Colombia’s free trade agreement with the United States has created duty-free re-export opportunities for Chinese companies, according to CNN blog Business 360.
With the recently ratified trade pact between Colombia and the United States, Chinese exporters could use the Latin American nation as a base, re-label goods as ‘Made in Colombia’ and export them to the US without paying any tariffs.
“The Chinese have their eyes on Colombia because it is the bridge they need to reach the U.S.,” said Jose Antonio Mutis, Colombian Consul General in Hong Kong. He added that “the president’s priority is the Asia Pacific region.”
A Chinese company is already looking for land to create a factory to produce steel pipes, according to the Colombian Trade Office. The United States imposed restrictions and tariffs on Chinese steel pipes in 2010 with which China declared it was “strongly dissatisfied.”
“With around 35 to 40% of the value of a product added in Colombia, it may be considered Colombian and enter the U.S. tax free,” an official at the trade office of the Colombian Embassy in China said.
One case of a businessman seeking to profit from a partnership with a Chinese company and tariff-free access to the U.S. market is Luis Guahuna, a clothing and footwear entrepreneur.
Six months ago, Guahuna started talks with Chinese footwear and sports apparel company Erke and has now obtained a license to sell Erke’s products in Colombia, and the free trade agreement brings the added benefit of being able to distribute those products in the U.S.
“We discussed with Erke’s management partnering to build a plant, to manufacture their products in Colombia and distribute them in Latin America and, later, in the U.S. with zero tariffs,” said Guahuna.
Guahuna also said that China could export to Brazil using Colombia as a stopping point, as the South American giant imposes no restriction on the import of Colombian goods.
“Exporting from China [to Brazil] is becoming a headache due to all the restrictions, tariffs, laws and complications. Erke needs to create partnerships in Latin America,” said the businessman.