US White House Report Lists South Korea, Japan, EU Among Economies with China-Linked Transshipment Risks

WASHINGTON, Aug. 13 (Yonhap) -- U.S. President Donald Trump's administration has listed South Korea, Japan, Taiwan and the European Union among dozens of economies facing transshipment risks involving China-linked products, a White House report showed Thursday, as it seeks to tackle schemes to evade U.S. tariffs and other trade remedies.

The White House Office of Trade and Manufacturing Policy released the report, titled "The Great Transshipment Scam," identifying some 40 countries associated with "elevated" transshipment risks, noting that Chinese exporters route goods through third countries, using various methods, such as relabeling, repackaging and false country-of-origin claims.

The report outlined its push to develop a "detective border" utilizing artificial intelligence (AI) that would support U.S. Customs and Border Protection by integrating shipment data, routing histories and other information to help identify high-risk shipments and facilitate duty collection and other measures.

The report grouped some 40 countries, identified as participants in the "Great Transshipment Scam," into three tiers based on the scale of China-linked trade, the depth of their economic integration with China and the weak-link advantages that make them susceptible to rerouting activity.

It classified South Korea, Japan, Taiwan, the EU, India, Canada, Mexico and Israel as Tier 1, or "diversified scale leaders," highlighting their diversified industrial bases and major U.S.-bound export platforms where a "transshipment risk is embedded within broad legitimate trade flows."

It listed Brazil, Indonesia, Malaysia, Thailand, Turkey and Vietnam as Tier 2, or "scale leaders with significant economic integration," noting they combine illegal transshipment volumes with deeper integration into China-linked supply chains, input sourcing, manufacturing platforms, logistics systems or regional rerouting channels.

Tier 3 consisted of "small, opportunistic Chinese targets" that are smaller economies with lower transshipment volumes but specific "weak-link advantages," including low-cost labor, port or border access, niche assembly capacity and preferential U.S. access that make them attractive targets for China-linked rerouting.

The Tier 3 category included Switzerland, Singapore, the Philippines, the United Arab Emirates, Chile and Colombia.

The report pointed out South Korea's semiconductor belt in Gyeonggi Province surrounding Seoul, saying it can serve as a conduit for integrated circuits, placing semiconductor production in Phoenix, Austin, Portland and San Jose under pressure.

"By routing around the tariffs, China and its state-supported manufacturers and trading firms could push goods into jurisdictions with cheap labor, weak customs oversight, permissive free zones, or preferential U.S. trade access," the report said.

"Over time, these lower-tariff countries, which number more than 40 today, became the launchpads and hubs of a new evasion architecture: products made largely in China, lightly touched abroad, and exported to America under new identities."

In a statement, U.S. Trade Representative (USTR) Jamieson Greer said that a transshipment is "perpetuated by bad-faith exporters who are often the very reason we have tariffs in the first place."

"This practice undermines the competitiveness of American businesses and workers, undercuts efforts to reshore jobs and production, and threatens the gains President Trump's 19 historic trade deals made thus far," he said.

He added, "The substantial report is a signal that our attention to the matter continues."

In a press call, a senior administration official said that Thursday's report is "completely" separate from U.S. trade investigations under Section 301 of the 1974 Trade Act that could result in new tariffs. Section 301 is a legal provision that allows the U.S. administration to investigate unfair foreign trade practices.

"I think (the report) will be viewed as just a good source of information that the USTR will have ... as it conducts those negotiations," the official said.

Citing government and private-sector estimates of potential transshipment or related trade-transfer exposure, the report puts the range of estimates at around US$40 billion to $303 billion annually.