Key Takeaways:
- The White House has flagged more than 40 countries as high-risk transshipment hubs for Chinese goods evading US tariffs.
- Government estimates put the potential rerouted goods at $60 billion to $75 billion annually.
- New enforcement combines traditional customs checks with AI-powered analytics to detect suspicious shipment patterns and verify genuine country-of-origin claims.
US officials are cracking down on a growing loophole where Chinese manufacturers route goods through third countries to dodge tariffs. The practice, known as transshipment, involves goods that pass through an intermediate country before entering the US market under a falsified national origin.
The White House has flagged more than 40 nations as transshipment risks in its report: “The Great Transshipment Scam: Rise, Scope, and Costs.” The report pairs that with a concrete enforcement tool: Detective Border, an AI-powered customs analytics platform built to catch what manual review can’t.
The Scale of the Problem
Estimates of diverted trade vary widely depending on methodology. Goldman Sachs places the figure near $40 billion annually on the conservative end. Altana, using facility-level supply chain mapping, puts it closer to $303 billion. Most government analyses cluster around $60 billion to $75 billion, capturing relabeled or repackaged goods moving through legitimate transit hubs.
The problem accelerated sharply after 2018, when Section 301 tariffs prompted Chinese exporters to restructure supply chains. According to the White House Office of Trade and Manufacturing Policy, as China’s direct share of US goods imports fell after 2018, the combined import share supplied by the flagged countries rose in near-perfect inverse proportion.
That correlation doesn’t prove every rerouted shipment is illegal. But, according to the White House report, “the timing, magnitude, and direction of the two trends correspond so closely that the relationship is unlikely to be explained by chance alone.”
How Transshipment Works
Transshipment usually involves simple repackaging or relabeling in a third country rather than substantive manufacturing or value-added processing. Goods made in China receive minor handling at a foreign facility, then ship to the US under a new national identity.
A German toolmaker case illustrated the risk clearly. Chinese-made cutting tools were lightly processed in Germany by King Kong Tools, then exported to the US as German goods to avoid a 25% tariff. The company later paid a $1.9 million settlement for customs fraud.
The practice exploits gaps in origin verification and relies on paper trails that obscure true manufacturing locations. Free-trade zones, bonded warehouses, and logistics platforms act as the operational backbone of what the White House report calls the Shadow Transshipment Network.
Which Countries Are on the List?
The report organizes more than 40 jurisdictions into three tiers based on the scale of China-linked trade flows, depth of supply-chain integration with China, and specific weak-link advantages:
Tier 1, Diversified Scale Leaders: Canada, the European Union, India, Israel, Japan, Mexico, South Korea, and Taiwan. These are major trading partners where transshipment risk is embedded within large volumes of legitimate trade.
Tier 2, Scale Leaders with Significant China Integration: Brazil, Indonesia, Malaysia, Thailand, Turkey, and Vietnam. These countries combine significant transshipment volumes with deep integration into China-linked manufacturing and logistics networks.
Tier 3, Small, Opportunistic Chinese Targets: Smaller economies including Cambodia, Panama, the United Arab Emirates, Jordan, Switzerland, Bangladesh, Kenya, Morocco, and others. These jurisdictions offer specific advantages: low-cost labor, free zones, bonded warehousing, permissive enforcement environments, or preferential U.S. market access.
Being on the list doesn’t imply guilt. It means CBP will scrutinize origin claims from these countries more closely.
What Enforcement Will Look Like
Washington plans to deploy AI-powered analytics to spot suspicious shipment patterns and paperwork inconsistencies faster than manual review allows. According to the White House report, the emerging “Detective Border” system will continuously ingest global trade data, comparing declared origins, routing histories, and component content against expected patterns.
Partner governments will also face pressure to tighten origin verification standards and scrutinize transit corridors more heavily. A June 2026 executive order gave US Customs and Border Protection additional tools to crack down, including tighter importer-of-record requirements and stronger penalties for noncompliance.
Businesses should expect longer customs hold times and demands for detailed bills of materials, contracts, and factory records.
What Companies Need to Do Now
The compliance window is narrowing. Here’s where to start:
Review supplier contracts and audit value-added claims at each production stage. If a manufacturer can’t demonstrate substantive processing at a given facility, that supply route carries real tariff exposure.
Document manufacturing steps with time-stamped records. The difference between legal multistage manufacturing and illegal transshipment will hinge on evidence. Keep clear, detailed bills of materials and factory records ready for scrutiny.
Prepare for higher compliance costs. Supply route changes, additional audits, and longer customs holds will add operational friction. Companies that build compliance infrastructure now will be better positioned than those that wait for a query.
(Note: AI assisted in summarizing the key points for this story.)