News

Trade & Policy

US Cracks Down On Transshipments

• By  Textile Excellence
• August 15, 2026

The US has fired a fresh warning shot across global supply chains: routing goods through a third country to escape American tariffs is coming under much tougher scrutiny.

A new White House report, The Great Transshipment Scam: Rise, Scope, and Costs, accuses more than 40 countries of being part of a China-linked network that allegedly helps tariffed Chinese goods reach the US through alternative routes. India is among them. But the report is important for another reason: it lays out how Washington plans to hunt down such trade flows - and the measures could affect exporters, manufacturers and sourcing hubs far beyond China.

The White House estimates that potential illegal transshipment could be worth around US$ 60 billion annually, using the midpoint of estimates from the Council of Economic Advisers. Other estimates cited range from US$ 40 billion to as much as US$ 303 billion, depending on the definition and methodology. The report says the central US estimate translates into potentially tens of billions of dollars in lost tariff revenue.

The basic allegation is straightforward. Chinese goods facing high US tariffs are allegedly being routed through lower-tariff countries where they may be repackaged, relabelled, lightly processed, re-invoiced or otherwise presented as originating somewhere else. The White House stresses, however, that the shift in trade does not prove that all increased exports from third countries are illegal transshipment; some represent genuine investment and production relocation.

India is on the list

India is classified as a Tier 1 “Diversified Scale Leader”, alongside Canada, the EU, Israel, Japan, Mexico, South Korea and Taiwan. The report says these economies handle large volumes of China-linked goods while having sizeable industrial bases and major US-bound export platforms.

That classification matters. It does not say India is illegally transshipping goods across the board. Rather, Washington considers India a significant node where legitimate manufacturing and possible origin-shifting activity can coexist.

The report even identifies an India-specific corridor: Pune-Gujarat-Chennai, linking it to US imports of pumps and compressors under HS codes 8413 and 8414. The White House maps these imports against manufacturing centres in Cincinnati, Dayton and Columbus, arguing that such flows can put corresponding US production under pressure.

Indian exporters increasingly relying on China-linked inputs, processing arrangements or complex multi-country supply chains can expect much deeper scrutiny of origin, ownership, production capacity and shipment histories.

What will Washington do?

This is where the report becomes more than a warning.

First comes AI-powered customs enforcement. The White House describes a developing system called “Detective Border”, designed to combine shipment data, routing histories, product classifications, ownership links, production-capacity information, anomaly detection and computer vision. The system is intended to flag suspicious shipments before or as they enter the US.

In practical terms, US customs wants to compare what a shipment says on paper with what the global trade data suggests should be possible.

A factory claiming to export millions of dollars of a product, for example, could be assessed against its known production capacity, imports of raw materials, ownership links, shipping routes and previous trade patterns. Computer-vision tools could also examine container markings, packaging and X-ray images for inconsistencies.

Then comes tougher enforcement.

The White House says countries or companies involved in relabelling or rerouting tariffed goods to evade US law could face interdiction, penalty tariffs, sanctions and potentially loss of market access.

The rules are getting tighter

President Trump’s June 3, 2026 Executive Order on Strengthening Customs Enforcement is described as the institutional backbone of this effort.

The order strengthens importer-of-record requirements, bonding and domestic-asset requirements, ownership and business-affiliation disclosures, good-standing requirements, penalties and customs transparency. The stated aim is to make it harder for shell companies, opaque ownership structures and under-bonded importers to exploit weaknesses in the system.

The US is also embedding stronger rules of origin into its Reciprocal Trade Agreements. The White House says these provisions allow signatories to establish rules needed to prevent agreement benefits from flowing substantially to third countries through illegal transshipment.

That could become particularly significant for countries that are building their export strategies around China+1 manufacturing.

A new test For near-shoring

Here lies the interesting twist.

Washington says it wants to distinguish real manufacturing relocation from tariff arbitrage. A genuine factory investment that uses Chinese machinery or raw materials is not automatically illegal transshipment. The challenge is proving that sufficient economic transformation actually occurs in the third country. The proposed AI system is explicitly designed to make that distinction.

That means simply moving final assembly to India, Vietnam, Bangladesh, Mexico or another country will not necessarily be enough if the US believes the underlying economic origin remains elsewhere.

This matters enormously for textiles.

As apparel and textile sourcing becomes more geographically diversified, brands are increasingly buying from factories that operate across multiple countries and source yarn, fabric, trims, machinery and chemicals internationally. The more complicated the chain, the more important documentation, traceability and proof of origin become.

India should take notice

The White House report does not announce a new India-specific tariff or penalty. India is listed in the highest-risk group, but the report does not accuse the Indian government itself of facilitating illegal transshipment or prescribe a special action against India.

The risk is nevertheless real.

For Indian exporters, the direction of travel is unmistakable: US customs is moving from checking documents to checking the entire supply chain behind those documents. Production capacity, ownership, inputs, routing, invoices, certificates of origin and shipment patterns could all become part of the scrutiny.

That could hurt companies engaged in genuine manufacturing if their documentation is weak. But it could also benefit India in the long run if the country can demonstrate genuine value addition and transparent supply chains.

The US itself admits that it is too early to know whether the new measures will work. Several provisions remain under implementation, and the administration says future trade and customs data will be needed to assess whether transshipment, tariff losses and economic damage actually decline.

For global manufacturers, however, the warning is already clear.

The US is not just raising tariffs anymore. It is building a system to track where goods really come from. And for every country hoping to capture manufacturing displaced from China, that distinction is about to matter a lot more.

The US itself admits that it is too early to know whether the new measures will work. Several provisions remain under implementation, and the administration says future trade and customs data will be needed to assess whether transshipment, tariff losses and economic damage actually decline. For global manufacturers, however, the warning is already clear. The US is not just raising tariffs anymore. It is building a system to track where goods really come from. And for every country hoping to capture manufacturing displaced from China, that distinction is about to matter a lot more.