of new Chinese tax incentives. According to these findings, the United States lost approximately $10 billion in tariff revenue due to U.S. companies’ underreporting.
The article’s authors, Hunter Clark and Anna Wong, noted that the discrepancies between Chinese- and U.S.-reported trade statistics indicated that evasion was likely occurring. U.S. trade statistics showed a significant decrease in 2018-2020 imports from China. The decline coincides with the imposition of Section 301 duties on hundreds of billions of dollars of Chinese imports during the Trump Administration. However, after initially reflecting a decline in exports from 2018-2019, the Chinese trade statistics showed an increase in exports to the United States from 2019-2020.
Although it is illegal to do so, a growing number U.S. companies importing goods from China have incentives to misreport their imports, due to the substantial tariffs on these products. According to the findings, importers are likely reporting import prices to U.S. Customs and Border Protection (Customs or CBP) based on “low-ball” invoiced prices, which would decrease the amount of duties collected but not reflect the actual cost of the imported merchandise. Common evasion techniques contribute to the exaggerated decline in the trade deficit, including mislabeling the country of origin, misclassifying imported products, or misidentifying sales through affiliated companies.
The researchers’ conclusions are consistent with an increase in the number of trade remedy evasion findings made by CBP, the agency responsible for collecting all customs duties and investigating allegations of duty evasion, misclassification, and undervaluation. While Customs carefully analyzes trade data to detect potential instances of fraud, it also relies heavily on allegations from U.S. producers and importers harmed by unfair trade practices.
JEFFREY NEWMAN REPRESENTS WHISTLEBLOWERS WORLDWIDE INCLUDING THOSE REPORTING MAJOR TARIFF FRAUD BY MISLABELING THE COUNTRY OF ORIGIN AND MISCLASSIFYING THE PRODUCTS. HE IS REACHABLE AT
978-880-4758 AND AT JEFFYREY.NEWMAN1@GMAIL.COM