White House says Morocco could be used to reroute Chinese goods around U.S. tariffs

Morocco is one of several countries that could be used as a transit point for Chinese goods seeking to avoid high U.S. tariffs, placing it in a network of trade routes Washington is watching for possible tariff evasion, according to a report by  White House Office of Trade and Manufacturing Policy.

The report groups Morocco with Kenya among what it describes as African hubs that can attract Chinese-linked trade because of their strategic locations, ports and access to international markets.

It places Morocco in the report’s “Tier 3” category, which covers smaller economies with lower overall volumes of transshipment but with specific advantages that can make them attractive for rerouting goods.

Those advantages can include lower-cost labor, specialized assembly capacity, access to preferential markets and, in some cases, weaker customs enforcement.

The concern is not necessarily that Morocco handles large volumes of Chinese goods destined for the United States. Instead, the report says countries such as Morocco and Kenya can offer specific advantages for Chinese exporters looking to change how goods are presented before they reach the U.S. market.

The report points to practices such as repackaging products, carrying out limited assembly, changing invoices or altering paperwork on the stated origin of goods.

Such operations can allow products made largely in China to move through a third country before being shipped onward, potentially making them appear to qualify for a lower tariff.

Morocco’s ports and economic zones are shown as part of a network of strategic shipping points near major trade routes and free trade areas.

The White House says this kind of rerouting has become a global problem, identifying more than 40 countries involved in what it calls “large-scale transshipment fraud.” 

The countries are divided into tiers based on factors including trade volumes and industrial structures.

The first tier includes major trade and manufacturing hubs such as Mexico, Canada, the European Union and Japan. The second includes countries with close economic links to China, including Vietnam, Turkey and Brazil.

The report estimates the value of goods involved in illegal transshipment could range from $40 billion to $303 billion a year, based on five estimates from government and private-sector sources.

Washington says the practice costs the U.S. government tens of billions of dollars in lost customs revenue each year while putting pressure on American manufacturers and jobs.