A White House report has identified more than 40 countries as presenting elevated risks of illegal transshipment of China-linked goods into the US, with a particular focus on manufacturing and logistics hubs across Asia.

The report, carrying the somewhat dramatic title of ‘The Great Transshipment Scam’ and headed by an image of a Trojan horse style graphic, says Chinese exporters increasingly routed goods through third countries after the US imposed Section 301 tariffs in 2018, using minor processing, relabelling, repackaging, re-invoicing or changes in documentation to create the appearance of a different country of origin.

Throughout, the report describes the resulting system as a global “Shadow Transshipment Network”. It argues that the network has developed around production hubs, logistics platforms, free zones, bonded warehouses and re-export centres that can allow China-linked goods to reach the US while reducing their own tariff exposure. It stresses, however, that the presence of a country in the network does not mean all trade from that country is illegal. Legitimate changes in production, investment and sourcing also contributed to the shift in US import patterns.

It would not be the first time such a network existed – although it would be by far the biggest if proven accurate.

A decade ago, Chinese solar manufacturers began shifting production and exports through other Asian countries after the US and EU imposed trade measures on Chinese photovoltaic products. The EU investigated allegations that Chinese solar equipment was being routed through Malaysia and Taiwan, and in 2016 extended its anti-dumping and countervailing duties to certain solar cells and modules shipped from the two countries. The investigation found a significant change in trade patterns after the duties were imposed, although it also concluded that many Malaysian and Taiwanese companies were genuine manufacturers rather than simply vehicles for tariff circumvention.

The practice became more widespread after the US-China trade war began in 2018, as Chinese-linked manufacturers expanded production across Southeast Asia. The US Department of Commerce later investigated Cambodia, Malaysia, Thailand and Vietnam, finding in 2023 that companies in all four countries had been used to circumvent US duties on Chinese solar products through limited processing before export. Commerce specifically found BYD Hong Kong and New East Solar in Cambodia, Canadian Solar and Trina Solar in Thailand, and Vina Solar in Vietnam had circumvented the duties.

The cases established a pattern that has since become familiar: Chinese solar manufacturers moved production into third countries to avoid trade barriers, making Cambodia, Malaysia, Thailand, Vietnam and, earlier, Taiwan important links in supply chains that came under US or EU anti-circumvention scrutiny.

Asia too remains central to the most recent report's assessment and places India, Japan, South Korea and Taiwan in its first tier of countries with large volumes of China-linked goods, diversified industrial bases and major US-bound export platforms. It puts Indonesia, Malaysia, Thailand and Vietnam in a second tier, alongside Brazil and Turkey, because of their deeper integration into China-linked supply chains and their manufacturing, port and logistics capacity.

The report says Vietnam, Thailand, Malaysia and Indonesia have become major platforms for electronics, machinery, plastics, footwear, apparel and components incorporating China-origin inputs. Their role reflects their geographical and cultural proximity to China and their established manufacturing and logistics infrastructure. The report also identifies Cambodia, Laos and Myanmar as smaller, more opportunistic nodes, citing factors including low-cost labour, free zones, border corridors and weaker enforcement capacity.

India receives particular, and potentially unexpected attention given recent trade frictions with Beijing. The Commerce Department's Office of Trade and Economic Analysis, or OTEA, estimated that about $67bn of US-bound goods were transshipped from China through the three leading hubs of Mexico, India and Vietnam in 2025. The report says the estimate was based on exact product matching at HS8 level, with Chinese imports and US exports from the same local region in the same quarter. OTEA estimated that the activity resulted in about $28bn of lost US tariff revenue.

Vietnam on China’s southern border is also highlighted as a significant production and rerouting platform. The report cites Ho Chi Minh City as a corridor for electrical switching and circuit-protection apparatus. It says those flows correspond to US manufacturing centres in Chicago, Milwaukee and Rockford. Malaysia's Penang-Kulim cluster, meanwhile is cited for plastic articles, while Indonesia's Bekasi-Batam corridor is associated with plastic boxes, cases, crates and packing articles. Thailand's Ayutthaya-Samut Prakan corridor to the north and east of Bangkok is linked to thermostats.

The report distinguishes between production-side and logistics-side activity. Production-side nodes can involve light assembly, finishing, testing, labelling, packaging, inspection or component integration. Logistics-side nodes can instead provide routing, consolidation, warehousing, documentation changes, re-invoicing, relabelling or re-export. The report says the key question for US customs officials is whether processing amounts to genuine substantial transformation or merely changes the appearance of origin.

In the report, Cambodia is presented as an example of a production-side microhub, where China-origin inputs can undergo stitching, labelling, packaging or final inspection before being exported under Cambodian documentation. Malaysia on the other hand is described as capable of serving both as a microhub and maritime gateway, including through the Port Klang Free Zone. Bangladesh, Cambodia, Laos, the Philippines and Sri Lanka are grouped as Southeast Asian microhubs, while Malaysia, Oman, Panama and the UAE are identified among maritime gateways offering free-zone re-export, port relay, container consolidation and re-invoicing capabilities.

Singapore, perhaps surprisingly given its international role as a regional financial hub appears in the report's third tier of smaller economies that can provide particular advantages for China-linked rerouting. The report also includes the Philippines and Sri Lanka in this group, alongside countries including Bangladesh, Cambodia, Laos and Myanmar. It says such jurisdictions may be attractive because of factors such as port access, bonded warehousing, free zones, niche assembly capacity, preferential US market access or limited customs enforcement.

In all, the report estimates the scale of potential illegal transshipment at between about $40bn and $303bn a year, depending on the methodology. Goldman Sachs provides the narrowest estimate at $40bn. The White House Council of Economic Advisers estimates a range of $34.2bn to $89.6bn, while Exiger puts its central estimate at about $75bn. Commerce's broader trade-transfer benchmark is $109bn and Altana's upper-bound exposure estimate is $303bn. The report says these figures are not additive or directly comparable.

The claims made in the report say the tariff incentive is straightforward. Chinese goods facing higher US duties can be routed through countries where the applicable tariff is lower. The difference creates a financial incentive to move production, assembly and logistics through third countries – and it would not be the first time this has happened. It also says such arbitrage has helped finance light-assembly plants, repackaging operations and other facilities across Southeast Asia, India, Mexico and eastern Europe.

It goes on to estimate that average US tariffs on Chinese exports were close to 50% when it was published and uses illustrative tariff differentials of 25%, 35% and 45% to calculate potential losses. Under those assumptions, the estimated tariff losses range from $10bn to $18bn a year for the Goldman Sachs estimate, and from $19bn to $34bn for Exiger's $75bn estimate. Commerce's $109bn benchmark implies losses of about $27bn to $49bn.

And while the report also points to antidumping and countervailing duties as an additional incentive for circumvention, it cites Chinese solar products as an example – and as was proven ten years ago – noting later circumvention findings involving Chinese-origin inputs completed in Cambodia, Malaysia, Thailand and Vietnam. It does, however, caution that this does not mean every illegally transshipped product carries such duties, but says the overlap between tariff-sensitive goods and products subject to additional duties can make the avoided cost substantially higher.