Out of chaos often comes opportunists.
As the promo community weathers the tariff roller coaster, with both its rising costs and constant uncertainty, PPAI Media has learned of a type of potentially dubious offer emerging in the form of email solicitations from alleged Chinese vendors offering creative solutions that are likely too good to be true.
- Under the current Trump administration, the U.S. has imposed 145% tariffs on imports from China, which has responded with 125% retaliatory tariffs on imports from the U.S.
- Additionally, President Donald Trump has announced an incoming increase to tariffs on Chinese imports previously exempt under de minimis at the rate of 120% of their value starting May 2.
It’s that second development concerning the elimination of the de minimis loophole that potential bad actors seem to be trying to use as their entry point, as it’s likely to affect many companies within the promo industry who are now looking for some way to adjust.
A common trait among some of these solicitations is offering the concept of “Delivery Duty Paid,” which essentially contends that the vendor will take care of the tariff costs beforehand.
When shown one of the emails that had been passed along to PPAI Media, Ben Zhang, president and CEO of Greater Pacific, PPAI 100’s No. 68 supplier, which sources roughly 70% of its products from China, confirmed, “Yes, we have been offered by some of our vendors as well for DDP [Delivery Duty Paid] terms recently. However, knowing the law, we have been cautiously evaluating these offers to make sure we are not getting any blood on our hands.”
Ben Zhang
President & CEO
What Might This Solicitation Look Like?
Dishonest solicitations of business can take a number of forms and that is likely to be true in these scenarios as well. However, under the current circumstances in which so many companies will understandably be looking to save money or offset the costs of tariffs, promo firms should be wary of any offers that promise costs will be drastically mitigated, especially if it comes from a source that they’ve not regularly conducted business with.
Unlike, say, a traditional phishing scenario, it’s hard to pin some of these solicitations down as clear scams, as they may more accurately be legitimate offers with inherent and considerable risk.
Below is an example of an email that was flagged by a PPAI 100 supplier.
*Names have been omitted. “Vendor” is referring to a specific Chinese vendor referenced multiple times in the email.
Subject Line: Vendor* Tariff Solution after May 2nd
Body/Text:
In response to the new tariff policy, Vendor has already implemented measures to help customers control cost increases. After May 2nd, if with the cancellation of the $800 exemption policy, you can choose “Vendor to prepay the duties.” And we will take steps to ensure your costs will not exceed a 15% increase when selecting this option. When you choose “Vendor to prepay the duties.” means you will pay based on DDP terms, including all duties, taxes and import costs.
What Are The Risks Of This Type Of Offer?
Depending on what exactly happens if one were to respond and follow through with this offer, there’s a tangle of illicit practices that would take place.
- In this scenario, the value reported would be of the “Vendor’s” material cost, as opposed to the sale price. Thus, this wouldn’t be a creative way to deal with tariffs. It would actually just be circumventing the true costs of tariffs and the obvious risk that comes with that.
PPAI Media reached out to Kevin Walsh, president of Showdown Displays, PPAI 100’s No. 8 supplier, and former chair of the PPAI Board of Directors, concerning the above email and what he made of the offer.
Kevin Walsh
President, Showdown Displays
“Beyond being unethical and illegal about this approach is that if this is discovered in an audit, the participants could be at risk for the true tariff costs, as well as fines and penalties,” Walsh says.
According to Zhang, U.S. Customs and Border Protection has increased its scrutiny on underreported commercial values of shipments as of late. It’s unclear what the fines and penalties that Walsh referred to would look like, but Zhang assumes it would be at least three times the commercial value, possibly more.
“I strongly recommend that vendors report the commercial value of shipments honestly and transparently,” Zhang says. “U.S. Customs has enough data to do a cost comparison and analysis on similar product or category.
“Engaging in any unethical or illegal activity to underreport values not only exposes all parties to substantial penalties but also jeopardizes the integrity and security of U.S. supply chains. Accurate reporting is essential to protect U.S. customers, prevent shipment seizures and maintain compliance with U.S. customs regulations.”
For questions or suggestions on regulatory or government affairs issues, please contact Rachel Zoch at RachelZ@ppai.org.
