New Delhi: The United States has accused India and more than 40 other countries of being part of what it calls a “shadow trans-shipment network” that allows Chinese goods to bypass high US tariffs by being routed through third countries. The allegations were detailed in a White House report titled “The Great Transshipment Scam”, released on August 13.
The report, prepared under US trade adviser Peter Navarro, claims that Chinese exporters are increasingly using intermediary countries to disguise the original source of goods before they enter the American market.
India’s inclusion in the report could add another layer of tension to already complicated India-US trade relations, particularly as both countries continue to negotiate over tariffs and market access.
What is trans-shipment?
Trans-shipment refers to goods being sent from one country to another through an intermediary country before reaching their final destination.
The practice itself is not illegal. Global supply chains routinely involve multiple countries, with products or components moving across borders before reaching consumers.
The problem arises when companies deliberately use an intermediary country to conceal the true country of origin of goods and avoid tariffs or other trade restrictions.
Washington alleges that Chinese exporters have used this method to get around steep US duties on Chinese products.
India among more than 40 countries named
The White House report identifies more than 40 countries that it says have elevated risks of being used for Chinese trans-shipment.
The list includes major US trading partners such as India, Mexico, Canada, Japan, South Korea and members of the European Union, alongside several Southeast Asian and other economies.
The report does not mean that every company or shipment originating from these countries is involved in illegal activity.
Rather, Washington is identifying countries where it believes the scale and structure of trade create opportunities for Chinese goods to be rerouted.
India’s large manufacturing base and extensive international trade links make it one of the countries Washington considers significant in this context.
US alleges China is exploiting tariff loopholes
The Trump administration has argued that China’s ability to access the US market has not fallen as much as official import figures might suggest.
According to the White House report, Chinese manufacturers can send products or components to third countries, where they may undergo limited processing, repackaging or relabelling before being exported to the United States.
If the goods are subsequently declared as originating from the intermediary country rather than China, they could potentially avoid the higher tariffs imposed on Chinese products.
The administration has described this practice as a major challenge to its tariff policy.
India faces a delicate situation
For India, the allegations come at a sensitive time.
New Delhi and Washington have been working through significant trade disagreements, with tariffs and market access among the key issues in bilateral negotiations.
Being named in a US report could lead to increased scrutiny of Indian exports entering the American market.
US customs authorities could potentially subject certain categories of imports to greater examination if officials believe there is a risk that Chinese goods are being routed through India.
However, being identified as a trans-shipment-risk country is not equivalent to the United States accusing every Indian exporter of wrongdoing.
Washington plans AI-based monitoring
The Trump administration is planning to use artificial intelligence to strengthen its ability to identify suspected tariff evasion.
The proposed system, known as “Detective Border”, is expected to analyse large amounts of trade and shipping information to identify unusual patterns.
The system could examine factors such as shipment routes, product classifications, ownership structures and production capacity.
AI could help US Customs and Border Protection identify inconsistencies that would be difficult to detect through manual checks alone.
Why AI could change US customs enforcement
International supply chains generate enormous quantities of data.
A single product can involve manufacturers, component suppliers, shipping companies, distributors and importers across several countries.
Tracking those relationships manually can be extremely difficult.
An AI system could compare declared information with historical shipping patterns and other available data to identify shipments that appear unusual.
For example, if a country suddenly exports large quantities of a product despite having limited domestic production capacity for that product, customs authorities could flag the shipments for further investigation.
US estimates billions in lost tariff revenue
The White House report argues that tariff evasion through trans-shipment has significant financial consequences for the United States.
The administration estimates that the US could be losing between $19 billion and $26 billion a year in tariff revenue because of such practices.
The report’s estimates vary depending on how trans-shipment is defined and measured.
Another estimate cited in the reporting puts the potential value of goods involved in illegal trans-shipment at around $75 billion, while broader estimates have been considerably higher.
The figures underline why the Trump administration has made the issue a priority.
Peter Navarro issues warning
Peter Navarro, one of Trump’s senior trade advisers, has warned countries against allowing their trade infrastructure to be used to circumvent US tariffs.
He has framed the crackdown as an effort to protect American businesses and workers from what the administration considers unfair competition.
Navarro has also indicated that countries facilitating tariff evasion could face greater scrutiny and stronger enforcement measures.
The approach suggests that Washington’s tariff policy is increasingly moving beyond imposing duties on individual countries and towards monitoring the entire supply chain.
Legitimate manufacturing could also face scrutiny
One challenge for the US will be distinguishing between genuine manufacturing and illegal origin-shifting.
Modern products frequently contain components manufactured in several countries.
A product assembled in India, for example, could legitimately contain Chinese components while still qualifying under applicable rules as an Indian-origin product, depending on the specific product and customs rules.
Determining whether sufficient processing occurred in the intermediary country can therefore be complicated.
The White House report itself acknowledges that distinguishing legitimate supply-chain activity from fraudulent trans-shipment can be difficult. (Eciks)
Impact on Indian exporters
Indian exporters could face increased documentation requirements and scrutiny if Washington tightens its enforcement.
Industries with complex international supply chains could be particularly affected.
Exporters may need to provide stronger evidence regarding where raw materials were sourced, where products were manufactured and how much value was added in India.
Greater customs scrutiny could increase compliance costs and potentially slow shipments.
At the same time, Indian manufacturers that genuinely produce goods domestically could benefit if US buyers increasingly seek alternatives to Chinese suppliers.
Could this affect India-US trade talks?
The report could complicate ongoing discussions between New Delhi and Washington.
India wants greater access to the US market, while Washington is seeking concessions on tariffs and assurances that Chinese products will not use India as a route into the American market.
The new allegations could therefore become another issue in negotiations.
India is likely to emphasise the difference between legitimate Indian manufacturing and deliberate tariff evasion by individual companies.
US targets more than India
The inclusion of India should also be viewed in the broader context of the report.
Washington has identified numerous major economies, including countries that are close US allies.
Canada, Mexico, Japan, South Korea and the European Union are among those facing scrutiny.
This indicates that the Trump administration’s concern is not limited to India or a small group of countries.
Instead, the US is attempting to monitor what it views as a global network of alternative trade routes that Chinese manufacturers can use to reach American consumers.
A new phase in the US-China trade battle
The trans-shipment crackdown represents another phase in the broader US-China trade conflict.
Tariffs were originally designed to make Chinese products more expensive in the American market.
If Chinese companies can circumvent those duties by changing the declared origin of their products, the effectiveness of the tariffs is reduced.
Washington therefore sees stronger customs enforcement as essential to making its tariff policy work.
What happens next?
The US is expected to increase scrutiny of shipments from countries identified as high-risk.
The planned AI-based enforcement system could eventually allow customs officials to analyse global trade patterns at a much larger scale.
For India, the immediate priority will be to ensure that legitimate exporters are not unfairly caught up in the crackdown.
Indian companies exporting to the US may also face greater pressure to maintain detailed documentation demonstrating the origin and manufacturing process of their products.
Conclusion
The United States has placed India among more than 40 countries it says face significant risks of being used as transit points for Chinese goods seeking to bypass American tariffs. The allegations form part of a new White House report called “The Great Transshipment Scam”.
The Trump administration plans to use AI-driven tools to identify suspicious trade routes and strengthen customs enforcement.
For India, the development comes at a sensitive point in bilateral trade relations. While the US allegations do not mean Indian exporters as a whole are involved in tariff evasion, increased scrutiny could affect businesses involved in international supply chains.
The coming months will show whether the new US enforcement measures become a major obstacle in India-US trade negotiations or instead encourage greater transparency and stronger supply-chain cooperation.