Chinese Cabinet Makers Skirt Tariffs

U.S. agents had to climb over piles of boxes to see inside the warehouse. They had learned about the secret building after finishing their tour of cabinet-production facilities in Penang, Malaysia.

- INTI PACHECO

The place was packed with boxes of ready-to-ship wooden cabinets that looked identical. Some were stamped as made in China and others had labels saying they were made in Malaysia, according to a Customs report reviewed by The Wall Street Journal.

U.S. Customs and Border Protection, or CBP, agents were inspecting the site as part of a late 2022 inquiry into allegations that subsidiaries of Chinese company Qingdao Haiyan Group were evading tariffs. Haiyan had been accused of sending Chinese-made cabinets to the U.S. by shipping them through Malaysia, masking the origin of the goods a scheme known as transshipping.

'No one cared'

The investigation has splintered the kitchen-cabinet industry. Haiyan has been a supplier to some of the largest cabinet makers and distributors in the U.S., such as American Woodmark. They, in turn, supply retail giants such as Lowe's and Home Depot. One longtime Haiyan customer, Cabinets To Go, sparked the probe and has called out larger U.S. rivals for continuing to ignore red flags.

"No one cared," said Cabinets To Go owner Tom Sullivan, who filed a lawsuit against Haiyan and said he alerted the CBP in 2021. "They still allow them to import from those companies."

The Malaysia factory's general manager said he didn't initially tell CBP agents about the finished-goods warehouse because he misunderstood what agents wanted when they asked him to list every building the business owned, the CBP report said.