Republicans look to stop China's 'backdoor' tariff dodging scheme

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Republicans are targeting China's efforts to sidestep U.S. tariffs through foreign production, with new legislation introduced Thursday by House Budget Chairman Jodey Arrington, R-Texas.

The Axing Nonmarket Tariff Evasion (ANTE) Act aims to stop subsidized and state-owned entities from setting up production in other countries to avoid tariffs.

"For far too long, adversaries like China have engaged in unfair trade practices, cheated the American economy, and cost the U.S. millions of jobs," Arrington said in a statement to Fox News Digital.

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On April 2, which the White House dubbed "Liberation Day," President Donald Trump announced sweeping tariffs with the intention of ending trade imbalances. Some of the harshest of the tariffs were imposed on China, which was initially hit with a 145% tariff that was later lowered to 30%. 

While tariffs seem to be discouraging Chinese manufacturers from exporting to the U.S., as evidenced by a recent Commerce Department report showing import levels at their lowest since the COVID-19 pandemic, imports have not stopped entirely.

The Chinese Communist Party (CCP) has found ways to evade the tariffs, such as setting up production in third-party countries or by shipping goods to another country and re-labeling them before sending them to the U.S. By labeling the goods as originating from another country, manufacturers dodge the high tariffs on China and instead get hit with much lower tariffs that are imposed on other nations. This is something that Arrington hopes to stop with his legislation.

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"The ANTE Act will stop highly-subsidized, state-owned businesses from using third countries as backdoors to evade President Trump's tariffs and help ensure a level playing field for American producers and manufacturers," Arrington told Fox News Digital.

Sen. Jim Banks, R-Ind., who is introducing companion legislation in the Senate, is also confident the bill will stop the CCP from falsifying the origins of imports.

"Communist China shouldn't be able to dodge U.S. tariffs by slapping a 'Made in Mexico' label on their products," Banks said in a statement to Fox News Digital. "My bill closes loopholes and stops the CCP from cheating American workers and manufacturers." 

The phenomenon of "place-of-origin washing" is not limited to large businesses. Chinese social media platforms are filled with ads offering services to help sellers avoid tariffs, the Financial Times reported. The outlet also noted that South Korea's customs agency has seen an uptick in cases involving sellers using their country to avoid U.S. tariffs.

Under U.S. law, goods must undergo "substantial transformation" in a country to qualify as originating from there. The transformation must significantly add to the value of the good, according to the International Trade Administration's (ITA) website. 

As an example, the ITA writes that if ingredients are taken from several countries and turned into baked goods, the country of origin can be listed as where the items were baked, as this constitutes a "substantial transformation." However, if produce from multiple countries is frozen and mixed in another nation, then the origin of each ingredient must be listed.