The US has put India among more than 40 countries it says face risks of becoming conduits for Chinese goods seeking to avoid American tariffs, potentially adding another complication to the ongoing trade negotiations between Washington and New Delhi.A new report by the White House Office of Trade and Manufacturing Policy accused exporters in multiple countries of helping Chinese goods enter the US market through third countries, including by rerouting shipments, relabelling products or falsely declaring their country of origin.The report described the practice as the “Great Transhipment Scam” and warned that Washington would step up efforts to detect and penalise such shipments.
India placed in top-risk category alongside major economies
The report divided the more than 40 countries into three categories based on their economic relationship with China and the risk of transshipment.India was placed in Tier 1, described as “Diversified Scale Leaders”, alongside Canada, the European Union, Israel, Japan, Mexico, South Korea and Taiwan.According to the report, these are large and diversified industrial economies where the risk of transshipment is embedded within otherwise legitimate trade flows.Tier 2, or “Significant Economic Integration with China”, includes Brazil, Indonesia, Malaysia, Thailand, Turkey and Vietnam.Tier 3, described as “Small, Opportunistic Targets”, includes Bangladesh, Cambodia, the Philippines, Singapore, Sri Lanka and the UAE.The classification does not by itself allege that all countries or their governments are deliberately facilitating tariff evasion. Rather, it identifies them as jurisdictions where US officials see varying levels of transshipment risk.
Peter Navarro warns India, Vietnam over tariff evasion
Senior US trade adviser Peter Navarro specifically named India during a briefing on the report, warning that countries facing higher US tariffs could have an incentive to facilitate the routing of Chinese goods through their territories.“This is about the 40-plus countries that are enabling the transshipping, and as we impose higher tariffs on other countries, India, Vietnam, down the line, they’re going to try this transhipment too,” Navarro said.He added that countries seeking lower tariffs should not use transshipment as a way to circumvent US trade measures.“The way to pay less is not to cheat; it is to stop dumping, respect intellectual property, drop your barriers to American goods and move towards reciprocity,” Navarro said.He further warned countries facilitating such trade that “preferential access to the American market is not a license to launder somebody else’s exports.”
What is Chinese transshipment and why is the US targeting it?
Transshipment generally involves goods being routed through a third country before reaching their final destination. In legitimate trade, products can pass through several countries as part of complex supply chains.The concern raised by Washington is about shipments allegedly being rerouted or minimally processed to obscure their Chinese origin and avoid tariffs imposed on Chinese products.The report cited examples including Chinese electric motors being fitted into recliners in Vietnam.It also referred to so-called “screwdriver factories”, where imported components undergo only limited assembly before being exported as products originating from another country.US officials said such processes may not constitute the “substantial transformation” needed for a product to legitimately acquire a new country of origin.
US plans AI monitoring and tougher penalties
Washington is planning several measures to intensify its crackdown on suspected transshipment.According to the report, these include an executive order aimed at strengthening enforcement powers at US Customs and Border Protection (CBP) and a new AI-based monitoring system described as a “detective border”.The system is intended to identify shipments carrying a higher risk of transshipment before they arrive at US ports.The US is also incorporating anti-transshipment provisions into new trade agreements. Officials said these clauses would carry penalties for countries that allow disguised Chinese goods to enter the US market through their territory.Importantly for India, officials indicated that such provisions could form part of future trade agreements, including a potential US-India deal.Under the proposed enforcement approach, if a shipment is subsequently found to have been transshipped, CBP could potentially seek tariffs retrospectively on a company’s shipments going back one year, rather than limiting the action to the specific consignment identified.The report comes at a sensitive point in India-US trade negotiations over a reciprocal tariff agreement.Washington’s concerns over Chinese goods entering the US through other countries could add another issue to negotiations already complicated by disagreements over India’s trade and energy ties with Russia.US officials stressed that the report was “not about China” specifically, while identifying Vietnam, Cambodia, Malaysia, Indonesia and the Philippines as key transshipment hubs and warning that other countries facing higher tariffs could follow the same route.Officials declined to say how the findings could affect US President Donald Trump’s expected meeting with Chinese President Xi Jinping, saying the report would inform the US Trade Representative’s approach at the negotiating table.
