A White House report puts Indonesian exporters under suspicion

Washington has published a report titled "The Great Transshipment Scam", and Indonesia is one of nine Southeast Asian countries named in it. The accusation is transshipment: goods made in China are sent through another country, given new paperwork, and then enter the United States as if they were made there, which avoids the higher tariffs Washington puts on Chinese products. The South China Morning Post reports that Vietnam, Malaysia and Thailand are on the list as well.

Trade analysts quoted in the piece say the report mixes two very different things. Over the past several years, companies have moved part of their production out of China without leaving it entirely, a strategy known as "China plus one": keep the Chinese factory, add a second one in Indonesia or a neighbour. That is ordinary business, and Indonesia has gained factories and jobs from it. A product built in Indonesia from some Chinese parts is not the same as a Chinese product with an Indonesian label. Barrett Bingley of the Asia Pacific Foundation of Canada said it plainly: "A supply chain touching China is different from illegal transshipment."

The practical result is paperwork, and it lands on exporters rather than on governments. Southeast Asian firms selling to the United States may soon have to prove where their goods really came from, part by part, rather than simply declaring the country of assembly. Proof of that kind costs time and money, and small suppliers are the least able to produce it.

Why it matters

If you work for or supply a factory that exports to the United States, expect customers there to start asking for documents on where your inputs came from, and expect the answer to affect the order. Firms that can trace their supply chain will win business from firms that cannot. The wider risk is that a country named in a report like this ends up negotiating from a weaker position the next time tariffs are set.