What are the U.S.’s latest allegations against India? | Explained
A White House report titled the "Great Transshipment Scam," released in mid-August, accused India along with more than 40 other countries of enabling Chinese exporters to evade United States tariffs through third-country routing
The report alleges that Chinese-origin goods are routed through intermediary countries, undergoing limited processing, assembly, repackaging or relabelling, before being exported to the US as if originating in that intermediary country
Countries named alongside India in the report include major US trading partners such as Canada, Mexico, the European Union, Japan and South Korea
The allegations arrive alongside a broader US tariff posture toward India, including a 25% tariff on Indian goods and an additional penalty tied to India's purchase of Russian crude oil, raising questions about India's export competitiveness and growth trajectory
Rules of Origin and "Transshipment" Under Trade Law
Rules of origin are the criteria used to determine the "economic nationality" of a traded product — essential for applying tariffs, quotas and trade-agreement preferences correctly. "Transshipment" in the pejorative/illegal sense refers to routing goods through a third country with only nominal processing, specifically to disguise their true country of origin and evade origin-specific duties.
Key Details
- Legitimate rules of origin generally require "substantial transformation" — a genuine change in tariff classification or a minimum percentage of local value addition — for a product to be considered as originating in the transit country
- Illegal transshipment is distinguished from legitimate re-export/entrepot trade by the absence of substantial transformation — mere repackaging, relabelling or minimal assembly does not confer new origin
- Under the current US executive order cited in the report, goods determined to have been illegally transshipped face an additional duty of 40% on top of applicable tariffs, though the administration has not fully clarified the precise transshipment test being applied
- India's own trade remedy law (Customs Act provisions, anti-circumvention rules under the Customs Tariff Act) contains analogous anti-circumvention concepts used against dumped/subsidised Chinese goods routed through third countries into India
The "Great Transshipment Scam" report applies this transshipment logic against India itself, alleging Indian intermediation for Chinese goods bound for the US market, rather than India being on the receiving end of such circumvention as is more commonly discussed in Indian trade-remedy contexts.
Section 301 of the US Trade Act, 1974
Section 301 is the principal US statute empowering the Office of the US Trade Representative (USTR) to investigate and retaliate against foreign trade practices considered "unfair," "unreasonable" or discriminatory to US commerce, including through unilateral tariffs. It has been the primary legal vehicle for the tariff escalation against Chinese goods since 2018, and by extension, against countries alleged to be facilitating circumvention of those tariffs.
Key Details
- Enacted under the Trade Act of 1974; grants USTR authority to act without needing a WTO dispute ruling, making it a unilateral instrument
- China-specific Section 301 tariffs were first imposed in 2018 under the first Trump administration, formally to counter unfair trade practices including forced technology transfer and IP theft
- A WTO dispute panel found unilateral Section 301 tariffs on Chinese goods inconsistent with WTO non-discrimination and tariff-binding obligations, though such rulings have limited enforcement power absent US compliance
- India separately faces a 25% tariff plus an additional penalty related to Russian crude oil purchases, layered on top of any transshipment-related duties, reflecting a broader recalibration of US-India trade terms
The Great Transshipment Scam allegations effectively extend the enforcement logic of Section 301 China tariffs to third countries like India, treating transshipment facilitation as itself an actionable trade practice subject to additional duties.
India-US Trade Relationship and WTO Dispute Settlement Context
India and the US have a large, growing but increasingly contentious trade relationship, with recurrent friction over tariffs, market access and now transshipment allegations. India can, in principle, contest unilateral US tariff measures through the WTO dispute settlement mechanism, though the WTO Appellate Body has been non-functional since 2019, limiting effective recourse.
Key Details
- The WTO Appellate Body has lacked a quorum of judges since December 2019 due to the US blocking appointments, meaning appealed WTO rulings cannot be finally enforced — a standing constraint on India's ability to seek binding relief against unilateral US tariffs
- India has previously used WTO-consistent retaliatory tariffs (e.g., in response to US Section 232 steel/aluminium tariffs) as a countermeasure tool
- Bilateral India-US trade negotiations (ongoing at various points in 2025-26) have sought a limited or interim trade deal, distinct from a comprehensive Free Trade Agreement, to address tariff and market-access frictions
- Rising tariff and compliance risk on Indian exports to the US (India's largest export destination) has downstream implications for India's export-led growth targets and the trade deficit position
The transshipment allegations add a new layer of friction to an already tense India-US trade relationship dominated by tariff actions, with limited near-term prospect of WTO-based redress given the Appellate Body's non-functional status.
- "Great Transshipment Scam" report released: August 13 (mid-August 2026), authored by the White House Office of Trade and Manufacturing Policy
- Countries named: 40+, including India, Canada, Mexico, the European Union, Japan and South Korea
- Additional duty for goods found illegally transshipped: 40%, under the cited executive order
- Separate US tariff on Indian goods: 25%, plus an additional penalty tied to Russian crude oil imports
- Section 301 tariffs on China: first imposed 2018, under the Trade Act of 1974
- WTO Appellate Body: non-functional since December 2019 due to blocked judicial appointments