White House exposes Transshipment Scam costing US up to $26B, points finger at China

Concerns are growing that foreign exporters are routing goods through third countries to evade U.S. tariffs, according to a new White House report released Thursday.

As well as China, Panama, Mexico and Colombia are among more than 40 countries identified as posing a high transshipment risk, together with Brazil, Argentina, Chile, Peru, Costa Rica and the Dominican Republic.

Transshipment can involve routing goods through an intermediary country before they enter the United States under a different country of origin, potentially qualifying for lower tariffs.

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The 25-page report, titled "The Great Transshipment Scam," was produced by the White House Office of Trade and Manufacturing Policy, which is led by trade adviser Peter Navarro.

The report says China offers the most developed historical example of transshipment.

Following the imposition of Section 301 tariffs on China in 2018, the direct U.S. trade deficit with China fell in 2019 and 2020.

"After their imposition, Chinese exporters increasingly routed goods through third countries," the report says, with goods that previously moved directly from China to the United States instead being shipped through jurisdictions where limited assembly, finishing, repackaging, relabeling or documentation changes could create the appearance of a different national origin.

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"Over time, these practices contributed to the development of a global network of production hubs, logistics platforms, free-trade zones, bonded warehouses, processing corridors, and re-export centers," the report said of the transshipment practice.

The report also estimates tariff-avoiding transshipment costs the U.S. Treasury between $19 billion and $26 billion in revenue annually.

"The Trump administration has taken steps to strengthen transshipment enforcement."

"For years, the great transshipment scam has let communist China launder its exports," Navarro said, according to The Associated Press.

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Navarro also said countries such as India could also use transshipment to avoid tariffs and that new trade frameworks pursued by the Trump administration will include provisions to penalize trading partners that engage in the practice.

The report cites government and private-sector estimates putting the value of goods transshipped to avoid tariffs at roughly $34.2 billion to $303 billi