"US Report Accuses India of Enabling Chinese Tariff Evasion via Transshipment"
Transshipment
routing goods through an intermediate country to obscure their true origin and evade tariffs
Section 301
US Trade Act 1974 provision authorising unilateral tariffs on countries with unfair trade practices
The current transshipment controversy is rooted in the escalating US-China trade war that began with the imposition of Section 301 tariffs under the Trade Act of 1974, which allows the US to impose unilateral tariffs on countries found to engage in unfair trade practices. As these tariffs on Chinese goods rose steeply — ranging from 7.5% to over 100% on specific product categories — Chinese manufacturers faced powerful incentives to reroute exports through third countries to obtain a different certificate of origin and avoid the duties. This practice exploits the WTO Agreement on Rules of Origin, which requires that goods undergo 'substantial transformation' to qualify for a new country-of-origin designation, but whose enforcement is uneven across jurisdictions.
India's trade relationship with China is structurally asymmetric: China's exports to India are worth roughly eight times India's exports to China, with Indian imports concentrated in electronics, industrial equipment, and intermediate goods. This deep dependency on Chinese inputs — even as India positions itself as a 'China Plus One' manufacturing destination — creates a structural vulnerability. India simultaneously maintains a strategic partnership with the US through frameworks like the Quad and the initiative on Critical and Emerging Technologies (iCET), while negotiating a Bilateral Trade Agreement (BTA) with Washington. The transshipment accusation now sits at the intersection of these competing economic and strategic relationships.
Transshipment in international trade occupies a legally contested grey zone. Legitimate nearshoring — where a company genuinely relocates production, adds substantial value, and employs local labour — is not only legal but actively encouraged under WTO norms and is the basis of the 'China Plus One' strategy that India has sought to benefit from. What the US report targets is pass-through trade: minimal processing, relabelling, or repackaging of Chinese goods in a third country to obtain a different certificate of origin, without meeting the 'substantial transformation' standard. The distinction matters enormously for policy: conflating the two would penalise legitimate manufacturing investment.
The White House report, titled 'The Great Transhipment Scam: Global Evasion and Economic Costs', was produced by the Office of Trade and Manufacturing Policy (OTMP) — an advisory body within the White House, not a statutory agency. …
Consider the following statements:
1.The value of Indo-Sri Lanka trade has consistently increased in the last decade.
2.'Textile and textile articles' constitute an important item of trade between India and Bangladesh.
3.In the last five years, Nepal has been the largest trading partner of India in South Asia.
Which of the statements given above is/are correct?
Which of the following has/have occurred in India after its liberalization of economic policies in 1991?
1.Share of agriculture in GDP increased enormously.
2.Share of India's exports in world trade increased.
3.FDI inflows increased.
4.India's foreign exchange reserves increased enormously.
Select the correct answer using the codes given below:
The 'substantial transformation' standard in international trade law is associated with which of the following?
Consider the following statements regarding Section 301 of the US Trade Act of 1974:
1.It authorises the US President to impose unilateral tariffs on countries engaged in unfair trade practices.
2.It was the primary legal basis for US tariffs imposed on Chinese goods from 2018 onward.
3.The US Supreme Court struck down Section 301-based tariffs as unconstitutional.
Which of the statements given above is/are correct?
Which of the following product categories from India's Pune–Gujarat–Chennai industrial corridor is specifically cited in the US transhipment report as a high-risk transhipment-prone sector?
Want the full note, Prelims Facts & MCQ answers?
Create a free account — takes less than a minute.
Create free account