Navigating trade winds: China’s transshipment and India’s compliance

IBT editorial | May 16, 2025

As global trade routes shift amid the U.S.-China trade war, Indian exporters face growing scrutiny and compliance risks. With evolving regulations and rising tariff circumvention concerns, artificial intelligence is emerging as a strategic ally—automating documentation, flagging red flags, and safeguarding India’s export credibility in a high-stakes global market.

transshipment - pexels

Image credit: Pexels

The U.S.-China trade war has catalyzed a complex rerouting ecosystem where Indian exporters risk becoming unwitting participants in tariff circumvention schemes. Amid heightened scrutiny from U.S. Customs and Border Protection (CBP) and India’s tightened CAROTAR 2.0 rules, artificial intelligence (AI) emerges as a critical defense mechanism. By automating trade documentation, predicting compliance risks, and profiling supplier networks, AI co-pilots are redefining how exporters navigate this high-stakes landscape while safeguarding India’s trade integrity.

AI-Driven Documentation: The First Line of Defense

Modern trade compliance hinges on accurately processing hundreds of data points across commercial invoices, bills of lading, and certificates of origin. AI systems like iCustoms’ document processing engine and Passage’s validation algorithms automate this workflow through:

Optical Character Recognition (OCR) 2.0: Advanced models extract text from scanned documents while cross-referencing fields like harmonized system (HS) codes and invoice values, reducing manual entry errors significantly.
Real-Time Discrepancy Flagging: Machine learning compares declared values against historical shipment patterns, instantly alerting exporters to anomalies like sudden spikes in product volumes or mismatched supplier addresses.
Dynamic Regulation Updates: Natural language processing (NLP) scans updates from 190+ global customs portals, automatically adjusting documentation requirements for new tariffs or trade embargoes.

For Indian solar panel exporters, these tools proved vital when CBP revised origin criteria for photovoltaic cells in Q1 2025. AI systems updated self-certification templates within hours, whereas manual processes typically required 14–21 days.

Predictive Risk Profiling: Anticipating Customs Red Flags

Beyond reactive compliance, AI enables proactive risk mitigation through:

Supply Chain Graph Analysis

Platforms like TradeBeyond’s chain of custody suite map multi-tier supplier relationships, identifying hidden connections to sanctioned entities or embargoed regions. By analyzing procurement patterns and shipping routes, the system flagged a Surat-based textile exporter’s indirect sourcing from Xinjiang cotton farms, preventing a potential U.S. Customs detention under the Uyghur Forced Labor Prevention Act (UFLPA).

Behavioral Anomaly Detection

Machine learning models trained on millions of cleared shipments detect subtle red flags:

Unusual Transshipment Patterns: An AI model developed by Servient identified a Gujarat machinery parts supplier whose ASEAN-bound shipments consistently rerouted to U.S. ports—a hallmark of Chinese triangulation schemes.
Financial Irregularities: Algorithms cross-reference supplier bank statements with export declarations, surfacing discrepancies like under-invoiced raw material purchases from China.

Dynamic Risk Scoring

Each consignment receives a risk score (0–100) based on multiple parameters, including:

Supplier’s historical compliance rate
Geopolitical stability of transit countries
Regulatory alignment between origin and destination markets

Exporters with high-risk scores trigger mandatory enhanced due diligence, reducing penalty risks substantially.

Automated Origin Verification: Closing the Transshipment Loophole

India’s Common Digital Platform for Certificates of Origin (CoO) now integrates AI validation layers that:

Cross-check production records against GST returns to verify value addition claims
Analyze factory floor sensor data (IoT) to confirm manufacturing timelines
Scrape global shipping databases for parallel shipments of identical goods from Chinese ports

A pilot with Maharashtra auto parts exporters demonstrated high accuracy in detecting falsified CoO claims compared to manual audits.

AI-Enhanced Supplier Vetting: Building Compliant Networks

Unilever’s AI procurement model, adapted for Indian MSMEs, evaluates suppliers using:

Financial Health Algorithms: Predicting bankruptcy risks by analyzing RBI’s CRILC database and credit bureau reports
Sustainability Compliance Checks: Cross-referencing ESG certifications against global watchlists
Geopolitical Exposure Scores: Mapping supplier facilities to conflict zones using satellite imagery and news sentiment analysis

This system helped a Coimbatore precision tools exporter replace 23 Chinese component suppliers with compliant alternatives during the 2025 Taiwan Strait crisis.

Integrating AI into India’s Trade Ecosystem

While AI tools offer transformative potential, their effectiveness hinges on:

Unified Data Lakes: Merging DGFT, GSTN, and RBI databases into federated learning systems that improve model accuracy without compromising data sovereignty
Regulatory Sandboxes: Allowing exporters to test AI compliance solutions against synthetic customs scenarios under ICEGATE supervision
Skill Development: Partnering with NASSCOM to certify 50,000 trade professionals in AI-assisted compliance by 2026

As CBP deploys its own AI-driven Anti-Circumvention Intelligence Platform (ACIP) in 2025, Indian exporters must adopt equally sophisticated tools to maintain market access. Those leveraging AI’s predictive capabilities will not only avoid penalties but also position India as a reliable alternative to China in reshoring initiatives—a potential $1.2 trillion opportunity by 2030.

In the words of a Mumbai-based trade compliance officer: “AI isn’t replacing our expertise—it’s amplifying our ability to spot risks we couldn’t see before.” For India’s export community, this technological partnership may well determine their place in the new global trade order.