US flags India in Chinese tariff-evasion warning

The United States has labeled India as one of over 40 countries at risk of being used by Chinese goods to bypass American tariffs, according to a report by the White House Office of Trade and Manufacturing Policy. This revelation adds a complex element to ongoing trade negotiations between Washington and New Delhi. The report identified this practice as the "Great Transhipment Scam," warning that the U.S. will intensify efforts to detect and penalize such shipments.

India was placed in Tier 1, alongside countries like Canada, the European Union, Israel, Japan, Mexico, South Korea, and Taiwan. These nations are categorized as "Diversified Scale Leaders" with a medium risk of transshipment within legitimate trade flows. Other countries, including Brazil, Indonesia, Malaysia, Thailand, Turkey, and Vietnam, are in Tier 2, while Bangladesh, Cambodia, the Philippines, Singapore, Sri Lanka, and the UAE are in Tier 3, considered "Small, Opportunistic Targets."

The classification is not suggesting any deliberate attempts by these countries or their governments to assist in evading U.S. tariffs. Instead, it highlights varying degrees of risk associated with transshipment. U.S. Trade Adviser Peter Navarro specifically mentioned India and Vietnam, warning that countries facing higher tariffs might be tempted to route Chinese goods through their territories through transshipment.

Navarro urged countries to address broader trade barriers rather than using transshipment to circumvent U.S. measures. He emphasized that the key to lower tariffs lies in respecting intellectual property, ending dumping, and moving towards reciprocity. He also cautioned that countries facilitating such trade should not be granted preferential access to the American market as a license to launder exports.

The report outlines several enforcement measures, including an executive order to strengthen the powers of U.S. Customs and Border Protection and an AI-based monitoring system dubbed "detective border." This system aims to flag shipments more likely to involve transshipment before they reach U.S. ports. The administration also seeks to incorporate anti-transshipment provisions into new trade agreements, which could impose penalties on countries allowing disguised Chinese goods to enter the U.S. through their territory.

If a shipment is found to have been transshipped, U.S. customs authorities could potentially seek retrospective tariffs on a company's shipments going back one year, rather than only the specific shipment identified. The report comes amid ongoing negotiations between India and the U.S. over a reciprocal tariff agreement, as both sides navigate disagreements over India's trade and energy ties with Russia.