Several companies reportedly have been fined by the U.S. government for attempting to avoid new duties imposed by the Trump administration, Reuters reported on Wednesday.
According to the report, a U.S. Embassy official contacted Reuters via email to relay news of the fines on several businesses exporting goods away from China using a special economic zone supported by Chinese interests.
“The Department of Homeland Security has inspected and fined a number of companies for evading tariffs in the United States by routing goods through Cambodia,” U.S. Embassy spokesman, Arend Zwartjes, said in a statement emailed to Reuters.
Known as the Sihanoukville Special Economic Zone, the region is a part of the Belt and Road initiative and is a major regional manufacturing center, producing textiles, garments, bags, leather products, hardware, machinery and wooden products. Cambodia designates ares like the Sihanoukville Special Economic Zone, which is the nation’s only major international port, to create favorable trading conditions and, in this case, to open shipping lanes with partners such as China.
According to the Generalized System of Preferences, which sets forth U.S. trade preferences and tariffs, Cambodian goods such as bags, luggage and accessories can arrive on U.S. shores duty-free. The new report suggests that the exporters fined in this case were attempting to relabel their goods as Cambodian in order to take advantage of the nation’s preferential status.
Kaing Monika, the deputy secretary general of the Garment Manufacturers Association of Cambodia (GMAC)—which represents more than 600 Cambodian garment factories—told Reuters that the organization had no knowledge of large-scale mislabeling or the existence of illegal transshipping.
Both Vietnam and Cambodia have absorbed a great deal of the trade volume that is now receding away from China due to the trade war. In April, Chinese footwear exports fell by 8.4 percent while Vietnam’s footwear exports grew by 9.5 percent.
A month later, the World Bank reported that Cambodia apparel, footwear and travel goods exports now account for two-thirds of its total export haul and have risen by 17.6 percent since 2017 and 8.3 percent since last year.