A new US trade report has put India in an uncomfortable spotlight, naming it among more than 40 countries that Washington says face elevated risks of becoming routes for Chinese goods seeking to avoid American tariffs.
The White House has described the practice as part of a “Great Transshipment Scam,” alleging that Chinese exporters have increasingly relied on third countries to disguise the origin of products before they enter the US market.
But the report carries a bigger message than simply naming individual countries: Washington is now looking beyond China and turning its attention toward the global supply chains that connect Chinese factories with American consumers.
What exactly is transshipment?
At its simplest, transshipment means moving goods through another country before they reach their final destination.
There is nothing inherently illegal about that. Global trade routinely involves components being manufactured in one country, assembled in another and shipped through a third.
The controversy begins when, according to US officials, a product is routed through another country mainly to make it appear as though it originated there.
The White House report alleges that Chinese-linked businesses have used techniques such as minor processing, relabeling, repackaging, reinvoicing and changes in shipping routes to create the appearance of a different country of origin while leaving much of the underlying Chinese content unchanged.
That distinction could become increasingly important as Washington imposes different tariff rates on different trading partners.
Why India has been mentioned
India is one of several major economies identified by the US report as having elevated transshipment risk. Other countries named include Canada, Mexico, Japan, South Korea, Taiwan and members of the European Union.
For India, the report specifically points to the country’s Pune–Gujarat–Chennai production belt and alleges that Chinese-origin industrial equipment, including pumps and compressors, can enter supply chains operating from India.
US trade adviser Peter Navarro used this example to argue that products containing substantial Chinese content could potentially enter the American market under another country’s identity.
However, being listed as a transshipment-risk country does not automatically mean that every company or exporter in that country is involved in illegal activity.
The US report itself describes several different levels of risk, reflecting the complexity of international supply chains rather than treating every country as equally responsible.
That distinction will matter greatly for India as the issue develops.
The numbers behind Washington’s concerns
The scale of the alleged practice is one reason the White House is taking the issue seriously.
The report estimates that the annual value of potentially illegal transshipped goods could range from roughly $40 billion to $303 billion, depending on the methodology and definition used. Another US estimate cited by the Financial Times puts the value associated with affected trade at around $60 billion.
These figures are estimates rather than a confirmed tally of goods proven to have illegally bypassed tariffs.
Nevertheless, Washington argues that tariff evasion can have two consequences at once: reducing US government revenue and putting American manufacturers at a competitive disadvantage.
The administration’s argument is straightforward: if a tariff is imposed on Chinese goods but those same goods can effectively enter through another country at a lower rate, the tariff loses much of its intended effect.
Washington’s next weapon: Artificial intelligence
Perhaps the most striking part of the new strategy is not the list of countries but the technology the US says it will use to police the trade routes.
The White House says US Customs and Border Protection is working with an AI-enabled system called “Detective Border.”
The system is intended to analyze large volumes of trade information, including shipment records, routing histories and product details, to identify inconsistencies that could suggest suspicious transshipment activity.
In other words, Washington wants customs enforcement to become much more data-driven.
Instead of examining individual shipments in isolation, algorithms could potentially identify unusual patterns across thousands or millions of transactions.
That could include situations where a company’s declared production capacity does not appear to match its export volume, where shipping routes suddenly change, or where the declared origin of a product conflicts with other available trade information.
A warning for India’s exporters
For Indian businesses, this development could have consequences even if they have nothing to do with illegal transshipment.
As the US increases scrutiny of Chinese-linked supply chains, exporters may face greater demands to prove where products were actually manufactured, where components originated and whether sufficient processing occurred in India to establish Indian origin.
That could increase documentation and compliance costs.
It may also push companies to examine their supply chains more carefully, particularly manufacturers that rely heavily on Chinese components, machinery or intermediate goods.
At the same time, there is another side to the story.
India has been trying to strengthen its position as an alternative manufacturing destination as companies diversify production beyond China. Increased scrutiny of Chinese-linked supply chains could therefore create both risks and opportunities for Indian manufacturers.
Companies capable of demonstrating genuine Indian production and transparent sourcing may ultimately benefit from growing demand for more diversified supply chains.
This is bigger than India and China
The most important takeaway from the US report may be that Washington is no longer viewing the tariff battle as a simple two-country dispute between America and China.
Global supply chains have changed dramatically since the first major US-China tariff confrontation began in 2018. Companies have moved production, sourcing and assembly operations across Asia and other regions in an effort to reduce costs and manage geopolitical risks.
Countries such as Vietnam, Mexico and India have benefited from this shift.
But the same interconnected supply chains that create opportunities for new manufacturing hubs also make it harder for customs authorities to determine where a product was genuinely made.
The US appears determined to close that gap.
The Financial Times reports that Washington is also pushing stronger anti-transshipment provisions in trade agreements and working on tougher “rules of origin” to determine when a product can legitimately qualify for another country’s tariff treatment.
What happens next?
The immediate question for India is whether the US will move from identifying India as a transshipment-risk country to taking specific enforcement action against particular products, companies or supply chains.
That distinction could determine how seriously the issue affects Indian exporters.
For Washington, however, the direction is already clear: tariffs will increasingly be accompanied by stronger origin checks, data analysis and enforcement.
For businesses, the message is equally clear.
Simply shipping a product through another country will not necessarily make it a product of that country.
As trade barriers become more complicated, companies will need increasingly detailed evidence showing where goods, components and manufacturing processes actually come from.
The new US report therefore represents more than another chapter in the tariff dispute with China. It signals a potential transformation in how global trade is monitored — one where customs authorities increasingly use artificial intelligence and cross-border data to follow the journey of a product from factory floor to final market.
And for India, being named in the report may be less a final accusation than a warning: as India becomes a more important link in global manufacturing, Washington will be watching its supply chains much more closely.
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