India in U.S. crosshairs again — White House report cites countries ‘enabling’ China’s tariff evasions
A White House Office of Trade and Manufacturing Policy report, "The Great Transshipment Scam: Rise, Scope, and Costs," identified more than 40 countries as carrying "elevated illegal transshipment risk" for routing Chinese-origin goods to the United States.
India was placed in the report's "Tier 1" category alongside Canada, the European Union, Israel, Japan, Mexico, South Korea, and Taiwan.
The report specifically named India's Pune-Gujarat-Chennai industrial belt as absorbing pumps and compressors (falling under Harmonized System headings 8413-8414) that it claims affect manufacturing supply chains in the US cities of Cincinnati, Dayton, and Columbus.
The report estimated annual illegal transshipment at $40-303 billion depending on methodology, with an associated US tariff revenue loss estimated at $19-26 billion, and proposed an AI-based system to identify suspicious trade-origin discrepancies.
Harmonized System (HS) Classification and Rules of Origin
The Harmonized System (HS) is the World Customs Organisation's (WCO) internationally standardised nomenclature for classifying traded goods, used by over 200 economies as the basis for customs tariffs and trade statistics. It structures goods into 99 chapters, ~1,244 four-digit headings, and ~5,224 six-digit sub-headings, with countries free to extend classification further for domestic use.
Key Details
- The HS Convention entered into force on 1 January 1988; India has been a WCO member since 1977 and adopted HS-based classification from 1988.
- India's Customs Tariff uses an 8-digit HS-based nomenclature, while the DGFT's ITC(HS) classification for import-export policy extends to 10 digits.
- Pumps and compressors, the specific products cited in the report, fall under HS Chapter 84 (machinery), headings 8413 (pumps) and 8414 (air/gas compressors).
- Country of origin for tariff purposes is assessed via "substantial transformation" — the good must undergo a meaningful change (typically a change in HS tariff heading or a minimum value-addition threshold) in the exporting country to qualify as originating there.
The report's use of specific HS headings (8413-8414) to pinpoint the Pune-Gujarat-Chennai belt reflects how transshipment allegations are built product-by-product using HS trade-flow data, rather than aggregate country-level trade figures.
India's Customs Enforcement Architecture (DRI, CBIC, CAROTAR)
India's own anti-smuggling and origin-fraud enforcement is led by the Directorate of Revenue Intelligence (DRI), the apex anti-smuggling agency under the Central Board of Indirect Taxes and Customs (CBIC), Department of Revenue, Ministry of Finance. DRI investigates trade-based money laundering, customs valuation fraud, and origin misdeclaration under the Customs Act, 1962.
Key Details
- DRI collects and analyses intelligence, conducts investigations, and initiates adjudication/prosecution for customs offences, working alongside the CBIC's field formations.
- The Customs (Administration of Rules of Origin under Trade Agreements) Rules, 2020 (CAROTAR 2020), issued under Section 28DA of the Customs Act (inserted by the Finance Act, 2020), require importers claiming preferential tariff treatment to possess and produce supporting origin documentation on demand.
- DGFT retains parallel authority over export-import certificates and trade-promotion scheme compliance, distinct from DRI's enforcement role.
If the US pursues formal action based on the report, India's own DRI/CAROTAR framework — designed to catch exactly this kind of mislabelled-origin fraud at the point of Indian import — would be the natural counterpart mechanism to demonstrate compliance or investigate the allegation domestically.
Section 301 Tariffs and the "China+1" Trade Diversification Debate
Section 301 of the US Trade Act, 1974 allows the US Trade Representative to investigate and impose tariffs on countries found to engage in "unreasonable or discriminatory" trade practices, without needing WTO dispute-settlement clearance. The original 2018-era Section 301 tariffs on Chinese goods are what the alleged transshipment network is designed to circumvent.
Key Details
- The report frames India as part of a broader "China+1" supply-chain shift, where global manufacturers relocate production away from China — a trend India's Production Linked Incentive (PLI) scheme (approved 2020, spanning 14 sectors) has sought to capture with genuine domestic value addition.
- The White House report's proposed enforcement tool, an AI system referred to as "Detective Border," is intended to cross-reference shipment data, ownership links, and declared origins to flag suspicious trade routes.
- India was separately placed in a lower 10% additional-tariff tier under a July 2026 Section 301 forced-labour determination, layering onto existing India-US tariff friction.
The transshipment report supplies an evidentiary basis the US could use to justify tighter Section 301-style scrutiny of Indian exports in the affected HS categories, even as India contests whether its rising exports reflect genuine "China+1" manufacturing gains rather than relabelled Chinese goods.
- Report: "The Great Transshipment Scam: Rise, Scope, and Costs," White House Office of Trade and Manufacturing Policy, released 13 August 2026.
- Countries identified: more than 40, grouped into risk tiers; India placed in Tier 1 with Canada, EU, Israel, Japan, Mexico, South Korea, Taiwan.
- Products specifically named for India: pumps and compressors (HS headings 8413, 8414) from the Pune-Gujarat-Chennai belt.
- US cities cited as affected: Cincinnati, Dayton, and Columbus.
- Estimated annual illegal transshipment value: $40 billion to $303 billion (methodology-dependent); estimated US tariff revenue loss: $19-26 billion.
- HS Convention in force since: 1 January 1988; India a WCO member since 1977.