The U.S. White House claimed that China built a "shadow transshipment network" that routes through more than 40 countries, including Korea, to avoid high tariffs. Korea was classified as a group of countries at risk of illegal transshipment of Chinese goods. The Gyeonggi Province semiconductor belt was also cited as a potential distribution route for Chinese integrated circuits.
On the 13th, the White House Office of Trade and Manufacturing Policy said in a report on a "massive transshipment fraud" that cases of Chinese exporters using third countries to circumvent tariffs have increased since the United States imposed high tariffs on China.
According to the report, Chinese exporters send Chinese-made products to third countries with lower tariffs, then conduct simple assembly or processing, repackaging, or label changes to make them appear as if produced in those countries before exporting them to the United States.
The White House explained that if Chinese products pass through Mexico or Canada, where the United States-Mexico-Canada Agreement (USMCA) applies, tariffs are none or minimal, and even when routed through Korea, Japan, the European Union (EU), or Vietnam, lower tariff rates apply than when exported directly from China.
The White House classified countries associated with the risk of illegal transshipment into three types by economic size and degree of linkage to China's supply chain.
Korea was included in "Tier 1" along with Japan, the EU, Canada, India, Israel, Mexico, and Taiwan. These are countries with large volumes of China-related trade and developed industrial bases and export networks to the United States, where the risk of illegal transshipment could be mixed into normal trade processes.
Countries closely connected to China's production and supply chains, such as Brazil, Indonesia, Malaysia, Thailand, and Türkiye, were placed in Tier 2, and countries that are relatively smaller but could be used for rerouting exports of Chinese goods, such as Cambodia, Laos, and Myanmar, were classified as Tier 3.
The report specifically pointed to the Gyeonggi Province semiconductor belt in Korea as a potential distribution route for China-related integrated circuits. It said this could pressure semiconductor production in Phoenix, Austin, Portland, and San Jose in the United States.
Based on government and private-sector data, the White House estimated that China's potential illegal transshipment amounts to $4 billion–$303 billion (about 57 trillion–431 trillion won) annually. It said the resulting U.S. tariff revenue loss could also reach tens of billions of dollars.
Assuming the illegal transshipment scale at $75 billion a year, it analyzed that the federal government's tax revenue loss would reach $19 billion–$26 billion, and about 450,000 jobs could be displaced. It also said U.S. gross domestic product (GDP) could fall by $113 billion–$150 billion annually.
White House trade and manufacturing adviser Peter Navarro said, "This report is a warning to countries that are subject to high tariffs while using third countries as a shield," adding, "China is just one case."
The White House plans to strengthen transshipment enforcement by using a "Detective Border" system that analyzes shipping routes and country-of-origin information with artificial intelligence (AI).
Adviser Navarro drew a line that this probe is separate from the ongoing Section 301 trade investigation. However, he said the report could be used as reference material when the Office of the U.S. Trade Representative (USTR) conducts trade negotiations with various countries in the future.