A White House report released Thursday alleges that China and more than 40 other countries are participating in a "transshipment scam" that costs the U.S. Treasury between $19 billion and $26 billion in annual revenue. The report, titled "The Great Transshipment Scam," was produced by the White House Office of Trade and Manufacturing Policy, led by former trade advisor Peter Navarro.
Transshipment, according to the report, involves foreign exporters routing goods through intermediary countries before they enter the United States. This practice can alter the country of origin for the goods, potentially allowing them to qualify for lower tariffs or to avoid existing tariffs altogether. The report identifies China as having the most developed historical example of this practice.
Following the imposition of Section 301 tariffs on China in 2018, the direct U.S. trade deficit with China decreased in 2019 and 2020. However, the report states that Chinese exporters increasingly routed goods through third countries. These intermediary jurisdictions might involve limited assembly, finishing, repackaging, relabeling, or documentation changes to create the appearance of a different national origin. The report suggests these practices have contributed to the development of a global network of production hubs, logistics platforms, free-trade zones, bonded warehouses, processing corridors, and re-export centers.
Panama, Mexico, and Colombia are among the more than 40 countries identified as posing a high transshipment risk, alongside Brazil, Argentina, Chile, Peru, Costa Rica, and the Dominican Republic. Navarro stated that countries such as India could also use transshipment to avoid tariffs and that new trade frameworks pursued by the Trump administration would include provisions to penalize trading partners engaging in such practices.
Estimates cited in the report from government and private-sector sources put the value of goods transshipped annually to avoid tariffs between $34.2 billion and $303 billion. Navarro asserted that the "great transshipment scam has let communist China launder its exports."
The U.S. Customs and Border Protection (CBP) has reportedly begun using artificial intelligence in a prototype program to detect transshipment. Importers found to have falsified a product's origin can face retroactive tariffs applied for approximately one year. The report comes as concerns grow over foreign exporters evading U.S. tariffs by routing goods through third countries.