A White House report has identified five Middle Eastern countries as potential conduits for Chinese goods being illegally rerouted to the U.S. market, warning that ports, free-trade zones and other trade hubs could be used to circumvent American tariffs.
The report places Israel, Jordan, Oman, Turkey and the United Arab Emirates among more than 40 countries and economies it says face varying degrees of risk over illegal transshipment — a practice in which goods subject to high U.S. tariffs are routed through countries with lower duties before entering the American market. The findings could bring additional scrutiny to trade routes involving some of Washington’s regional partners.
The report means Washington’s scrutiny of China-linked trade routes could extend to some of its partners in the Middle East.
Illegal transshipment, according to the document, can include such practices as “relabeling, repackaging, re-invoicing, limited processing, or false claims of country of origin,” allowing goods to receive preferential tariff treatment they would not otherwise qualify for if their true origin were disclosed.
The report, issued by the White House Office of Trade and Manufacturing Policy, focuses on China as the leading example of the practice.
After the United States imposed broad tariffs in 2018, it says, Chinese exporters began routing goods through other countries, where the products could undergo limited changes in manufacturing, packaging or documentation before being re-exported to the United States.
Over time, the report says, this evolved into a network encompassing production centers, ports, free-trade zones, bonded warehouses and re-export platforms.
The decline in China’s share of U.S. imports and the rise in the share of other countries do not mean that all trade diversion was illegal, the report says. Some of the shift reflects “legitimate changes in production, investment and sourcing.”
Still, the report argues that the scale and timing of the changes in trade routes warrant greater scrutiny.
Israel Among Highest-Risk Countries
Israel appears in the first category of the report’s classification, alongside major economies including Canada, the European Union, India, Japan, Mexico, South Korea and Taiwan.
The report says these countries and economies receive large volumes of China-linked goods while also having diversified industrial bases and substantial exports to the United States. As a result, the risk of transshipment exists “within legitimate and extensive trade flows.”
Turkey is placed in the second category, alongside Brazil, Indonesia, Malaysia, Thailand and Vietnam. The report says transshipment through these countries is greater than in the third category, while their economies are more deeply integrated into Chinese supply chains.
Turkey and Brazil are described as major regional production and transportation hubs that could be used for “rerouting or making claims of substantial transformation of origin” for certain goods.
Jordan, Oman and UAE in Third Category
The report places Jordan, Oman and the UAE in a third category that it describes as involving “small and opportunistic Chinese targets.”
The countries in this group offer advantages that could make them attractive for rerouting goods, according to the document, including free-trade zones, ports, bonded warehouses, assembly capabilities and preferential trade treatment in the United States.
Jordan is specifically cited as offering preferential access to the U.S. market as well as specialized assembly capabilities.
The report also says countries including Jordan and the UAE facilitate what it calls “widespread transshipment circumvention,” benefiting from logistics infrastructure and easy access to the U.S. market. It does not, in this context, identify a direct role for the governments of those countries in the transshipment operations themselves.
The document presents the UAE as an example of what it calls the “maritime-gateway super node model,” a major hub for rerouting trade by sea. It points to Jebel Ali port, the free zone, customs-controlled warehouses and re-invoicing platforms, which it says allow “China-origin goods to move under new export documentation.”
The UAE and Oman are also included among a group of “maritime gateways” that rely on re-exports from free zones, deep-water ports, container consolidation and re-invoicing.
Turkey also appears in another group of advanced logistics hubs, alongside countries such as Canada, Singapore, Switzerland and the Netherlands.
The report argues that dependence by some export sectors and transportation networks in these countries on Chinese inputs, logistics services and capital could give Beijing greater commercial and political influence, even as goods continue to reach the United States indirectly.
Illegal transshipment, it says, can deepen “trade dependence created through the Belt and Road Initiative,” while acknowledging that the same ports, free zones and facilities can also serve legitimate trade.
AI-Powered Customs Scrutiny
The White House is not merely identifying countries. The report calls for tighter customs enforcement and outlines an artificial-intelligence system that would analyze shipping data, routing histories, product classifications, ownership structures and indicators of production capacity.
The goal, it says, is to distinguish genuine investment and manufacturing from goods passing through a third country primarily to alter their declared origin.
The report says countries through which this trade passes also reap economic benefits. Local companies earn revenue from assembly, storage, logistics, ports and customs brokerage, while governments benefit from jobs, tax revenues, investment and increased trade.
The report does not provide a specific estimate of the profits generated by the 40 countries through such transshipment practices. Instead, it cites estimates of the annual value of trade potentially exposed to transshipment or trade diversion ranging from about $40 billion to $303 billion.
Adapted and translated from the original Arabic.
