Malaysia must protect legitimate exporters from sweeping US tariff circumvention allegations
KUCHING: Malaysia should push back against any attempt to portray legitimate manufacturing and transshipment activities as tariff evasion following its classification by the United States as an economy deeply integrated into China’s supply chain.
Former Ministry of International Trade and Industry (MITI) secretary-general Tan Sri Dr Rebecca Fatima Sta Maria said Malaysia should cooperate with the US on tackling genuine tariff circumvention but firmly defend exporters engaged in lawful trade.
“Under WTO rules, transshipment is lawful,” she said.
Her comments came after the White House Office of Trade and Manufacturing Policy released a report accusing 40 countries of participating in alleged schemes to evade US tariffs through the falsification of the origin of goods.
Malaysia was placed in Tier 2 alongside Vietnam, Thailand and Indonesia, which the report described as economies “deeply integrated into China’s supply chains”.
Sta Maria said such a classification risked blurring an important distinction between goods legitimately manufactured or processed in Malaysia and products merely routed through the country to evade tariffs.
She said Malaysia had long been part of complex global supply chains, with goods routinely moving between several countries before reaching their final markets.
The determining factor, she said, should be rules of origin and whether a product had undergone substantial transformation in Malaysia.
Substantial transformation refers to a meaningful change in a product’s form, use or value and is used to determine where a product genuinely originates.
“Malaysian factories assemble, process and manufacture goods in ways that meet international standards for substantial transformation. That is legitimate trade, not circumvention,” she said.
Sta Maria stressed that Malaysia did not defend illegal practices.
Falsifying origin claims or carrying out only minimal processing to disguise the true origin of goods constituted tariff evasion and should be dealt with accordingly.
But she said legitimate Malaysian exporters should not be caught by enforcement measures that treated participation in regional supply chains as inherently suspicious.
Malaysia, she added, had established itself as a rules-abiding trading and manufacturing hub backed by major ports, logistics networks and extensive bilateral and regional trade agreements.
She urged the government to challenge questionable allegations with verifiable trade data and evidence while continuing efforts to protect the integrity of Malaysia’s export ecosystem.
“Malaysia must not accept any framework that mischaracterises our industries, imposes undue burdens, or treats legitimate supply chain activity as suspicious by default,” she said.
Sta Maria said engagement with Washington should continue, but cooperation must be based on transparency, evidence and mutual respect.
She warned that failing to distinguish legitimate transshipment from tariff circumvention could hurt exporters, damage perceptions of Malaysia’s supply chains and undermine confidence in rules-based international trade.
“Our manufacturers comply with rules of origin. Our factories perform substantial transformation. Our supply chains are legitimate,” she said.
Malaysia, she added, must stand firm for fair treatment while protecting its sovereign right to conduct legitimate commerce.
