South Korea’s customs agency has reported an increase in foreign products being misrepresented as South Korean exports to avoid US tariffs, particularly involving goods from China.

In Q1 2025, the Korea Customs Service identified 29.5 billion won (US$20.8 million) in origin violations, with 97% of these shipments headed for the US.

This amount is nearing the total of 34.8 billion won (US$24.5 million) in violations recorded for all of 2024, where US-bound shipments constituted 62% of the total.

The customs findings include 3.3 billion won (US$2.3 million) worth of cathode materials imported from China and falsely labeled as South Korean to evade high tariffs.

To address this, the customs agency launched a task force and is developing stronger safeguards for local industries.

🔗 Source: Reuters

🧠 Food for thought

1️⃣ Transshipment tactics evolve with tariff escalation

The escalation of tariffs, from the initial U.S. tariffs on Chinese goods in 2018 to the current 145% tariffs, has driven increasingly sophisticated circumvention methods.

South Korea’s customs investigation found specific examples: $3.3 billion worth of Chinese cathode materials falsely labeled as Korean-made and $19.3 billion worth of Chinese surveillance cameras shipped as parts and reassembled in Korea to bypass U.S. restrictions 1.

This pattern extends beyond Korea, with customs officials reporting similar schemes where products manufactured in China are shipped to third countries for relabeling before entering the U.S. market 2.

These methods have grown more elaborate over time, evolving from simple mislabeling to complex logistics operations including double invoicing and strategic disassembly-reassembly processes to technically qualify as “substantial transformation” under trade rules 3.

The significant jump in violations (97% of violations targeting U.S.-bound shipments in 2025 Q1 compared to 62% for all of 2024) directly correlates with the timing of Trump’s aggressive new tariffs that began in March.

2️⃣ Middle powers face unique vulnerabilities in great power trade conflicts

South Korea exemplifies the precarious position of countries caught between major trading partners during trade disputes.

With 25% of its total exports going to China and significant U.S. trade through its free trade agreement, South Korea faces pressure from both sides 4.