US names India in $67 bn ‘transshipment scam’:Pune-Gujarat-Chennai hubs under scrutiny; AI-powered checks proposed

The United States has accused more than 40 countries, including India, of helping Chinese goods enter the US market through third countries to avoid higher tariffs. The claim was made in a report titled The Great Transshipment Scam, released by Peter Navarro, President Donald Trump’s top trade adviser. The report also outlines plans to use artificial intelligence to detect suspected tariff evasion. The Indian government has not yet responded to the allegations. What does the US report allege? The report says the use of third countries to reroute Chinese goods became more common after 2018. That was when the Trump administration first imposed Section 301 tariffs on Chinese goods over trade practices it considered unfair. The report cites estimates that the value of goods moved through third countries could range from $40 billion to $303 billion a year, depending on how the trade is measured. It also puts the potential loss in US tariff revenue at about $60 billion. Navarro accused China of using more than 40 countries to reroute its exports and avoid higher US duties. India among countries named The report names several major US trading partners. They include Canada, Mexico, the European Union, India, Japan and South Korea. It also cites India’s Pune-Gujarat-Chennai manufacturing belt as an example of a supply chain that the US says could be used to move Chinese-linked goods. The report focuses on pumps and compressors. It says such trade could affect manufacturers in the Cincinnati-Dayton-Columbus area of Ohio. However, the report’s allegations do not mean that all trade from these countries is illegal or that companies operating there are involved in tariff evasion. The ‘screwdriver’ strategy: How the scam works Transshipment involves sending goods through another country before they reach their final market. According to the US report, Chinese exporters are using a ‘witch’s brew’ of incentives to bypass high US duties. Goods that should be slapped with 25% to 45% tariffs are instead being routed through Indian ports. Once they land in India, they undergo minor processing—relabeling, repackaging, or simple assembly in what are called ‘screwdriver factories’, to falsely claim a ‘Made in India’ tag. The report says companies may use countries with lower labour costs, free-trade zones or easier access to the US market as part of these supply chains. India’s manufacturing hubs under scrutiny The report highlights the Pune-Gujarat-Chennai manufacturing belt. It says these locations handle Chinese-linked industrial goods, including pumps and compressors. The US claims that such trade can put pressure on American manufacturers by reducing orders and factory use. The report, however, does not suggest that all manufacturing in these Indian hubs involves illegal transshipment. US plans AI-powered checks The Trump administration is also stepping up efforts to detect suspected tariff evasion. Navarro said US Customs and Border Protection is beginning to use an AI-powered system called ‘Detective Border’. The system is designed to analyse large amounts of trade data. It can compare declared countries of origin, shipping routes and the contents of products to identify unusual patterns. The aim is to help officials spot shipments that may need further checks. What happens next? The US is pushing for stricter checks on the origin of imported goods. The goal is to distinguish genuine manufacturing and investment from shipments that merely pass through another country before entering the US. If customs officials find violations, possible action could include collecting unpaid duties, imposing penalties, or blocking goods from entering the country. The report marks a tougher US approach to transshipment as Washington seeks to prevent Chinese goods from reaching the American market through alternative routes. For India and other major trading partners, the move could mean closer scrutiny of supply chains and country-of-origin claims.