US transshipment report: India's pump exports under scrutiny, but data tells a different tale

The White House's August 2026 report, titled 'The Great Transshipment Scam,' has accused India's Pune–Gujarat–Chennai production belt of serving as a mere logistical pit stop for Chinese pumps and compressors destined for the United States. According to the report, these exports involve little meaningful value addition, with China-linked exporters using Indian jurisdiction for 'both limited production activity and logistics-side routing.' The alleged motive is to evade the high tariffs imposed on Chinese goods under Section 301 of the U.S. Trade Act, first levied during the Trump administration.

The report specifically points to HS Codes 8413 and 8414, covering pumps and compressors. It claims that as tariffs on Chinese imports rose, shipments from countries like India, Mexico, and Vietnam increased at the same rate and volume, suggesting a deliberate rerouting of goods. The report also links this trend to a decline in pump and compressor manufacturing in Cincinnati, Dayton, and Columbus, U.S., which it says have been replaced by these Indian industrial clusters.

Under current U.S. tariff rules, pumps imported directly from India attract a duty of 10%, while those from China face an additional 10% to 25-35% under Section 301, which was justified by allegations of intellectual property theft and unfair trade practices. The White House report interprets the trade data as strong evidence of a transshipment scam.

However, a closer parsing of trade figures and interviews with industry sources present a more nuanced picture. Data suggests that a significant portion of these exports from India are actually manufactured by American multinationals, many listed on the New York Stock Exchange, which operate global production facilities to optimise costs and technology. The profits from these operations accrue to U.S. shareholders or are reinvested in growth, undermining the narrative of a shadow operation solely designed to evade tariffs.

Sourcing strategies at these global firms are complex, balancing cheap raw materials, manufacturing costs, tariff differentials, and geopolitical risks. For instance, an American pump company with a plant in India recently imported two branded motors from Singapore under India's Advance Authorisation scheme, which allows duty-free import of inputs for export production. This company exports its finished products worldwide, including the U.S.

Similarly, an Indian small and medium-scale pump manufacturer, exporting pumpsets to the U.S., relies on Chinese components that are unavailable domestically. It imports these parts legally, paying Indian customs duty, which largely nullifies any tariff advantage. This practice is not unique to India; it reflects the interconnected nature of global supply chains.

A reliable industry report tracking U.S. imports under HS Code 8413 from all countries except China, Taiwan, and Italy found that Canada accounts for roughly 85% of the import value, Mexico just over 11%, while India contributes a little over 2%. Brazil and Vietnam account for less than 1% each. Notably, Canada—a country not named in the White House report—is the largest source, suggesting that tariff differentials alone do not explain the trade flows.

Among the top 50 suppliers to the U.S. market, 16 are American-owned, six are German-owned blue-chip firms, four are Japanese, three South Korean, and one each from Switzerland, the UK, China, and Hong Kong. There are five Indian firms and two Mexican firms in this list. The total value of Indian pump exports to the U.S. is estimated at around Rs. 4,000 crore, but industry sources indicate only a small fraction originates from Indian-owned companies.

The White House report frames these complex supply chains as 'shadow' operations with the sole motive of tariff evasion. Yet, this characterisation leaves Indian micro, small, and medium enterprises (MSMEs) vulnerable to punitive U.S. trade actions. Many of these factories have operated for years, collaborating with international partners, and any abrupt disruption could have significant economic consequences for them.

The debate over transshipment highlights the tension between protectionist trade measures and the realities of a globalised economy. While the U.S. report raises legitimate concerns about tariff circumvention, the available data suggests that the situation is far more nuanced than a simple scam, involving legitimate multinational production networks and complex sourcing decisions.