‘Shadow Trans-Shipment Network’: US Flags India As ‘Tier-1’ Hub For China-Led Tariff Evasion

The United States has accused more than 40 countries, including India, of being part of a “shadow trans-shipment network” that allegedly allows Chinese goods to bypass steep US tariffs, while announcing plans to deploy artificial intelligence to identify and crack down on such shipments.

India has been placed in the “Tier-1 Diversified Scale Leader” category in a new US report, alongside major trading partners including the European Union, Canada, Mexico, Japan and South Korea, according to several media reports.

The classification does not by itself allege that all trade passing through these economies is illicit. Instead, the report identifies them as major global trade hubs where the risk of transshipment is considered substantial because of the volume

and diversity of goods entering the US.

The White House report said India, Mexico and Vietnam were the three leading destinations for Chinese-origin goods that were transshipped in 2025. Together, the three countries accounted for an estimated $67 billion worth of such goods.

US Trade Adviser Accuses China Of ‘Laundering’ Exports

In a report titled ‘The Great Trans-shipment Scam’, Peter Navarro, Counsellor to US President Donald Trump for Trade and Manufacturing, traced the rise of trans-shipment activity to 2018, when the Trump administration introduced Section 301 tariffs against China over what Washington described as “unfair trade practices.”

“For years, the great trans-shipment scam has let Communist China launder its exports through more than 40 countries,” Navarro told reporters.

According to Navarro, Chinese manufacturers and traders increasingly began using third countries to alter the appearance of goods’ origin without substantially changing their Chinese content.

“China began using these third countries for minor processing, relabeling, repackaging, reinvoicing, or routing changes that created the appearance of a new national origin while leaving the underlying Chinese content largely intact,” Navarro said in the report.

He alleged that such arrangements allow Chinese companies to route exports through countries where labour costs are lower, customs enforcement is weaker or free-trade zones and preferential access to the US market offer advantages.

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Pune-Gujarat-Chennai Belt In US Crosshairs

The report specifically pointed to India’s Pune–Gujarat–Chennai production belt, claiming that it absorbs Chinese-origin pumps and compressors and affects industrial supply chains in Cincinnati, Dayton, and Columbus.

“A Chinese pump that leaves Pune as Indian is a pump not machined in Cincinnati, Dayton or Columbus,” Navarro said.

The US report estimated the annual value of goods that may be illegally transshipped at anywhere between approximately $40 billion and $303 billion.

It noted that the wide range reflects differences in methodology and the definition of transshipment used in various estimates.

US Plans AI-Based ‘Detective Border’

The Trump administration also announced plans to deploy an AI-enabled system called “Detective Border” to help identify goods suspected of being transshipped before they enter the US market.

The system is expected to assist US Customs and Border Protection by combining multiple sources of information, including shipment records, historical routing patterns, product classifications, corporate ownership links and indicators of manufacturing capacity.

It will also use anomaly detection and computer vision to identify shipments that may warrant closer scrutiny.

“The objective is to improve CBP’s ability to distinguish legitimate nearshoring and foreign investment from illegal pass-through trade, identify high-risk shipments, and convert analytical findings into interdiction, duty collection, penalties, and exclusion,” the report said.

With inputs from PTI