‘Great Transshipment Scam’: How the US Says Chinese Goods Reach America Through India and Other Hubs

‘Great Transshipment Scam’: How the US Says Chinese Goods Reach America Through India and Other Hubs
Jitendra Kumar
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A new White House report has drawn attention to a complex global trade practice known as transhipment, alleging that Chinese exporters have increasingly used third countries to reduce the impact of US tariffs.

India is among the countries identified in the report’s Tier 1 group. Washington says these countries have large industrial bases, extensive trade connections and infrastructure that can potentially be used to move China-linked products toward the American market.

The report calls the broader phenomenon The Great Transshipment Scam. It argues that the system expanded after the United States imposed Section 301 tariffs on Chinese products in 2018. The tariffs were designed to increase the cost of Chinese imports and pressure Beijing over trade practices that Washington considered unfair.

According to the White House, Chinese exporters then had a strong financial incentive to find alternative routes. If a product faced a high tariff when imported directly from China but a much lower tariff when imported from another country, the difference created what the report calls a tariff-arbitrage opportunity.

In a simplified example, a Chinese manufacturer could send components to another country, where they might be assembled, packaged or processed before being exported to the United States. If customs authorities accepted the second country as the product’s country of origin, the importer could potentially pay a lower tariff.

The legality of such arrangements depends on customs rules and whether enough processing has taken place to establish a genuine change in origin. The White House report specifically focuses on cases where it believes the transformation is insufficient and the third country is being used primarily to conceal Chinese origin.

The report says the network includes production-side hubs as well as logistics hubs. Production-side locations may conduct light assembly, testing, finishing or packaging. Logistics hubs may instead provide warehousing, container consolidation, re-export services, documentation changes and re-invoicing.

India’s position in the global supply chain makes the issue particularly significant. India has rapidly expanded manufacturing and exports in several sectors and maintains extensive trade relationships across Asia, Europe and North America. That means legitimate India-based production and China-linked supply chains can sometimes exist within the same broader commercial ecosystem.

The White House report cites a Pune-Gujarat-Chennai corridor while discussing Chinese transhipment of electric pumps and compressors. It argues that such activity can benefit intermediary manufacturing and logistics locations while reducing demand for American production.

The report estimates that approximately $67 billion in US-bound goods may have been transhipped from China through major hubs including Mexico, India and Vietnam during 2025. It estimates potential lost tariff revenue of approximately $28 billion.

Washington says the consequences extend beyond customs revenue. American manufacturers can face competition from imported goods that, if the allegations are correct, have avoided tariffs intended to offset China’s trade advantages.

To tackle the issue, the White House wants customs officials to move beyond traditional document checks. Its proposed AI-driven “Detective Border” would analyse trade flows, shipping routes and production data to identify suspicious patterns.

For India, the report could increase pressure on exporters to demonstrate that products labelled as Indian genuinely meet US rules of origin. Companies with substantial Chinese inputs may also face closer scrutiny.

At the same time, India has an opportunity to strengthen its position by showing that its manufacturing expansion is based on genuine domestic production rather than simple re-export activity.

The latest report therefore places transhipment at the centre of the next phase of US trade enforcement. Rather than focusing only on China, Washington is increasingly examining the countries through which Chinese-linked goods may travel before reaching American consumers.

Journalist Details

Jitendra Kumar
Jitendra Kumar is an Indian journalist and social activist from Hathras in Uttar Pradesh is known as the senior journalist and founder of Xpert Times Network Private Limited.