Case Study: Sunsong
One company, Sunsong (a.k.a. Sanxiang Technologies or Qingdao Sunsong), is currently in the spotlight. Sunsong is a Chinese manufacturer with distribution facilities in Moraine, Ohio, and is receiving massive subsidies and domestic trade protection as a part of the Chinese Communist Party’s Made in 2025 Program.
Sunsong has infiltrated the American manufacturing industry, specifically in the manufacture and sale of aftermarket parts such as brake hoses and power steering hose products.
The automotive aftermarket is home to several large U.S. Retailers, as well as various co-ops, independent warehouse distributors, and e-commerce retailers.
Evidence suggests that Sunsong is skirting the law by fraudulently transshipping products from China to the United States via Thailand. The logistics of fraudulent transshipping are shown in the graphic below.
According to U.S law, the products shipped from Thailand to the U.S must have undergone a “fundamental change” after arriving from China (Ex: sugar from country A and flour from country B combined to make a new product is such a fundamental change) in order to be considered truthfully “made in Thailand.” Since evidence suggests no such change has occurred to Sunsong’s products, Sunsong claiming its’ products are manufactured in Thailand is a violation of the aforementioned law and, by extension, constitutes a failure to pay the Section 301 import tariffs currently imposed on Chinese goods.
Chinese companies that receive massive government subsidies and skirt American tariffs by fraudulently transshipping through other countries enjoy a massive, unfair, and illegal advantage in the American marketplace.
The Paper Trail
In 2022, Sunsong’s application to the Beijing Stock Exchange (BSE) alerted the public to the company’s history of suspicious transshipping activities into the United States, which public filings show began in 2019 via two related Thai companies. The BSE raised concerns about Sunsong’s shipment through Thailand during the review process, which resulted in inquiry letters and public responses available on BSE’s website.
Sunsong’s response, via extensive public filings, inadvertently publicized the company’s sustained use of ever-evolving deceitful business practices. In 2021, Sunsong set up its own Thai subsidiary to facilitate a similar transshipping practice. The information presented in the BSE filings does not suggest that the product underwent substantial transformation in Thailand, inadvertently providing compelling evidence of potential fraudulent transshipping.
The filings further corroborate that a primary motive in going through this complex process was to evade U.S. tariffs. Or, to quote directly from the document, “ease the cost pressure of U.S. tariffs on products shipped directly from China.”
Multiple Chinese periodicals have also raised credible questions. This article from November 2022, for example, explicitly stated that Sunsong was at “risk of being punished by the customs of the United States and Thailand for product export” after the company had already been “punished by the taxation and customs department” of China.
What appears to be a direct response to the questions raised, Sunsong’s primary shareholder brazenly declared that if “Sunsong and its subsidiaries are subject to any penalties or legal liabilities for violating trade regulations of the importing or exporting countries, resulting in fines and penalties, I will unconditionally bear all the aforementioned fines on behalf of Sanxiang Technology and its subsidiaries…”
The findings furthermore highlight the disparity in how Chinese companies report to domestic and foreign authorities. The Chinese government promises severe consequences and strict punishment for lawbreakers, and thus companies remain compliant and truthful in their reporting. When faced with American regulations, however, companies take advantage of the lax enforcement practices in the United States.
Demand Integrity: U.S. Auto Aftermarket Retailers Must Be Vigilant!
According to Sunsong’s 2023 semi-annual report filed with the Beijing Stock Exchange, over 40% of Qingdao Sunsong’s sales came from Sunsong North America’s top U.S. auto aftermarket customers including major iconic retailers such as O’Reilly Auto, AutoZone, Advance Auto.
U.S. retailers have a responsibility to hold themselves accountable as their purchases from suppliers that cheat tariffs harm U.S. businesses and support the CCP’s economic agenda. While these retailers should seek the best deals to generate value for their customers and shareholders, it is of vital importance that their suppliers respect U.S. trade law.
U.S. retailers must be vigilant. They must ensure their supply chains adhere to American ethical and legal standards. With robust internal accountability and watchfulness, retailers demonstrate a commitment to principled business practices and safeguard American supply chains. We cannot settle for anything less if we want to compete and thrive as a great nation. U.S. auto aftermarket retailers must demand integrity from their supply base. Not knowing is not good enough.
Recent Developments
On Thursday, January 18, 2024, the Department of Homeland Security executed a search warrant at the Ohio-based U.S. subsidiary of Chinese Auto Parts manufacturer Qingdao Sunsong.
On August 30, 2023, the House Select Committee on the CCP held a field hearing in Wisconsin focused on the CCP’s threat to American manufacturing. Rep. Darin LaHood (R-IL) called out Sunsong directly for its tariff evasion practices.
