US targets India, 40+ nations in tariff-dodging 'transhipment' crackdown

The United States has named India among more than 40 countries it claims are being used to reroute Chinese goods and evade American tariffs, as the Donald Trump administration launches a wider crackdown on what it describes as a global “transshipment” network. A new White House report alleges that China has increasingly routed exports through third countries where US tariffs are lower, allowing goods to enter the American market without attracting the higher duties applicable to Chinese products. Washington estimates that such practices may have affected tens of billions of dollars worth of trade.

India in Tier 1

India has been classified as a “Tier 1” transshipment risk alongside several major US allies and trading partners, including Canada, Mexico, Japan, South Korea, Taiwan and the European Union. The designation does not mean that all exports from these economies are considered illegally transshipped. Instead, the White House report identifies them as important routes through which Chinese-origin products or components could potentially enter the US while claiming a different country of origin. The US has identified more than 40 countries as part of the broader transshipment network, dividing them into different categories according to trade volumes, supply-chain links and routing patterns.

China main target

At the centre of Washington's allegations is China, which has faced elevated US tariffs since Trump's first term. White House trade adviser Peter Navarro alleged that China had developed increasingly sophisticated methods of routing exports through other countries after the US imposed Section 301 tariffs in 2018. Navarro claimed the practice had evolved from relatively limited tariff avoidance into “industrial-scale customs fraud” involving global supply chains. The White House report estimates about $60 billion in US tariff revenue may have been lost to potentially illegal transshipment last year, although estimates cited in the report range widely — from about $40 billion to more than $300 billion.

AI to track shipments

The Trump administration plans to strengthen customs enforcement with an artificial intelligence-powered system called “Detective Border”. The system will analyse large volumes of global trade data, comparing declared countries of origin, shipment routes and the content of imported products to identify unusual patterns that could indicate tariff evasion.

According to the administration, AI could detect discrepancies across complex international supply chains that would be difficult for customs officials to identify manually at scale. US Customs and Border Protection is expected to play a central role in the enforcement drive.

India faces warning

The report also warns that transshipment is not exclusively a China-related issue. Navarro claimed countries facing higher American tariffs could themselves have incentives to reroute exports through markets enjoying lower tariff rates. He specifically cited India and Vietnam while discussing the possibility of the practice spreading beyond China. The comments could add another source of friction to India-US trade ties at a time when tariffs and market access remain sensitive issues between New Delhi and Washington. However, the US allegations concern transshipment risks and potential tariff evasion and do not establish that all — or even most — Indian exports involve such practices.

40% penalty

Washington has already established severe consequences for goods found to have been transshipped to evade tariffs. Under Trump's reciprocal tariff framework, US Customs and Border Protection can impose an additional 40 per cent duty on goods determined to have been routed through another country to circumvent applicable tariffs. The penalty comes on top of other duties that may apply.

The US has also incorporated provisions aimed at preventing transshipment into trade arrangements with several countries. A key challenge remains determining the true origin of products manufactured through modern supply chains, where components may come from China but undergo processing or assembly elsewhere.

Rules of origin key

The crackdown is therefore expected to place greater emphasis on “rules of origin” — the criteria used to determine where a product was actually manufactured. US Trade Representative Jamieson Greer has argued that countries should not be able to benefit from favourable tariff agreements by simply acting as conduits for products originating elsewhere.

Washington is working on rules that could more precisely determine how much processing or manufacturing must take place in a country before a product can legitimately claim that country as its origin.

For Indian exporters, the development could mean greater scrutiny of supply chains, documentation and Chinese-origin inputs in goods shipped to the US. The latest report signals that the Trump administration's tariff strategy is moving beyond simply imposing duties on countries. Washington is increasingly focusing on how goods move through global supply chains — and whether exporters are using those networks to circumvent American trade barriers.