India Govt To India Inc: Don't Reroute Chinese Goods To US

Sources told The Secretariat that the government has reached out to customs departments asking them to remain vigilant and ensure compliance.  

Beijing, which has been focused on export driven growth, has often resorted to rerouting their goods from the shores of other countries. 

According to Fulcrum, an arm of ISEAS – Yusof Ishak Institute, American officials worry that Chinese firms are exploiting Vietnam as a backdoor to dodge tariffs, which are up to 25 per cent for some products, relabelling these Chinese-made goods as Vietnamese before shipping them to the US.

Analysts pointed out that the rerouting of Chinese goods from other countries, especially Vietnam, has increased since 2018, when the two economic giants first came at loggerheads.  

Though US President Donald Trump’s announcement of a 90-day pause in the application of reciprocal tariffs has come as a relief to the world community as well as India’s exporters, the existing additional tariffs that kicked-in on steel, aluminium, auto and auto components earlier this year, will remain in place. That apart, the universal 10 per cent tariff across countries will also be applicable.  

Meanwhile, China has not been spared. A whopping 125 per cent tariff on China will kick-in with immediate effect. 

“Rerouting of Chinese goods has always been a problem. Even India has faced this problem,” Ashwani Mahajan, National Co-Convener of Swadeshi Jagaran Manch (SJM) said, adding that the tariff issue is more a geopolitical one than geoeconomic.

“It is very clear that for the US, the main problem is China..we should look at strengthening our manufacturing and focus on the domestic market,” he said. 

Diversification Plans To Get Aggressive

Commerce Minister Piyush Goyal held a meeting with exporters on April 9 to discuss the trade and tariff issues. Goyal, who promised all possible assistance to the exporters to tide the challenges, is also expected to press the pedal on diversifying the exports market. The focus now is likely to shift to Latin America, Africa and Australia, besides existing ones.

“We now need to de-risk from America. We need to take our exporters to other countries. We have to promote Brand India in Latin America and other countries,” Pankaj Chadha, partner and CEO, Jyoti Steel Industries, and Chairman, Engineering Export Promotion Council (EEPC) told The Secretariat.

Chadha also pointed out that exports to countries falling under Category C of the US tariff regime, need to be augmented as well. Category C countries refer to those nations with added risks, especially related to travel and payment. 

The government is also looking at providing benefits to exporters to expand their markets in the Category C countries. A meeting between Export Credit Guarantee Corporation of India (ECGC), the exporters and Ministry officials is set to be held next week.

“To expand exports to these nations, we need to have a cover. We are hopeful that the outcome of the meeting will be positive,” Chadha added.

Amid uncertainties, tapping new markets will also provide a cushion to the micro, small and medium enterprises (MSMEs).

Meanwhile, India is hoping to conclude the Bilateral Trade Agreement with the US by the year-end. Such an agreement could establish a structured framework for resolving tariff challenges, thereby reducing the likelihood of unilateral trade measures or retaliatory tariffs, the Federation of Indian Export Organisations (FIEO) said.