US names India among 40+ nations in alleged China tariff-evasion 'shadow network'
The United States has accused India and more than 40 other countries of operating a "shadow trans-shipment network" that allegedly helps China evade high tariffs. The charge was made in a report released on Thursday (August 13, 2026) by the administration of President Donald Trump, which also unveiled plans to use artificial intelligence to detect and penalise such practices.
The report, titled The Great Transshipment Scam, was presented by Peter Navarro, the White House Counsellor for Trade and Manufacturing. It states that transshipments became more prevalent after 2018, when the Trump administration imposed Section 301 tariffs on China to counter what Washington described as "unfair trade practices."
According to the report, China has used third countries for "minor processing, relabeling, repackaging, reinvoicing, or routing changes that created the appearance of a new national origin while leaving the underlying Chinese content largely intact." This allowed Chinese manufacturers to route goods around tariffs by pushing them through jurisdictions with cheap labour, weak customs oversight, permissive free zones, or preferential U.S. trade access.
The countries named as part of China's "Shadow Transshipment Network" include many of America's largest trading partners, such as Mexico and Canada on U.S. land borders, as well as the European Union, India, Japan, and South Korea.
The report singles out India's Pune-Gujarat-Chennai production belt, saying it absorbs pumps and compressors, which affects industrial supply chains in the American cities of Cincinnati, Dayton, and Columbus. "A Chinese pump that leaves Pune as Indian is a pump not machined in Cincinnati, Dayton or Columbus," Navarro said.
The report estimates the annual value of illegally transshipped goods at anywhere between $40 billion and $303 billion, depending on methodology and definition.
To counter this, the U.S. plans to introduce an AI-enabled "Detective Border" system. It would support U.S. Customs and Border Protection (CBP) by integrating shipment data, routing histories, product classifications, ownership relationships, production-capacity indicators, anomaly detection, computer vision, and other analytical tools. The objective, the report says, is "to improve CBP's ability to distinguish legitimate nearshoring and foreign investment from illegal pass-through trade, identify high-risk shipments, and convert analytical findings into interdiction, duty collection, penalties, and exclusion."
This is the latest development in the longstanding trade dispute between the United States and China. Section 301 is a U.S. law that allows the president to impose tariffs on countries found to be engaging in unfair trade practices. The tariffs on China were imposed after a lengthy investigation and have been the subject of multiple disputes at the World Trade Organisation. The current report is an administrative document; it does not constitute a judicial finding, and the allegations have not been tested in any legal proceeding.
