US Report Flags China Tariff Evasion via Third Countries

A US report titled “The Great Transhipment Scam - Global Evasion and Economic Costs” alleges that Chinese goods are routed through third countries to evade U.S. tariffs. The report identifies over 40 countries, including India, as part of an alleged “shadow transhipment network,” and flags India-specific concerns such as the Pune-Gujarat-Chennai industrial corridor for pumps and compressors.

US Report on Alleged Transhipment-Based Tariff Evasion:

Dimension	Key Details
Transhipment (definition)	Transhipment comprises the movement of goods through an intermediate country before reaching the final destination.
When transhipment becomes illegal	Transhipment becomes illegal when used to conceal the true origin of goods and evade tariffs, quotas, or trade restrictions.
Illustration of illegal transhipment	If a Chinese product is sent to India and then exported to the U.S. as an Indian product mainly to avoid U.S. tariffs on Chinese goods, it constitutes illegal transhipment (China → India → USA).
Three-tier classification (Tier 1)	Tier 1 comprises India, Mexico, Canada, and EU, with risk embedded in large legitimate trade flows.
Three-tier classification (Tier 2)	Tier 2 comprises Vietnam, Malaysia, and Thailand, which are closely integrated with China.
Three-tier classification (Tier 3)	Tier 3 comprises Cambodia, Panama, and UAE, which have weak customs enforcement.
Key finding	About $67 billion of U.S.-bound goods are allegedly transhipped through Mexico, India, and Vietnam in 2025.
Estimated U.S. tariff revenue loss	The estimated U.S. tariff revenue loss is $28 billion.
U.S.-claimed impacts of transhipment	The U.S. claims transhipment can reduce tariff revenue, widen the trade deficit, displace domestic production, and reduce GDP growth and tax receipts.
India-specific concern flagged	India’s Pune-Gujarat-Chennai industrial corridor is highlighted for pumps and compressors.
GTRI view on India’s manufacturing	Global Trade Research Initiative (GTRI) argues that India has substantial domestic manufacturing capacity.
GTRI view on treatment of India’s exports	GTRI states that India’s exports cannot automatically be considered Chinese goods being rerouted.
Value addition vs. illegal transhipment	Genuine value addition in India using imported inputs should be distinguished from illegal transhipment.
Rules of Origin	Rules of Origin determine the country where a product is considered to have originated.
Supply chain complexity	Complex global supply chains involving components from multiple countries make determination of origin difficult.
Possible U.S. response	The U.S. may seek stricter country-of-origin and customs rules.
Implications for India (opportunities)	Implications for India include opportunities such as China+1 strategy and greater integration into global value chains.
Implications for India (challenges)	Implications for India include challenges such as greater U.S. scrutiny of Indian exports, possible additional tariffs or trade restrictions, pressure to reduce Chinese input dependence, and higher compliance costs.
Global Trade Research Initiative (GTRI)	GTRI is a prominent, New Delhi-based research institute and think tank co-founded by former Indian trade bureaucrat Ajay Srivastava.
GTRI work domains	GTRI work domains comprise trade, technology, climate change, and investment from a developmental perspective.