David Rashid, CEO of Plews and Edelmann, dives into a gripping tale of trade fraud as he investigates his Chinese competitor, Qingdao Sunsong. Despite tariffs aimed at leveling the playing field, Sunsong keeps prices low, sparking Rashid's quest for answers. He uncovers possible deception involving routing Chinese products through Thailand. The journey involves forensic analyses and international detectives, highlighting the complexities of tariffs and the murky waters of trade laws. A surprising friendship blooms over hummus amidst the chaos!
David Rashid's investigation into the pricing strategies of competitor Qingdao Sunsong highlighted how tariffs can be circumvented through transshipment practices.
The complexities of enforcing trade laws were exemplified by Rashid's challenges in getting government support despite substantial evidence of potential trade fraud.
Deep dives
David Rashid's Challenge in the Auto Parts Industry
David Rashid was tasked with improving the efficiency and competitiveness of Plus & Edelman, a manufacturer of power steering hoses facing fierce competition from the Chinese company Qingdao Sun Song. Despite various efforts to streamline operations and reduce costs, including consolidating manufacturing facilities and cutting inventory, the company continued to lose market share to Sun Song, which was offering lower prices. The situation took a turn when the Trump administration imposed tariffs on Chinese imports, leading David to believe that the tariffs would elevate Sun Song's prices and provide an opportunity for his company to regain lost business. However, contrary to expectations, Sun Song managed to maintain its low pricing even after the tariffs were increased, prompting David to investigate the underlying reasons for this anomaly.
The Investigation into Supply Chain Manipulation
David's quest to uncover how Sun Song maintained competitive pricing led him to gather a team of experts to analyze import data and product samples. His investigation revealed a pattern of imports where Sun Song began sourcing hoses from Thailand just before the tariffs were implemented, suggesting possible transshipment practices to circumvent tariff regulations. Tests performed on hoses labeled as Thai-made showed they were identical to those produced in China, raising suspicions of trade fraud regarding the origins of the products. David's findings indicated that Sun Song could be shipping products through Thailand to avoid tariffs, a practice considered illegal if intended to evade import duties.
Navigating Legal Channels for Trade Fraud Enforcement
After compiling evidence of Sun Song's potential trade fraud, David attempted to approach the U.S. government for intervention, starting with the Department of Justice and Customs and Border Protection. Despite submitting all gathered documentation including forensic lab reports and trade data, his case was initially declined by the DOJ, leaving him frustrated and seeking alternative routes. With the assistance of a congressman, momentum increased, ultimately resulting in a raid on Sun Song's facilities by the Department of Homeland Security as part of an ongoing investigation. This scenario underscores the complexities and challenges faced in enforcing trade laws and highlights how tariffs can be manipulated in a globalized economy.
When David Rashid took over US autoparts maker Plews and Edelmann, the company was losing business to its Chinese rival, Qingdao Sunsong. Both companies make power steering hoses, but Sunsong was offering its hoses to retailers at a much lower price.
Then, in 2018, the Trump administration threw companies like Rashid's a lifeline, by announcing tariffs on a range of Chinese goods, including some autoparts. Rashid thought the tariffs would finally force Sunsong to raise its prices, but, somehow, the company never did.
It was a mystery. And it led Rashid to take on a new role – amateur trade fraud investigator. How could his competitor, Sunsong, absorb that 25% tax without changing its prices? And why had all of Sunsong's steering hoses stopped coming from China and started coming from Thailand?
On today's episode, the wide gulf between how tariffs work in theory... and how they actually work in practice. And David Rashid's quest to figure out what, if anything, he could do about it. It's a quest that will involve international detectives, forensic chemists, and a friendship founded on a shared love for hummus.
This episode was hosted by Keith Romer and Jeff Guo. It was produced by Emma Peaslee and edited by Molly Messick. It was fact-checked by Sierra Juarez and engineered by Ko Takasugi-Czernowin. Alex Goldmark is our executive producer.
