'The Great Transshipment Scam': WH accuses 40+ countries of helping China dodge US tariffs

WASHINGTON, DC: The White House issued a report on Thursday, August 13, accusing over 40 countries of taking part in what it refers to as a "global Shadow Transshipment Network," which allegedly enables China to send its goods via third countries in order to escape US tariffs, resulting in an estimated $19 billion to $26 billion in annual federal revenue losses.

The report titled "The Great Transshipment Scam" listed countries extending from Mexico to Israel, together with India, Canada, the European Union, Japan, South Korea, Taiwan, and Vietnam, among others, as posing a high risk of being involved in the practice. Peter Navarro, senior counselor to the president on trade and manufacturing, gave a direct description of the scheme. 

How the White House says the scheme works

"For years, the great transshipment scam has let communist China launder its exports through more than 40 countries," Navarro told reporters.

Exporters were able to disguise where a product came from by repackaging or relabeling the goods and performing limited assembly in another country before sending the product to the US, the White House stated in its report.

The report also named Canada, countries in the European Union, Japan and South Korea among countries the White House viewed as an elevated risk of having Chinese goods be rerouted.

It acknowledged that those countries, which are major US trading partners, also conduct large amounts of legitimate trade.

The report referenced a separate analysis by the Commerce Department that estimated about $67 billion of goods last year were transshipped from China through Mexico, India, and Vietnam.

That resulted in about $28 billion in tariff revenue losses. The White House estimated the annual cost to be between $19 billion and $26 billion.

AI system to detect suspicious shipments

The Trump administration is also developing an artificial intelligence system, dubbed the “Detective Border,” to help US Customs and Border Protection identify suspicious shipments.

The proposed system would examine shipping routes, product information, ownership, and other data to help officials distinguish legitimate trade from attempts to evade tariffs.

“The message to the world is simple. The age of untraceable illegal transshipment is over,” the report read. “What once seemed like quiet paperwork maneuvers, relabeling, repackaging, re-invoicing, has become a matter of economic sovereignty and national will.”

Chinese President Xi Jinping is expected to visit the US in September, and the timing of the report provides a pointed backdrop to the anticipated thorny trade talks between Washington and Beijing.