Brazilian newspaper Estado de Sao Paulo revealed documents from Chinese company Sun Falcon International Inc. offering triangulation scheme through Los Angeles port, the busiest container port in the US, to avoid Brazilian anti-dumping tariffs.
First, goods would be exported from Shanghai to L.A., where they would be labeled “Made in the USA”. Then, goods would be shipped from the US West Coast to Brazil’s ports, thus avoiding antidumping tariffs. Sun Falcon International also proposed the use of Taiwanese and Vietnamese ports.
This scheme includes falsification of certificates of origin and possible sanction is prohibition of Sun Falcon International Inc. to export to Brazil. Such a severe punishment could be applied because the Chinese company is supposedly committing crime and not just violating international trade norms.
Even though Brazil is one of the world fastest-growing consumer markets, the country’s manufacturers have been struggling with rising imports fueled by a very strong currency. Brazil’s currency (Real) has appreciated over 100% since 2002 and gained over 30% in the past two years. Today, Real is trading at around 1.55 per US dollar. Brazil’s government uses antidumping tariffs to try to protect domestic industrialists. Under rules of the World Trade Organization, a country can apply anti-dumping import tariffs when it can prove that imported goods were sold at below-market prices and caused damage to domestic industry.
However, Brazil has been facing many cases of triangulation. In May, Brazilian Chamber of commerce and international business opened investigation to examine “circumvention” (technical name of triangulation) in importation of blankets from Paraguay and Uruguay. Apparently, Chinese companies were using the two countries to export to Brazil. Therefore, not only avoiding payments of antidumping tariffs to Brazil, but also getting exemption from any tariffs since both countries are Mercosur members.
There is suspicion that Argentina is also being used to avoid Brazilian antidumping tariffs. Estado de Sao Paulo revealed that one out of every five goods sold by Argentina to Brazil in the first semester of 2011 was not in the list of goods imported from Brazil’s neighbor in the same period last year. The volume (20%) is colossal. However, the total value is only 1.15% of the total bought by Brazil from its neighbor.
A good example is the case of importation of speakers: In the first semester of 2011, Brazil’s imports of speakers from Argentina soared 5.383% if compared to the same period last year. Coincidentally, antidumping tariff on Chinese speakers of US$ 2.35 per kilo started in the beginning of 2011.