US Accuses India of Aiding China Through Transit Schemes, Intensifying Pressure on Trade Relations

The White House has leveled accusations against more than forty countries and territories, asserting that Chinese firms are utilizing their markets to reroute goods into the United States to evade high American duties.

According to estimates from the Donald Trump administration, such schemes result in an annual loss of $19 to $26 billion in U.S. customs revenue.

Accusations and List of Countries

An official White House document, titled 'The Great Transit Scheme,' lists countries at high risk of participation in this scheme. These include Canada, Mexico, India, Japan, South Korea, as well as European Union member states and other major U.S. trading partners. Washington emphasizes that these countries conduct a substantial volume of legitimate trade with the United States.

The mechanism of this scheme involves products first being shipped from China to a third country. There, the goods may undergo repackaging, relabeling, refinement, or new documentation processing. Subsequently, they are exported to the U.S., declaring a different origin, which allows them to benefit from a lower duty rate.

Scale of the Problem and Causes

Data presented in the report shows significant discrepancies in the estimated volume of such trade. Depending on the methodology used, the figures range from $30 to $40 billion, and in some cases, up to $300 billion annually. A separate analysis points to approximately $75 billion worth of goods that may have passed through third countries to circumvent tariffs.

Peter Navarro, White House advisor on trade, noted that this practice intensified after the introduction of the first major U.S. tariffs on Chinese products in 2018. He explained that differences in tariff policies among various countries became an incentive for companies to alter logistics routes to secure more favorable terms for importing into the U.S.

Control Measures and Future Meetings

U.S. agencies plan to tighten oversight of these shipments using artificial intelligence technologies. The U.S. Customs and Border Protection is developing a system called Detective Border, designed to analyze data on transport routes, product information, company owners, and other details to detect suspicious cargo.

Washington faces the complex task of separating illegal duty evasion from routine transit operations or full production in third countries. The White House acknowledges that it is difficult to determine whether a product has genuinely acquired a new origin after processing, or if it was merely repackaged to bypass tariffs.

The release of this report coincides with ongoing trade disputes between the U.S. and China. This situation could become one of the topics discussed at the upcoming meeting between Trump and Chinese President Xi Jinping in Washington, scheduled for September. It should be recalled that the U.S. previously imposed tariffs on the import of unmanned aerial vehicles, setting a 100% duty on drones weighing over 25 kilograms.

The United States has leveled serious accusations against India, asserting that India is part of a 'secret shipping network' helping China bypass high US tariffs. This suspicion also extends to 40 other countries.

The core of the accusation is that India and other nations sell Chinese products to Americans, thereby shielding China from significant customs duties. In a report titled 'The Great Transshipment Scam,' White House trade advisor Peter Navarro stated that the US administration plans to use artificial intelligence to identify such shipments and take action against them.

Navarro noted that this practice has become more prevalent since 2018, when the Trump administration imposed tariffs on China under Section 301 due to allegations of unfair trade practices. The report estimates the annual volume of illicit shipments to be between $40 billion and $303 billion USD.

President's trade and manufacturing advisor Peter Navarro stated that the large-scale goods movement scandal over many years has allowed communist China to legitimize its exports through more than 40 countries. He pointed out that among the countries involved in China's so-called 'shadow transshipment network' are some of the US's largest trading partners, including Mexico, Canada, the European Union, India, Japan, and South Korea.

Furthermore, Navarro's report found that Chinese goods were originating from these third countries. China began using these countries for minor processing, relabeling, repackaging, invoicing, or rerouting. Although the country of origin changed, a significant portion of the Chinese goods remained in the supply chain.

To evade tariffs, goods could be routed differently, allowing Chinese state-owned producers and trading firms to deliver products to locations with cheap labor, weak customs control, preferential free zones, or access to the US market.

The report mentions that the Pune-Gujarat-Chennai production zone in India is in demand for pumps and compressors, which affects the technology supply chain in Cincinnati, Dayton, and Columbus. Navarro emphasized that Chinese pumps sold in India are not manufactured in Cincinnati, Dayton, or Columbus. The US also plans to use AI to detect suspicious shipments.

Navarro stated that the US will implement an AI-based 'Border Detective' system to help identify goods entering American markets via third countries. This system is expected to analyze data on supplies, route history, product classification, production capacity, and other information.