The Great Transshipment Scam

Executive Summary 

The United States faces a growing challenge from the illegal transshipment of goods through third countries to evade applicable tariffs and other trade remedies. Exporters in higher-tariff jurisdictions can abuse differences in U.S. tariff treatment across countries to route goods through lower-tariff jurisdictions before entering the American market. Illegal transshipment may involve relabeling, repackaging, re-invoicing, minor processing, false country-of-origin claims, or other actions intended to secure tariff treatment that would not apply if the goods’ true economic origin were declared. President Trump’s tariff actions have helped to protect U.S. workers and industry, and his Administration has taken stronger actions against countries that pose larger economic challenges. However, the expansion of differentiated tariffs in 2025 has significantly increased the importance of effective transshipment enforcement. Tariff differentials are necessary to address differences in trading practices and levels of reciprocity, but they also create opportunities for arbitrage and evasion. Any higher-tariff country may seek access to the U.S. market through a lower-tariff country, and any lower-tariff jurisdiction may benefit from serving as a production, processing, warehousing, or logistics intermediary for higher-tariff countries. China provides the most developed historical example of this conduct. Following the imposition of Section 301 tariffs in 2018, the direct U.S. trade deficit with China fell in 2019 and 2020. Even today, imports of a number of Chinese products subject to these original duties, like electric vehicles, are much lower in the U.S. than in places like the European Union. But the overall success of these tariffs co-exists with the abuse, by exporters, of the tariff differentials that they contribute to. After their imposition, Chinese exporters increasingly routed goods through third countries. Products that previously moved directly from China to the United States were shipped through jurisdictions where limited assembly, finishing, repackaging, relabeling, or documentation changes could create the appearance of a different national origin. Over time, these practices contributed to the development of a global network of production hubs, logistics platforms, freetrade zones, bonded warehouses, processing corridors, and re-export centers. This report identifies more than 40 countries associated with elevated illegal transshipment risk. These jurisdictions vary significantly in economic scale and function. Some are major trading partners with diversified industrial bases and large volumes of overall commerce. Others are closely integrated into China-linked production and supply networks. A third group consists of smaller jurisdictions that offer specific advantages, including low labor costs, permissive free-zone rules, strategic port access, bonded warehousing, limited customs capacity, niche assembly operations, or preferential access to the U.S. market.

Full Report Here:  https://www.whitehouse.gov/releases/2026/08/the-great-transshipment-scam/