Transshipment clause in US-Vietnam trade deal cause for concern

South China Morning Post

4 hours ago

The word '
transshipment ' is causing many to lose sleep in Asia, not least in China. The problem is that a term that Washington has been using as a blunt instrument in trade negotiations with Asean countries, among others, is vague enough to be open to interpretation but harsh enough to penalise China's trading partners in the region.
The most extreme form of transshipment refers to exporters evading tariffs by diverting goods through a third country. But what about foreign components that have gone into another country's domestic production or assembling?
'Transshipment' is
embedded in a clause in the new
trade deal that Washington announced has been struck with Vietnam. As it may well become a test case, the reported trade pact has everyone's attention, though its official terms have yet to be released.
China – a top supplier of goods and products to Association of Southeast Asian Nations economies – has already warned against trade deals that could undermine its interests.
Initially, Hanoi heaved a
sigh of relief over the trade pact. The Vietnamese stock market reacted by hitting its highest in more than three years. To rebalance trade in Washington's favour, US exports to Vietnam will have tariff-free market access, while Vietnamese exports will face a 20 per cent levy instead of the initial 46 per cent.
But what worries people most in the region is the clause about transshipment. US President Donald Trump also wrote in his social media post announcing the deal that such goods would face a much higher rate of 40 per cent.