If you put up a barrier, people will find a way around it. So its not shocking to read recent news stories about how some businesses are trying to skirt around tariffs – particularly from China.
They’re shipping goods through third countries, rather than directly from China, using special “shoppers” to skirt minimum quantity amounts, colluding with suppliers to falsify country-of-origin labels, undervaluing goods, or “assembling” products out of China where tariffs are lower. They’re creating shell companies in more tariff-friendly countries and even going so far as forging certificates of origin (thanks ChatGPT!) and otherwise falsifying shipping documentation in collusion with, or independently from, their suppliers.
I get it. Whether you’re a supporter or not of the administration’s tariff policies, you’re still likely fed up with Donald Trump’s almost daily changes of his mind, the court cases, the lack of process, the chaos, the Tweets (sorry Xs, no, wait Truths).
It’s not as if businesses don’t do this stuff all the time. For thousands of years, butchers have been putting their fingers on the scale; middlemen pocketed a few stolen pennies or denarii or drachmas behind their customers’ backs. I have clients who regularly undervalue (or even hide) their inventory, keep two sets of books, fail to report cash receipts, run their personal expenses through their companies. The list goes on.
But none of this is a great idea.
As a certified public accountant, I have a professional obligation to not only point this kind of behavior out to my clients but to disengage from providing services to those who are breaking the law, or at the very least demonstrating a significant lack of ethics. I warn them about the downsides: the penalties, the fines, the potential jail time for criminal behavior. I try to make them understand that behaving this way risks ruining relationships with suppliers, customers, partners and employees. If caught it’s both professionally and personally humiliating and not the kind of PR that will benefit your company. And it definitely upsets those in the community who are doing their best to abide by the law.
And when it comes to tariffs, there are other – legal – ways to either avoid or reduce their impact on your business. You could use bonded or free trade zone warehouses. You could raise prices, cut other costs, invest in technologies. You can use new resources from the Small Business Administration to find domestic suppliers or lean into organizations like the World Trade Center Association to find alternate suppliers in more tariff-friendly locales.
And yet, I know – and read – of a not-insignificant number of business people who insist on just skirting the law. Why? It’s down to risk. Every decision one makes when running a business – or living your life – involves a risk/reward analysis.
Rolling out a new product? It’s possible no one buys it. Investing in a piece of property? Getting on an airplane? Crossing the street? We all take risks every day because we want the rewards. Some people have a higher tolerance for this stuff. Those are the ones playing the tariff lottery, risking that their number won’t get picked.
The business people I know who are willing to take these risks – even if they’re on dubious legal grounds – all have a reason to back up their actions. Maybe they were “completely ignorant, innocent or naïve” about the law. Or they come up with some legal explanation for their actions, regardless of how flimsy or far-fetched. Some of them have no problem throwing their supplier or employee or customer under the bus and then sleeping like a baby that night. They don’t just hope that no one finds out. They have a story to tell.
Personally, this is not for me. I’m not a big risk taker. And, like most people, I’m a pretty bad liar.
