By Charlotte Windle BBC Shanghai business reporter

Despite what's on the label, the clothes could be 'made in China'

A growing number of Chinese textile manufacturers are resorting to illegal transhipment to get their goods into the US and Europe.

They say it's the only option left available to them since the reintroduction of quotas on Chinese textile exports earlier this year.

In Zhejiang province to the south of Shanghai - one of the heartlands of textile manufacturing in China - many factories are faced with the choice of illegally transhipping their products or laying off workers.

One factory in the province has decided that rather than putting many of its 1,500 workers out of work, they will offer their customers - mainly European retailers - goods that are illegally transhipped.

The factory produced more than 4 million items of clothing for the European market last year.

This year, they had planned to exceed that figure and were not expecting quotas to be introduced on Chinese textile exports in June.

Legal limits

The quotas forbid the factory from producing anything more for the European market this year.

The Europeans and Americans just say what we are doing is illegal but I say morally I have an obligation to my workers Factory owner in Zhejiang

But as it has already bought material for a batch of blouses ordered by a German retailer it has decided to go ahead and make them anyway.

Legally, the manufacturer cannot get the products into Europe so it has found a way of doing it illegally by sending the clothes via another country.

The way it works is that the factory will make and pack the garments and will also sew in care instructions - but no "Made in China" label. It then ships the garments to Europe via a third country.

Third countries that are being used in this way include the Philippines, Turkey or Morocco.

For a fee, a factory in that country will sew in "Made in the Philippines" or "Made in Morocco" labels if required - the US market requires country of origin labels but not all European nations do - as well as providing country of origin certificates.

'Moral obligation'

Factory owners believe they are justified in acting in this way.

The owner of the Zhejiang factory told the BBC: "The Europeans and Americans just say what we are doing is illegal but I say morally I have an obligation to my workers.

"There are so many workers behind me. I have a responsibility to them."

Chinese manufacturers say transhipping protects jobs

Industry insiders say that many small and medium sized retailers in Europe and the US may now be receiving shipments of this kind.

And, while the big name retailers refuse to take the risk, those who source indirectly from Chinese suppliers may not know their orders are being handled in this way.

Howard Liu is one such industry insider. He runs a textiles trading company - helping US and European retailers to source from China.

Shipping switch

He says smuggling via a second country has become widespread since the introduction of quotas and he says that while his company is not involved, everyone is aware it is happening.

"They will put orders to China and China will make the order, the garments, and pack and everything and then just ship it to this country. This kind of country has a non-quota agreement with the Europe side then they will ship the goods freely to Europe."

When a garment leaves China, the absence of a "Made in China" label isn't enough to alert the attention of customs officials.

China exports to numerous countries that do not require goods to be labelled in this way.

And, while every shipment entering the EU or the US must be accompanied by a certificate of origin, those documents can, and are, being falsified.

It is unclear whether the Chinese government knows what is happening.