Following the field hearing, China Committee Chairman Rep. Mike Gallagher (R-WI) and Rep. Darin LaHood (R-IL) sent a letter to U.S. Department of Homeland Security Secretary Alejandro Mayorkas urging him to take action against Sunsong.
While these developments mark a significant and positive development in the campaign for tariff integrity, more work remains to be done. TAPP looks forward to and encourages immediate, additional action from all relevant regulatory authorities including DHS Secretary Mayorkas, U.S. Trade Representative Katherine Tai, and Attorney General Garland.
Government Action
On Wednesday, August 30, 2023, members of the House Select Committee on the CCP held a field hearing in Stoughton, Wisconsin, on the CCP’s threat to American manufacturing. Rep. Darin LaHood (R-IL) delivered remarks. Below are some of his noteworthy comments that emphasize the severe threat of the CCP’s efforts, specifically Sunsong’s:
“Sunsong manufactures their product in China. Prior to implementations of the tariffs in 2019, they shipped their products directly to the United States. But when the tariffs went into effect in 2019, they began to ship their products through two separate entities in Thailand prior to shipping them then to the United States in a blatant effort to evade the 301 tariffs.”
“It is clear to me that the federal government needs to do a better job and be more equipped to quickly and efficiently support our small and medium-sized manufacturers by pushing back against Chinese companies like Sunsong that don’t play by the same rules and standards and laws that every other industrialized country in the world does.”
“Through my time on the select committee on China as well as my role on the Ways and Means Committee Trade subcommittee, I’ve seen numerous examples of blatant and rampant trade fraud and tariff evasion by Chinese SOEs. And through these examples, it is clear that we do not have sufficient mechanisms in place to support US companies.”
Following the Wisconsin Roundtable, China Committee Chairman Mike Gallagher and Rep. Darin LaHood wrote a letter on behalf of the House Select Committee on the Chinese Communist Party to Homeland Security Secretary Alejandro Mayorkas, urging him to take action against Sunsong.
The letter states that “reviews of Qingdao Sunsong’s public disclosures lay out a case of blatant trade fraud that is having a catastrophic impact on American manufacturers.” Because of this fraud, the Select Committee on the CCP called for the DHS to provide a briefing no later than October 13, 2023, detailing how it is “investigating and seeking redress from these perpetrators.”
Rep. Darin LaHood (R-IL-16) delivering remarks on Sunsong’s impact on U.S. businesses.
On Thursday, January 18, 2024, the department of Homeland Security executed a search warrant at the Ohio-based U.S. subsidiary of Sunsong. Following the raid, the Select Committee on the CCP released the video below:
Video released by the Select Committee on the CCP following the raid of Sunsong.
In the Media
The ongoing threat from Sunsong continues to gain more and more traction in the news. Below captures mentions from the most recent publications:
Repairer Driven News - Congress committee leaders warn major retailers about purchasing fraudulent Chinese-made parts
Star Advertiser - Lawmakers investigate U.S. retailers for evading Chinese tariffs
Reuters - Lawmakers probe if US retailers bought Chinese auto parts that evaded tariffs
Freight Waves - Auto parts executive slams China’s alleged end run around US tariffs
Daily Caller - HARRIS: The Decline Of American Industry Is A Choice
Axios - DHS raids Chinese car parts maker's U.S. headquarters
News Nation - Chinese auto parts maker's Ohio headquarters raided by DHS
MSN - DHS raids Chinese auto parts maker’s Ohio headquarters
Carscoops - Homeland Security Raids Chinese Auto Parts Maker’s Ohio HQ, China Cries Foul
AllSides - DHS raids Chinese auto parts maker’s Ohio headquarters
Ground News - DHS raids Chinese auto parts maker’s Ohio headquarters
The Stock Dork - U.S. Homeland Security Raids Chinese Auto Parts Maker in Ohio
Dayton Daily News - Homeland Security executes search warrant at Moraine business
WDTN - Homeland Security officials investigating in Moraine, Ohio
The Ripon Advance - LaHood, colleague call for DHS briefing on U.S. tariff evasion
Federal Newswire - LAWMAKERS URGE ACTION AGAINST QINGDAO SUNSONG OVER ALLEGED TARIFF EVASION
The Epoch Times - House China Panel Probes DHS on Enforcing Trade Fraud Penalties
Law360 - Lawmakers Call For Probe Into Alleged Auto Parts Tariff Fraud
Bloomberg - US Lawmakers Ramp Up Trade Heat On China Over Auto-Parts Tariffs
Breitbart - China’s Automakers to Skirt Tariffs, Fill U.S. Market with Electric Vehicles
Note on Research
Tariff Integrity constantly engages in research to update the accuracy of its content. Periodic changes to the content of the website reflect its most recent research.
What You Can Do to Help
Ask U.S. Trade Representative Katherine Tai to crack down on China and to fight for tariff integrity.