US says India, 40 others enabling Chinese goods to bypass tariffs
A US report alleged that Chinese exporters are routing goods through more than 40 countries, including India, to bypass tariffs via a "shadow" trans-shipment network
The report specifically flagged India's Pune-Gujarat-Chennai industrial corridor in relation to pumps and compressors
India requested additional information and clarification from US authorities on the specific claims made in the report
A domestic trade policy think tank (GTRI) advised India to independently examine its own manufacturing and export data to verify or rebut the allegations
Trans-shipment and Rules of Origin
Trans-shipment refers to routing goods through an intermediary country with minimal or no substantive processing, so that the goods can be declared as originating from that intermediary country rather than the actual manufacturing country — typically to access lower tariffs or preferential trade terms. Rules of Origin (RoO) are the legal criteria used to determine a product's true "economic nationality" for customs and tariff purposes.
Key Details
- Under WTO's Agreement on Rules of Origin, origin is generally determined by criteria such as "wholly obtained" or "substantial transformation" (a change in tariff heading, or a minimum value-addition threshold)
- India's own domestic safeguard against origin fraud is the CAROTAR (Customs Administration of Rules of Origin under Trade Agreements) Rules, 2020, notified under Section 28DA of the Customs Act, 1962; it came into force on 21 September 2020
- CAROTAR requires importers claiming preferential tariff treatment under Free Trade Agreements (FTAs) to possess and produce detailed origin information, going beyond merely holding a Certificate of Origin
- Genuine "substantial transformation" (e.g., real manufacturing/assembly) is legally distinct from mere repackaging, relabelling, or minimal processing, which constitutes transshipment/origin fraud
The US allegation is essentially a rules-of-origin dispute — claiming goods manufactured in China are being minimally processed in India's Pune-Gujarat-Chennai corridor and then exported as "Made in India" to avoid China-specific tariffs; India's request for details centers on verifying whether the underlying trade data supports substantial transformation or genuine transshipment.
US Tariff Enforcement Architecture and Trade Remedy Measures
The allegation forms part of the US administration's broader tariff enforcement push against transshipment, which it frames as undermining domestic tariff policy aimed primarily at Chinese-origin goods.
Key Details
- The report classifying countries by transshipment risk places India in a higher-scrutiny tier alongside other major manufacturing/trading economies, distinct from countries assessed as smaller opportunistic transshipment points
- US authorities have proposed enhanced detection measures (e.g., AI-assisted customs screening) analysing shipment routing, ownership structures, and product classification to identify disguised Chinese-origin goods
- Separate US Commerce Department analysis has estimated significant annual revenue loss from transshipment-related tariff evasion across intermediary hubs including Mexico, India, and Vietnam
- Such measures typically operate alongside standard US trade remedy tools like antidumping and countervailing duties, and Section 301 tariff investigations, which target unfair trade practices by specific countries
For India, being named in a formal US enforcement report is significant because it could translate into stricter customs verification, additional documentation requirements for Indian exporters, or targeted tariff/duty actions on specific product categories such as pumps and compressors.
Institutional Role of Trade Policy Think Tanks in Verifying Trade Data
India's response mechanism to such international allegations often involves policy research institutions cross-checking claims against domestic production and trade statistics before framing an official position.
Key Details
- The Global Trade Research Initiative (GTRI) is an independent, India-based trade policy think tank that publishes analysis on India's trade flows, FTA negotiations, and WTO-related issues
- Verifying transshipment allegations typically requires reconciling HS-code-level export data, domestic manufacturing capacity data, and import content of exports (to assess genuine value addition) — the kind of technical exercise GTRI recommended
- Government-level engagement on such disputes typically proceeds through bilateral trade consultations rather than unilateral acceptance or denial of foreign allegations
GTRI's recommendation that India examine its own manufacturing and export data reflects the standard evidentiary approach needed to counter or substantiate origin-fraud allegations before any formal bilateral trade response.
- Countries named in the US transshipment report: more than 40, including India
- India-specific corridor flagged: Pune-Gujarat-Chennai (for pumps and compressors)
- CAROTAR Rules: notified 2020, in force from 21 September 2020, under Section 28DA of the Customs Act, 1962
- Legal basis for India's origin verification: Customs Act, 1962 (Section 28DA) and CAROTAR Rules, 2020
- Indian institution advising data verification: Global Trade Research Initiative (GTRI)
- WTO framework governing origin determination: Agreement on Rules of Origin (criteria include "wholly obtained" and "substantial transformation")