China Behind ‘Great Transshipment Scam’ Costing Billions of Dollars, White House Says

WASHINGTON—The White House released a report on Aug. 13 detailing what it called a “transshipment scam” involving communist China and more than 40 countries.

The report describes how goods are illegally routed through third countries to conceal their Chinese origin before being shipped to the United States.

The report, titled “The Great Transshipment Scam,” estimates the annual value of illegally transshipped goods at $40 billion to $303 billion, depending on the methodologies and definitions used by government and private sector sources.

“For years the great transshipment scam has led communist China to launder its exports to more than 40 countries, rob our treasury of tens of billions of dollars, and steal the paychecks of American workers,” Peter Navarro, an assistant to President Donald Trump and senior counselor for trade and manufacturing, said during a call with reporters.

“This report rips the mask off.”

The report states that China systematically evades U.S. tariffs and other trade measures by routing goods through third-party countries using “relabeling, repackaging, re-invoicing, minor processing, false country-of-origin claims, or other actions.”

According to the report, these transshipments have resulted in the loss of 450,000 U.S. jobs, a $113 billion to $150 billion reduction in annual gross domestic product, and $19 billion to $26 billion in lost federal revenue.

According to Navarro, Chinese components are shipped to countries such as Vietnam, assembled into a recliner, for example, and then falsely declared as Vietnamese-made when exported to the United States.

This allows importers to avoid higher tariffs on Chinese goods.

Navarro described the practice as modern-day smuggling and said it is far more widespread than many people claim, involving more than 40 countries.

“It’s really a clinic in economics,” Navarro said.

The report also highlights the administration’s initiative to deploy an artificial intelligence-enabled “detective border” system to help U.S. Customs and Border Protection (CBP) more effectively identify products transshipped illegally.

In June, Trump signed an executive order aimed at stopping transshipment by making customs enforcement stronger and improving trade transparency.

Navarro said the administration is working with CBP to improve the new AI system and is aiming to achieve full-scale implementation by the end of 2026.

“President Trump is pairing strong trade policy with strong enforcement to ensure that goods entering the United States pay the duties they owe,” Treasury Secretary Scott Bessent said in a statement.

CBP Commissioner Rodney Scott touted the new AI initiative.

“CBP is making generational investments and process improvements to crack down on this illegal practice,” he said in a statement.

With this new initiative, the U.S. government can look back over the past year and collect tariffs on every shipment, not just one, if it finds that an exporter has been making illegal transshipments, Navarro said.

Over the past 12 months, U.S. Trade Representative Jamieson Greer has signed several bilateral trade agreements or frameworks that include provisions targeting transshipments by imposing high tariffs on these products. 

Countries that help Chinese goods circumvent U.S. tariffs will face harsh penalties, Navarro said.

The administration’s strategy, he noted, is to target these enablers rather than directly change China’s behavior.

The report groups these 40 countries into three tiers.

Tier one includes major trading partners that are key exporters to the United States and handle high volumes of China-linked goods.

These are Canada, the European Union, India, Israel, Japan, Mexico, South Korea, and Taiwan.

Tier two includes countries with significant volumes of illegal transshipment and deeper integration into China-linked supply chains.

These countries are Brazil, Indonesia, Malaysia, Thailand, Turkey, and Vietnam.

Tier three includes smaller economies with lower absolute volumes of illegal transshipment, such as Argentina, Bangladesh, and Sri Lanka.