US trade-fraud crackdown raises risk of past import records being reopened

Only 17 Shanghai- and Shenzhen-listed firms confirmed to have claimed refunds

Refunds total $160 million; some firms see net profit jump

Chinese companies weigh windfall against exposure to US oversight

The factory of Yangtze Memory Technologies Co. (YMTC), a NAND flash memory chip maker, in Wuhan, China. [YMTC website]
The factory of Yangtze Memory Technologies Co. (YMTC), a NAND flash memory chip maker, in Wuhan, China. [YMTC website]

Even as the Donald Trump administration refunds tariffs it collected unlawfully, many Chinese companies are holding back from filing claims. With US authorities stepping up enforcement against trade fraud, firms fear that applying for a refund could invite scrutiny of their past import records and expose them to unwanted legal risk. At the same time, companies that have moved to claim refunds are reaping tens of millions of dollars — and an unexpected boost to their earnings.

As of Thursday afternoon (local time), only 17 companies listed on the Shanghai and Shenzhen stock exchanges had confirmed receiving tariff refunds from the United States, the Financial Times reported Thursday, citing Nikkei Asia. Nearly all are technology-related firms, and their combined refunds total about $160 million.

The refunds stem from a US Supreme Court ruling that found legal problems with tariffs the Trump administration had imposed under the International Emergency Economic Powers Act, triggering a process to return already-collected duties to affected companies.

Chinese firms, however, have been reluctant to file claims. As Washington has tightened surveillance of trade fraud, companies worry that going through the refund process could cause their past US import records to be reopened and reviewed.

Claiming a refund requires companies to verify the prices, origins and duty-payment histories of goods they previously shipped to the United States. That process can expose past customs declarations to fresh scrutiny by US authorities — a prospect deterring some firms from applying.

Companies that have pursued refunds, by contrast, have recovered substantial sums and seen a meaningful improvement in their financial results.

Zhejiang CF Moto Power, which makes motorcycles and off-road vehicles, received the largest refund among Chinese-listed companies at $38.6 million. The company said the refund is expected to add about 183 million yuan ($27.2 million) to its net profit this year — equivalent to roughly 11 percent of its full-year net profit last year.

Hanshow Technology, which makes electronic shelf labels for retailers, and LED display manufacturer Leyard Optoelectronic each received about $20 million. Interactive display maker Hitvision last month became the first Chinese-listed company to publicly disclose a US tariff refund; its refund exceeded $4 million, surpassing half of its net profit last year. Chinese pharmaceutical firm Huahai Pharmaceutical recovered more than $14 million, and auto parts and electronics makers have also been moving through the refund process.

As refund amounts grow large enough to materially affect earnings, Chinese companies face an increasingly complex calculation. Recovering tens of millions of dollars in cash is appealing, but the refund process also risks re-exposing past export and import transactions to the US government's heightened surveillance.

The concern is particularly acute given that US authorities have intensified enforcement against false declarations of product origin and underreporting of prices — tactics used to evade tariffs. Companies worry that resubmitting historical trade records to claim a refund could trigger an unexpected investigation.

The result, analysts say, is that Washington's large-scale tariff refunds have become an unexpected dilemma for Chinese firms: claim the money and lift near-term earnings, or walk away from the refund and avoid the risk of additional scrutiny from US authorities.

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sjy@heraldcorp.com