US Puts India on Tariff-Dodging Watchlist in ‘Great Transhipment Scam’ Crackdown

The Trump administration has a new target in its tariff war: goods that become “non-Chinese” somewhere between China and the American border. And India is on Washington’s radar.

A new report from the White House Office of Trade and Manufacturing Policy has identified more than 40 countries that it says could facilitate the rerouting, relabelling or minimal processing of Chinese goods before they enter the United States, allowing exporters to dodge higher tariffs.

The White House has given the practice a characteristically dramatic name: the “Great Transhipment Scam.” India has been placed in Tier 1, alongside Canada, the European Union, Israel, Japan, Mexico, South Korea and Taiwan. These are large, diversified industrial economies where, according to the report, transhipment risks can become embedded within substantial volumes of legitimate trade. The warning comes at an awkward moment for New Delhi, which is already negotiating a reciprocal tariff agreement with Washington while facing US pressure over its purchases of Russian oil.

Why has India been named?

The White House divides the 40-plus countries into three groups based on the nature and scale of the perceived transhipment risk. India falls under “Diversified Scale Leaders”, the top tier comprising economies with large manufacturing and trading bases.

Tier 2, described as countries with “Significant Economic Integration with China,” includes Brazil, Indonesia, Malaysia, Thailand, Turkey and Vietnam. Tier 3, labelled “Small, Opportunistic Targets,” includes Bangladesh, Cambodia, the Philippines, Singapore, Sri Lanka and the UAE. Crucially, inclusion does not mean every export from these countries is suspect. Washington's concern is that their manufacturing bases, supply chains or ports could potentially be used to disguise the true origin of Chinese goods.

What exactly is ‘transhipment’?

This isn't simply about a Chinese container stopping at another country's port on its journey to America. The kind of transhipment Washington is targeting involves goods being routed through a third country, relabelled or subjected to minimal processing so they can be declared as originating somewhere other than China and therefore attract a lower US tariff.

The report cites examples such as Chinese electric motors being fitted into recliners in Vietnam, as well as so-called “screwdriver factories” where minimal assembly is performed without sufficiently transforming the underlying product. The key test is what trade rules call “substantial transformation”: has the product genuinely been manufactured into something new in the intermediary country, or has its passport effectively been changed to beat a tariff?

What did Peter Navarro say about India?

Trump's senior trade adviser Peter Navarro explicitly named India while warning countries against trying to circumvent rising US tariffs. “As we impose higher tariffs on other countries, India, Vietnam, down the line, they're going to try this transhipment too,” Navarro said. His message was blunt: countries wanting better access to the American market should reduce trade barriers and dumping rather than help exporters circumvent US duties. “Preferential access to the American market is not a license to launder somebody else's exports,” he said.

How does the US plan to catch tariff dodgers?

Washington is preparing to attack the problem on several fronts. The administration plans an executive order strengthening the enforcement powers of US Customs and Border Protection. It is also developing an AI-powered monitoring system described as a “detective border”, designed to identify shipments carrying a higher risk of transhipment before they arrive at American ports. And anti-transhipment provisions are being inserted into new US trade agreements. That potentially includes any eventual trade deal with India.

The penalty could reach backwards

This is where the crackdown could become particularly expensive for exporters. If US Customs concludes that a shipment has been illegally transhipped, authorities would be able to pursue duties retrospectively on a company's shipments over the previous year, rather than merely charging additional tariffs on the consignment caught at the border. US officials have also indicated that anti-transhipment provisions will be enforced according to their “spirit”, potentially giving Washington considerable latitude in deciding whether a country is doing enough to stop circumvention.

Why does this matter for India-US trade talks?

Because transhipment has now become another variable in an already complicated negotiation. India and the US are discussing a reciprocal tariff agreement while New Delhi simultaneously faces pressure from Washington over its Russian oil purchases. Now comes another message from the Trump administration: if India wants favourable access to the world's largest consumer market, Washington expects it to police what travels through Indian supply chains as well as what India itself produces.

The tariff war, in other words, is no longer only about where a product is made. Increasingly, it is about proving where it really came from.

(With inputs from ANI)