David Rashid never expected to spend all his free time learning the intricacies of international trade law and tariff regulations. 

Yet over the last four years, Rashid, the executive chairman of Plews and Edelmann, a Dixon, Illinois-based auto parts company, has spent hours digging into trade data and combing through Chinese corporate filings, traveled several times to Capitol Hill, and even hired private investigators in Thailand — all in an attempt to prove that Plews’ Chinese competitor, Qingdao Sunsong Company, has evaded U.S. tariffs.

Plews has spent over $1 million in the process, according to Rashid: That has included filing a lawsuit with the Department of Justice (DOJ), and submitting information to its Trade Fraud Task Force, which works with the Department of Homeland Security (DHS) on tariff evasion investigations. While DHS raided Sunsong’s U.S. headquarters in January, Plews has yet to receive any remedy and Rashid says the company’s profits have dramatically decreased as a result of Sunsong’s unfair practices. 

Rashid’s sisyphean journey is just one illustration of what experts and manufacturers say is a pressing issue: while imposing tariffs on Chinese imports has become a core part of the U.S. policy — in mid-May, the Biden administration hiked tariffs on Chinese electric vehicles and other goods — adequate systems to enforce them are not yet in place. As a result, Rashid says tariffs intended to protect U.S. businesses can instead hurt American manufacturing.

“Behind me, there are thousands of other companies that are affected,” Rashid says in a coffee shop near the Capitol Building, where he recently spent several days talking with lawmakers and their staff. 

“I think this story is important for American manufacturers, or just people who play by the rules,” he adds. “This is about [how] we live in a country where there are laws, we need to follow those laws. If there are people who aren’t following those laws, it puts all the rest of us in a precarious situation.”

Plews is not alone. Industry associations and experts say that Chinese tariff evasion is common in the textile, solar, and steel industries, and the most common transhipment destinations are Southeast Asia and Mexico. Last year, for example, the Commerce Department found that five leading Chinese solar manufacturers were evading tariffs by routing products through Southeast Asia. 

Kimberly Glas, the president of the National Council of Textile Organizations (NCTO), a trade group representing the textile industry, says that companies in the sector face widespread tariff evasion issues. The NCTO estimates that cross-sector trade fraud totals anywhere between $176 and $457 billion annually.

“It’s one thing to make trade policy over at USTR, and it’s another to make sure that when these products are entering the U.S. marketplace, we’re making sure it’s compliant,” she says. “Trade fraud is a massive problem without massive consequences under how we do our U.S. enforcement.” 

Officials also recognize the lack of enforcement. 

Congress and the [Biden] administration have an obligation to address unacceptable economic manipulation by CCP-backed companies.

Darin LaHood (R-IL)

“There is evidence of companies intentionally evading the section 301 duties,” USTR officials wrote, referring to the type of tariffs which allow the U.S. to respond to any foreign government’s unfair policies, in the report announcing new tariffs last month. “Allocating additional funds to Customers and Border Protection (CBP) would allow for the greater enforcement of the section 301 actions (and similar trade actions) and would make the section 301 actions more effective.”

Left: CBP officers at the Port of New York inspect a shipment from China suspected to have been made with forced labor, June 29, 2020. Right: CBP officers in Jacksonville inspect shipments of possible IP rights violations, February 21, 2019. Credit: U.S. Customs and Border Protection via Flickr

Lawmakers are now mulling action to streamline and boost tariff enforcement. The House’s Select Committee on the Chinese Communist Party is drafting a bill which would beef up tariff enforcement, and create a new trade fraud unit with criminal authorities under DOJ, according to people briefed on the discussions. The Trade Fraud Task Force is currently housed under DOJ’s civil division and has a small staff.

The Select Committee declined to comment on the bill, but a spokesperson said “the government needs to have teeth to enforce [tariffs] and punish companies for breaking the law.”

A DHS spokesperson confirmed the raid on Sunsong’s U.S. headquarters but said in a statement that “this is an ongoing investigation and no further information is available at this time.” DOJ did not respond to requests for comment.

Plews’ rival Sunsong is a two-decade old private company based in the coastal city of Qingdao which in China supplies automakers like BYD and Geely Automobile, according to its website. It has no state ownership, according to WireScreen, and was listed on the Beijing stock exchange two years ago, with a market value currently around $100 million. Sunsong did not respond to multiple requests for comment.

