White House Warns of Chinese Products Disguised as Korean

On August 13, the White House released a report titled "The Great Transshipment Scam." The report reveals a shadow network through which products made in China are disguised as originating from third countries before entering the U.S. market. It warns that the U.S. is closely monitoring these activities and will enhance oversight systems. South Korea is mentioned in the report, indicating that this is not a matter to be taken lightly.

The cover of the report features an image of the Trojan horse, serving as a warning rather than a mere symbol. The U.S. poses a critical question: "Is what is coming through your ports truly yours?"

There are two primary methods of transshipment. The first is production-based transshipment, where Chinese components are sent to a third country, assembled with a few screws, relabeled, and exported as "locally made." The report cynically refers to these operations as "screwdriver factories." The second method is logistics-based transshipment, where the product remains unchanged, but the paperwork is altered. The report notes, "Paperwork changed faster than the product did," a striking statement.

The root of these practices lies in tariff differences. Direct shipments from China to the U.S. face a 50% tariff, while shipments through third countries may incur tariffs of 10% or even 0%. This discrepancy becomes a business model. Just as water flows from high to low, goods flow toward lower tariffs. History has shown this pattern, as seen during Napoleon's Continental Blockade when British goods infiltrated Europe.

The report categorizes over 40 countries into three tiers. South Korea is classified as Tier 1, a group of leading countries with significant imports, alongside Canada, Japan, and Taiwan. This classification may sound complimentary, but it is far from it.

The report indicates that South Korea's semiconductor belt could serve as a "conduit" for circumvention. This does not imply that there have been actual cases of detection, but the mere inclusion as a "possible suspect route" is a signal. South Korea has appeared in records of investigations conducted by U.S. Customs and Border Protection (CBP), which identified a circumvention network involving Chinese goods transiting through South Korea, Indonesia, and Vietnam between January and August of this year.

In contrast to simple transshipment countries like Cambodia or Panama, which face issues of "repackaging and labeling," South Korea presents a more complex challenge due to its "deep supply chain" issues. The structure of importing intermediate goods from China, processing them, and selling them in the U.S. is robust. The U.S. is now asking a different question: instead of "Was it made in Korea?" the inquiry is now "What was changed in Korea, and to what extent?"

The U.S. response has already begun. In June, President Donald Trump issued Executive Order 14411, tightening importer registration requirements and mandating the disclosure of beneficial ownership and supply chain information. The CBP has utilized the EAPA (Enforcement and Compliance) tool to uncover over $400 million in unpaid tariffs this year alone. The report ambitiously proposes the concept of an "AI detective border," aiming to analyze shipping data, routes, satellite images, container images, and ownership relationships to identify suspicious patterns. Where customs once relied on human inspectors, the future will involve digital detectives using CCTV, financial tracking, and AI. The era of surviving through paperwork manipulation is coming to an end.

South Korea has one clear path forward: instead of claiming unfair treatment, it must provide evidence.

Companies should meticulously manage their Bill of Materials (BOM) and maintain records of manufacturing processes and equipment capabilities. They must actively utilize the U.S. Customs' advance ruling system. In the future, origin management must be treated with the same rigor as financial accounting. The era of relying on intuition is over.

Standards must also be clearly defined for Chinese capital entering South Korea. Investments focused solely on repackaging and labeling will only raise U.S. suspicions. However, investments that involve actual production, technology transfer, and job creation in areas like semiconductor materials, battery components, and automotive parts will tell a different story. South Korea must communicate to Chinese companies that it is not merely a sticker factory for circumvention but a high-value manufacturing partner. This is beneficial for our industry as well.

The U.S. dislikes opacity and seeks verifiable trust. If South Korea can secure that trust first, it may find itself in a favorable position amid the ongoing supply chain restructuring. Trade is akin to navigating the seas; on stormy days, smaller boats may sway, but those that know their course will ultimately reach their destination. What South Korea needs now is not fear but precise navigation skills.

[Author's Note] This commentary is based on an analysis of the policy report "The Great Transshipment Scam" released by the White House on August 13, 2026.

Author's Background
▲ Current Director of the Korea-China Economic Research Institute
▲ Researcher at the National Diplomatic Academy
▲ Research Fellow at the Korea Institute for International Economic Policy
▲ Former KOTRA China Research Officer

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