US Great Transhipment Scam Report

Why in news?

The US report titled “The Great Transhipment Scam – Global Evasion and Economic Costs”, alleging that Chinese goods are being routed through third countries to evade U.S. tariffs.

• Context – Over 40 countries, including India, were identified as part of an alleged “shadow transhipment network”.

• Transhipment is the movement of goods through an intermediate country before reaching the final destination.
  • It becomes illegal when used to conceal the true origin of goods and evade tariffs, quotas or trade restrictions.

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 is an illegal transhipment (China → India → USA).

• Three-Tier Classification

• Key Findings – About $67 billion of U.S.-bound goods were allegedly transhipped through Mexico, India and Vietnam in 2025.
  • Estimated U.S. tariff revenue loss – $28 billion.
• The U.S. claims transhipment can –
  • Reduce tariff revenue
  • Widen the trade deficit
  • Displace domestic production
  • Reduce GDP growth and tax receipts.
• India-Specific Concerns – India’s Pune–Gujarat–Chennai industrial corridor was highlighted for pumps and compressors.
• Global Trade Research Initiative (GTRI), argues that India has substantial domestic manufacturing capacity.
  •  India’s exports cannot automatically be considered Chinese goods being rerouted.
• Genuine value addition in India using imported inputs should be distinguished from illegal transhipment.

• Rules of Origin
  • It determine the country where a product is considered to have originated.
  • Complex global supply chains, involving components from multiple countries, make determination difficult.
  • The U.S. may seek stricter country-of-origin and customs rules.
• Implications for India
  • Opportunities – China+1 strategy and greater integration into global value chains.
  • Challenges – Greater U.S. scrutiny of Indian exports.
    • Possible additional tariffs/trade restrictions.
    • Pressure to reduce Chinese input dependence.
    • Higher compliance costs.

Global Trade Research Initiative (GTRI)

• It is a prominent, New Delhi-based research institute and think tank co-founded by former Indian trade bureaucrat Ajay Srivastava.
• The organization is widely recognized for producing high-quality, jargon-free policy analysis.
• Aim – To helping governments and industries navigate complex issues across trade, technology, climate change, and investment from a developmental perspective

Reference

Indian Express| US Great Transhipment Scam Report