White House report blames transshipment scheme for up to $26B in lost tariff revenue

A White House report released Thursday says foreign exporters are increasingly routing goods through third countries to dodge U.S. tariffs, a practice known as transshipment that the administration estimates costs the Treasury between $19 billion and $26 billion in revenue annually.

The 25-page report, titled "The Great Transshipment Scam" and produced by the White House Office of Trade and Manufacturing Policy under trade adviser Peter Navarro, names more than 40 countries as high transshipment risks, including China, Panama, Mexico, Colombia, Brazil, Argentina, Chile, Peru, Costa Rica and the Dominican Republic. The report says China offers the most developed example, noting that after Section 301 tariffs were imposed on Chinese goods in 2018, exporters increasingly rerouted shipments through third countries where limited assembly, relabeling or documentation changes could make goods appear to originate elsewhere.

Navarro said U.S. Customs and Border Protection has begun testing artificial intelligence to detect transshipment and that importers caught falsifying a product's origin can face tariffs applied retroactively for about a year. He also said new trade frameworks being pursued by the administration will include penalties for trading partners that engage in the practice, and pointed to India as another country that could use transshipment to avoid tariffs.

The report cites estimates that place the total value of goods transshipped to avoid tariffs at roughly $34.2 billion to $303 billion annually, and comes ahead of a planned September visit to Washington by Chinese President Xi Jinping.

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