White House identifies South Korea as Tier 1 transshipment risk

The White House has released a report titled ‘The Great Transshipment Scam,’ identifying South Korea as a ‘Tier 1’ country regarding the risk of illegal transshipment of Chinese goods. This classification applies to nations with significant economic scale and deep integration with Chinese supply chains that could potentially serve as routes to bypass U.S. tariffs through simple assembly, repackaging, or label changes.

Specifically, the report identifies the Gyeonggi semiconductor belt in South Korea as a potential distribution route for Chinese-linked ‘other electronic integrated circuits.’ The White House noted that this could impact semiconductor production in U.S. hubs such as Phoenix, Austin, Portland, and San Jose. While the report does not cite specific illegal acts by South Korean companies, it suggests that the use of third countries to avoid high tariffs on Chinese products could result in annual illegal transshipment volumes between $40 billion and $303 billion.

To combat these practices, the White House plans to implement a ‘Detective Border’ system, utilizing artificial intelligence to analyze shipping routes and origin information. This increased scrutiny may lead to higher compliance and documentation costs for South Korean exporters as they work to prove the origin of their goods.