In the U.S., the company provides auto parts for replacement or maintenance through a subsidiary called Sunsong North America located near Dayton, Ohio. It also directly supplies automakers through a separate Dayton-based subsidiary called Harco, which Sunsong bought in 2015. Plews competes with Sunsong North America particularly in power steering hose equipment for the so-called ‘auto aftermarket’.

Plews executives first suspected Sunsong North America was evading tariffs during the Trump administration, which implemented 10 percent tariffs on auto parts in 2018 before raising them to 25 percent the next year. Plews had expected it would pick up new customers as Sunsong was forced to raise prices, but Rashid says they instead stayed the same.

This discrepancy prompted him to look deeper into his competitor. First, by looking at trade data for the period 2018-20 from a platform called ImportYeti, he saw that the flow of goods from Sunsong’s Chinese headquarters to Sunsong North America mysteriously stopped around the time of the Trump tariffs, before resuming in mid-2020 from a company called Imperial Cable Industry in Thailand. Rashid then sent samples of Sunsong equipment — some labeled as from Thailand and some from China — to labs in Ohio and Canada, which concluded that they were nearly identical. The Wire has reviewed both the ImportYeti data and the lab reports.

Needing further evidence, Rashid hired private investigators in Thailand, who obtained trade and financial documents from Imperial Cable, the Thai company shipping goods to Sunsong North America, and another Thai company called Virayont Group, which was importing goods into Thailand from Sunsong’s Chinese operations.  These two Thai companies are not owned by Sunsong, but a ten percent shareholder of Sunsong and his family controlled both firms, according to company filings.

Trade data the private investigator turned up showed that some initial shipments from Qingdao Sunsong and exports to Sunsong North America had the exact same weight and number of units. Financial information also showed that the two Thai companies’ sales surged, but their operational expenses, assets and gross profit all remained nearly the same from 2017 to 2020. 

I’m an optimist by nature, you have to be if you’re willing to go through all of this. But I don’t know how many more steps I’m going to have to take before I get to the finish line.

David Rashid, the executive chairman of Plews and Edelmann

These pieces of evidence indicated to Rashid that Sunsong was transhipping goods through Thailand. Rashid says he doesn’t know how the private investigator obtained the information, which was reviewed by The Wire but could not be independently verified. When Sunsong applied to go public in 2022, its filings confirmed some of the private investigator’s findings and stated that shipping products via Thailand “can alleviate the cost pressure of tariffs imposed by the U.S. on goods shipped directly from China.”

In 2021, Sunsong stopped relying on Virayont and Imperial Cable for the movement of shipments, according to filings, and shifted that activity to Sunsong Thailand, a subsidiary which constructed a factory there. Rashid says he stopped collecting evidence about Sunsong’s practices after 2021.

Armed with this evidence, Plews filed a lawsuit in July 2021 under the False Claims Act, which allows companies to sue on the government’s behalf, alleging that Sunsong was defrauding the U.S. government of tariff revenue. After the DOJ declined to intervene six months later, Rashid submitted his information to the department’s Trade Fraud Task Force and made an allegation through the CBP online trade violations portal. 

Last year, he contacted his representative, Darin LaHood (R-IL), who also sits on the Select Committee on China. LaHood invited Plews to participate in a committee roundtable held in August, 2023 about China’s impact on American manufacturing, and the next month, co-authored a letter urging DHS to take action on Sunsong’s tariff evasion.

“The trade fraud challenge Plews and Edelmann in Dixon faces is a poignant example of what manufacturers across the country are feeling,” Representative LaHood said in a statement to The Wire. “Congress and the [Biden] administration have an obligation to address unacceptable economic manipulation by CCP-backed companies.” 

In January, DHS raided Sunsong’s facility in Ohio, but the current status of the investigation is unclear. Except for filing an appeal with the Commerce Department for so-called ‘countervailing duties and anti-dumping duties,’ a potentially expensive and long process, Rashid has exhausted his options to get the government to intervene. 

Over the last four years, Rashid says he had to move some production lines to Mexico to cut costs, and if the government does not take action, he worries all of his effort will have been in vain.

“I’m an optimist by nature, you have to be if you’re willing to go through all of this,” Rashid says. “But I don’t know how many more steps I’m going to have to take before I get to the finish line.”

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