New White House Report Brings ‘Shadow Transshipment Network’ Into Spotlight

To prevail in a trade war against China, the United States needs enforcement tools that match its trade policy goals. On August 13, the White House released a report accusing more than 40 countries of participating in a “global Shadow Transshipment Network.” Alongside a June executive order strengthening customs enforcement, the report demonstrates the Trump administration’s expanding focus on enforcing, not just erecting, trade barriers. The report frames transshipment primarily as a tariff enforcement gap: exporters routing finished products through third-party countries to disguise their origins and exploit lower tariff rates. However, transshipment also undermines U.S. export control and sanctions enforcement. Not All Transshipment Is Created Equal The report outlines three different typologies of transshipment risks: deep manufacturing ties to China in countries like Vietnam, large trade volumes with China in countries like India, and smaller, unique vulnerabilities in countries like Cambodia. Transshipment predates today’s trade fight, but high tariffs have intensified it. In 2022, an American company was caught importing cabinets only assembled in Vietnam from Chinese-made components, evading antidumping duties between 59 percent and 84 percent on Chinese-origin cabinets. More recently, in 2025, an American firm was found transshipping Chinese tungsten carbide — a composite used in aerospace manufacturing and ammunition — through Taiwan to avoid paying U.S. tariffs. The Assembly Loophole in Rules of Origin Many of the concerns outlined in the report — and in a complementary New York Times op-ed by White House senior counselor Peter Navarro — center on rules of origin, which define where a good is produced or substantially transformed. While transshipment is outright Customs fraud, rules-of-origin arbitrage is a legal loophole. Current origin rules were not designed for a globalized landscape where minimal final assembly, rather than substantial production, should determine a good’s legal origin. Closing this loophole requires renegotiating the rules themselves. Where a product is “made” is now a central sticking point in ongoing United States-Mexico-Canada Agreement (USMCA) negotiations, as officials work to redefine the origin rules that grant preferential North American market access. China, meanwhile, is shifting toward manufacturing high-value input materials rather than finished goods, positioning itself as a supplier to final-assembly hubs worldwide. From January to May 2026, China’s exports of intermediate goods rose 25 percent year-over-year, while exports of consumer goods grew just 4 percent. The United States is also concerned that Chinese manufacturers will export largely finished components to a lower-tariff country for minimal final assembly, adding little economic value to the country the product is nominally made in. Navarro cites a Chinese-owned Vietnamese factory that installs Chinese motors in recliners, which are classified as wholly Vietnamese under U.S. tariff rules. Trade Enforcement Is Necessary for Economic Statecraft As the United States confronts China’s non-market practices, enforcing trade barriers is as critical as imposing them. Gaps like transshipment quietly erode U.S. economic power, allowing Chinese goods to reach American markets duty-free under a different flag. Trade barriers are among Washington’s strongest economic levers, but only if they are enforced. The report highlights external estimates of annual transshipment flows between $40 billion and $303 billion. Such an imprecise range reflects how little standardized data exists to assess the problem’s true scale. Closing that data gap is a prerequisite for any enforcement strategy to work. That volume not only is a tariff-revenue problem but also actively undermines U.S. manufacturers still recovering from the “China Shock,” which Treasury Secretary Scott Bessent noted cost 3.7 million Americans jobs. Enforcement Requires Allied Cooperation America must work with allies and trade partners to address the transshipment risks highlighted in the White House report — and nowhere is this more critical than in USMCA negotiations. Washington, Ottawa, and Mexico City should redefine USMCA rules of origin to reflect substantial transformation rather than light assembly, thereby disincentivizing minimal-assembly Chinese operations from accessing the North American market. At the same time, the administration should continue prioritizing Customs’s enforcement capacity, tracking and closing the gaps — like transshipment and rules-of-origin loopholes — that let adversaries undermine U.S. trade policy. One area for improvement is extending public-disclosure requirements from ocean shipping to cover aircraft, truck, and rail freight. Elaine Dezenski is senior director and head of the Center on Economic and Financial Power (CEFP) at the Foundation for Defense of Democracies (FDD). Susan Soh is a research associate at FDD. For more analysis from Elaine, Susan, and FDD, please subscribe HERE. Follow FDD on X @FDD and @FDD_CEFP. Follow Elaine on X @ElaineDezenski. Follow Susan on X @SusanSoh827. FDD is a Washington, DC-based, nonpartisan research institute focused on national security and foreign policy.