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The White House says China has been routing exports through more than 40 countries to dodge US tariffs, costing the Treasury an estimated $19 billion to $26 billion a year.

Getting into it: The 25-page report, titled “The Great Transshipment Scam,” came out last week from the Office of Trade and Manufacturing Policy, run by trade adviser Peter Navarro. It describes a “global Shadow Transshipment Network” built out of “production hubs, logistics platforms, free-trade zones, bonded warehouses, processing corridors, and re-export centers,” and calls the whole thing “fraud cloaked in paperwork.”

The mechanics are simple. An exporter ships their shit to a third country, where light assembly, repackaging, new labeling or a paperwork change makes it look like it originated somewhere else, then sends it on to the US at a lower tariff rate. The report says this took off after the 2018 Section 301 tariffs, when the direct US trade deficit with China fell in 2019 and 2020 while Chinese manufacturing kept growing. Trump’s trade policy leans on charging different countries different rates, and the report concedes those gaps also “create opportunities for arbitrage and evasion.”

The named countries include Canada, Mexico, India, Japan, South Korea, Israel, Panama, Colombia, Brazil, Argentina, Chile, Peru, Costa Rica and the Dominican Republic, along with EU members. The report notes that several of those are among the biggest trading partners the US has, and that the vast majority of what moves through them is perfectly legal.

In a statement, Navarro said “Communist China has engaged in an extremely sophisticated set of actions that are designed essentially to transship and thereby evade the tariffs.” He also said, “For years, the great transshipment scam has let communist China launder its exports.” He framed the problem as partly one of enabling countries, said India could do the same thing, and said new trade frameworks will carry provisions penalizing partners that allow it.

China rejected the framing. A spokesperson for its embassy in Washington said “trade wars have no winners,” that Beijing opposes the tariffs and the use of state power against Chinese companies, and that “any unilateral actions or agreements concerning transshipped goods must not target or harm the interests of third parties.”

This all comes about a month before Xi Jinping is expected in Washington DC.