India among 40-plus economies flagged by US for China-linked transshipment risk

The US has identified India as one of the key hubs through which Chinese goods may be illegally rerouted to the American market to evade tariffs.

A report released by the White House Office of Trade and Manufacturing Policy said India is part of a global network of more than 40 countries through which China-linked goods could be routed.

The report, titled "The Great Transshipment Scam", classified India in its top tier of "Diversified Scale Leaders", along with Canada, the European Union, Israel, Japan, Mexico, South Korea and Taiwan. It said these economies account for large volumes of China-linked goods and have diversified industrial bases and major export platforms to the US.

The classification, however, does not mean that all exports from India are being treated as illegally transshipped.

The report itself says transshipment risk in these countries is embedded within broad legitimate trade flows.

An analysis by the US Commerce Department's Office of Trade and Economic Analysis (OTEA), using transaction-level customs data, estimated that about $67 billion of US-bound goods were transshipped from China through Mexico, India and Vietnam in 2025.

The report estimated that the flows resulted in about $28 billion in lost US tariff revenue.

The report does not provide a separate estimate of the value of goods allegedly routed through India.

It also cited India's Pune-Gujarat-Chennai production belt as a potential corridor for pumps and compressors falling under HS codes 8413 and 8414, linking such flows to US industrial supply chains in Cincinnati, Dayton and Columbus.

The US report said tariff differences between China and third countries can create an incentive for exporters to reroute goods through countries with lower US duties.

Such schemes can involve minor assembly, finishing, testing, packaging, labelling, re-invoicing or changes in shipping documentation that do not amount to substantial transformation of the goods.

India's inclusion comes as the US seeks to tighten scrutiny of global supply chains following the imposition of higher tariffs on Chinese goods.

The report estimates the overall scale of potential illegal transshipment through various methodologies at between about $40 billion and $303 billion annually.

It traces the rise in transshipment risks to the US-China trade war that began in 2018, arguing that Chinese exporters increasingly used third countries after the Trump administration imposed Section 301 tariffs.

According to the report, the resulting network includes production hubs, logistics platforms, free-trade zones, bonded warehouses and re-export centres. It said the network can preserve US market access for China-linked goods while allowing third-country businesses to earn assembly, warehousing, logistics and other fees.

The report also stresses that the apparent shift in US sourcing away from China cannot by itself establish illegal transshipment.

A chart in the report shows China's share of US goods imports declining after the 2018 tariffs while the combined share of more than 40 countries identified as transshipment-risk jurisdictions increased. The report says the timing and direction warrant further investigation but acknowledges that some of the shift reflects genuine changes in production and trade.

The US administration has proposed stronger customs enforcement and an AI-enabled system dubbed "Detective Border" to identify suspicious shipment routes, ownership links, production-capacity discrepancies and other indicators of possible tariff evasion.

The report said it was too early to assess the net impact of the administration's latest tariff and anti-transshipment measures.

“Trade and customs data become available with a lag, and several enforcement provisions remain under implementation,” the report said. “The Administration will need to evaluate future data to determine whether transshipment volumes, tariff losses, and associated economic costs are declining.”