The United States has identified India as one of over 40 nations susceptible to becoming conduits for Chinese products attempting to circumvent American tariffs, a development that could introduce further complexities into the ongoing trade discussions between Washington and New Delhi. A recent report from the White House Office of Trade and Manufacturing Policy alleges that exporters in numerous countries are assisting Chinese goods in accessing the U.S. market via third countries. This assistance reportedly includes rerouting shipments, relabeling products, or falsely declaring their country of origin. The report characterizes this practice as the “Great Transshipment Scam” and signals Washington’s intent to intensify efforts to detect and penalize such shipments.
India has been placed in a top-risk category alongside other significant economies. The report categorizes the more than 40 nations into three tiers based on their economic relationship with China and the associated transshipment risk. India is classified under Tier 1, designated as “Diversified Scale Leaders,” a group that also includes Canada, the European Union, Israel, Japan, Mexico, South Korea, and Taiwan. This category encompasses large and diversified industrial economies where the risk of illicit transshipment is intrinsically linked with otherwise legitimate trade flows. Tier 2, termed “Significant Economic Integration with China,” comprises Brazil, Indonesia, Malaysia, Thailand, Turkey, and Vietnam. The third category, “Small, Opportunistic Targets,” includes Bangladesh, Cambodia, the Philippines, Singapore, Sri Lanka, and the UAE. It is important to note that this classification does not imply that all listed countries or their governments are intentionally facilitating tariff evasion; rather, it highlights jurisdictions where U.S. officials perceive varying degrees of transshipment risk.
Peter Navarro, a senior U.S. trade adviser, specifically mentioned India during a briefing on the report, warning that countries subject to higher U.S. tariffs might be incentivized to facilitate the routing of Chinese goods through their territories. Navarro asserted that “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.” He underscored that countries seeking lower tariffs should not resort to transshipment as a means to circumvent U.S. trade measures. Navarro emphasized, “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.” He further cautioned nations facilitating such trade that “preferential access to the American market is not a license to launder somebody else’s exports.”
Business transshipment generally refers to goods being routed through a third country before reaching their final destination. While this can be a legitimate practice within complex global supply chains, Washington’s concern arises when shipments are allegedly rerouted or minimally processed to obscure their Chinese origin and evade tariffs imposed on Chinese products. The report provides examples, such as Chinese electric motors being incorporated into recliners in Vietnam. It also references “screwdriver factories,” where imported components undergo only limited assembly before being exported as products originating from another country. U.S. officials contend that such processes may not constitute the “substantial transformation” required for a product to legitimately acquire a new country of origin.
In response, the U.S. plans to implement several measures to intensify its crackdown on suspected transshipment. These include an executive order aimed at strengthening the enforcement powers of U.S. Customs and Border Protection (CBP) and a new AI-based monitoring system, referred to as a “detective border.” This system is designed to identify shipments with a higher risk of transshipment before their arrival at U.S. ports. Furthermore, the U.S. is integrating anti-transshipment provisions into new trade agreements. Officials have indicated that these clauses will carry penalties for countries that permit disguised Chinese goods to enter the U.S. market via their territory. Significantly for India, officials suggest that such provisions could be part of future trade agreements, including a potential U.S.-India deal. Under the proposed enforcement approach, if a shipment is subsequently identified as transshipped, CBP could potentially seek retrospective tariffs on a company’s shipments going back one year, rather than limiting action to the specific consignment identified. This report emerges at a sensitive juncture in India-U.S. trade negotiations concerning a reciprocal tariff agreement. Washington’s apprehension regarding Chinese goods entering the U.S. through other countries could add another layer of complexity to negotiations already strained by disagreements over India’s trade and energy ties with Russia. While U.S. officials stressed that the report was “not about China” specifically, they identified Vietnam, Cambodia, Malaysia, Indonesia, and the Philippines as key transshipment hubs and warned that other countries facing higher tariffs could follow a similar route. Officials declined to comment on how these findings might impact U.S. President Donald Trump’s anticipated meeting with Chinese President Xi Jinping, stating that the report would inform the U.S. Trade Representative’s approach at the negotiating table.
