Tariff Gains Come With Compliance Risks, GTRI Warns Indian Exporters

New Delhi, Apr 24 (KNN) The Global Trade Research Initiative (GTRI) has issued a warning to exporters looking to capitalise on new opportunities in the US market created by high tariffs on Chinese goods.

The report highlights both potential benefits and significant risks for countries like India seeking to fill the trade gap.

With Chinese exports now facing tariffs as high as 245 percent while most other countries enjoy just 10 percent duties, a major disruption in global trade flows has emerged.

This stark difference is forcing companies to reconsider their sourcing strategies, giving rise to three distinct trade models with varying implications for exporters.

The GTRI report emphasises that simply rerouting Chinese goods through countries like India or Vietnam to avoid tariffs constitutes illegal circumvention.

Such practices violate US sourcing rules and can result in severe penalties. US Customs authorities carefully examine whether products undergo genuine transformation during manufacturing, and goods merely assembled outside China may still be subject to Chinese-level tariffs.

To legitimately benefit from the tariff gap, exporters must ensure their products undergo ‘substantial transformation’ with real value addition such as integration, design, or programming.

The report stresses that basic assembly or repackaging operations are insufficient, stating unequivocally that simply assembling goods is not enough–true manufacturing transformation must occur.

The most sustainable approach, according to GTRI, involves establishing genuine manufacturing hubs outside China.

Countries including India, Vietnam, and Mexico are attracting interest from global companies looking to reconfigure supply chains. These shifts are particularly pronounced in sectors such as garments, pharmaceuticals, toys, electronics, and chemicals.

India specifically stands to benefit in areas like APIs (Active Pharmaceutical Ingredients), textiles, leather, and home goods–provided it adheres to compliance requirements.

The report advises exporters to maintain comprehensive supply chain documentation and consider applying for binding rulings from US Customs to prevent compliance issues.

GTRI concludes that while the export opportunity is both real and significant, attempts to circumvent rules will prove counterproductive.

Sustainable gains will only accrue to those who invest in legitimate manufacturing capabilities, thoroughly understand US regulations, and build transparent, compliant supply chains.

(KNN Bureau)