U.S. White House flags South Korea among nations at high risk for transshipping Chinese goods to avoid tariffs

The U.S. White House has designated approximately 40 countries, including South Korea, as high-risk for illegally transshipping Chinese products to circumvent U.S. tariffs. A report released by the White House Office of Trade and Manufacturing Policy, titled "The Great Transshipment Fraud," claims that Chinese goods subject to high tariffs are increasingly being re-exported to the U.S. after undergoing simple assembly, packaging, or relabeling in third countries to alter their origin.

The report categorizes countries involved in this alleged transshipment into three tiers, based on their economic scale and the degree of their integration with Chinese supply chains. South Korea falls into the first tier, which includes countries with a large volume of Chinese-linked goods, diversified industrial bases, and well-developed export platforms to the U.S. This tier also includes Canada, the European Union, India, Israel, Japan, Mexico, and Taiwan. The White House suggests that the risk of illegal transshipment may be mixed within the normal trade flows of these nations.

According to the report, transshipping Chinese goods through countries like Mexico or Canada could allow them to qualify for the U.S.-Mexico-Canada Agreement (USMCA), resulting in zero or near-zero tariffs. While using routes through the EU, Japan, Vietnam, or South Korea might still incur significant tariffs, they would be substantially lower than those applied directly to Chinese products. The report specifically points to South Korea's semiconductor belt as a potential distribution route for "other integrated circuits," which could pressure U.S. semiconductor production in cities like Phoenix, Austin, Portland, and San Jose. However, the report does not provide specific company, factory, port, or seizure data from within South Korea.

The White House estimates that the potential scale of Chinese goods illegally transshipped could range from $40 billion to $303 billion annually, leading to tens of billions of dollars in lost U.S. tariff revenue. To combat this, the administration plans to enhance transshipment enforcement by developing an "AI-powered detection" system that analyzes shipping routes and origin information. The report utilizes estimated data from government and private sources to arrive at its figures.