India could face increased scrutiny from American customs authorities after a new White House report identified the country as part of a global network allegedly used to move Chinese-linked goods into the United States.
The report, The Great Transshipment Scam, argues that the problem emerged on a large scale after the first Trump administration imposed Section 301 tariffs on Chinese imports in 2018.
The White House says Chinese exporters responded to higher tariffs by changing their supply chains. Instead of sending products directly from China to the US, some allegedly began using intermediary countries where tariffs were lower.
Such a system can be legitimate when goods undergo genuine manufacturing in a third country. However, Washington is concerned about cases in which products receive only minimal processing before being exported under a different origin.
The report lists activities such as assembly, finishing, packaging, relabelling and changes to documentation. It says these practices can become problematic when they are used primarily to disguise the actual origin of goods.
India has been placed in Tier 1, a category that includes major trading economies and platforms. According to the report, these countries can become significant nodes because of their industrial capacity, ports, logistics infrastructure and connections with global supply chains.
The report specifically highlights India alongside several other major economies. That makes the issue particularly relevant for Indian companies exporting to the United States.
American customs officials could increasingly ask exporters to demonstrate how products were manufactured. For example, an Indian company importing Chinese components and assembling them in India may need to maintain clear records showing the extent of processing performed domestically.
The difference between legitimate manufacturing and illegal transhipment is therefore likely to become central to future trade disputes.
The White House report says its analysis found a major shift in trade flows after the 2018 tariffs. China’s share of US goods imports declined, while the combined share of more than 40 countries identified as transhipment-risk locations increased. Washington says the relationship is too significant to ignore, although it also acknowledges that not all of the increase necessarily represents illegal activity.
The report estimates that around $60 billion of potentially illegal transhipment could be taking place annually. A separate estimate cited in reporting on the document puts US-bound transhipped goods from China through Mexico, India and Vietnam at approximately $67 billion during 2025.
The alleged losses are substantial. The White House estimates that illegal transhipment could deprive the US government of billions of dollars in tariff revenue while putting American manufacturers under additional competitive pressure.
Washington’s planned response includes an AI-powered system known as “Detective Border.” The proposed technology would examine large quantities of trade data and search for unusual patterns.
For example, if an exporter suddenly reports a sharp rise in production without a corresponding increase in factory capacity, that could trigger additional scrutiny. Similarly, unusual shipping routes, inconsistent invoices or suspicious relationships between companies could be examined.
The White House says the technology would allow US Customs and Border Protection to focus enforcement resources on the shipments and companies most likely to present risks.
For Indian businesses, the message is clear: documentation and supply-chain transparency are becoming increasingly important in the US market.
The allegations also highlight a larger challenge for India. As the country seeks to become a global manufacturing hub, it must ensure that its expanding trade infrastructure is associated with genuine production rather than becoming a route for goods attempting to avoid tariffs elsewhere.
The controversy does not automatically establish wrongdoing by India or Indian exporters. But the report could lead to more investigations and closer scrutiny of specific products and companies.
For India-US trade relations, the coming months will reveal whether the issue remains primarily a US customs concern or develops into a wider diplomatic and commercial dispute.
