TWN Info Service on WTO and Trade Issues (Aug26/13)
17 August 2026
Third World Network

US announces drone tariffs, polysilicon duties, and "Great Reallocation" crackdown

Geneva, 16 August (D. Ravi Kanth) – The Trump administration last week announced a slew of seemingly unilateral and illegal trade measures against dozens of countries, including some that tend to act as Washington's accomplices in forcing a "regime change" in the rules that established the World Trade Organization (WTO) in 1995, according to people familiar with the developments.

On 13 August, the White House issued a detailed statement titled "The Great Transshipment Scam – Rise, Scope, and Costs," which purported to expose countries that are illegally aiding and abetting the export of Chinese goods through their territories to the US market.

The first tier of countries identified as seemingly engaging in the "Great Transshipment Scam" includes Canada, the European Union, India, Israel, Japan and Mexico – who are apparently the "Diversified Scale Leaders" with "large absolute volumes of China-linked goods; diversified industrial bases and major US-bound export platforms where transshipment risk is embedded within broad legitimate trade flows."

The second tier comprises Brazil, Indonesia, Malaysia, Thailand, Turkey and Vietnam – who are apparently engaged in "significant transshipment volumes combined with deeper integration into China-linked supply chains, input sourcing, manufacturing platforms, logistics systems, or regional rerouting channels."

The third tier includes Argentina, Azerbaijan, Bangladesh, Cambodia, Chile, Colombia, Costa Rica, the Dominican Republic, Georgia, Jordan, Kazakhstan, Kenya, Laos, Morocco, Myanmar, Oman, Panama, Peru, the Philippines, Singapore, Sri Lanka, Switzerland, the United Arab Emirates and Uzbekistan – "smaller economies with lower absolute transshipment volumes but specific weak-link advantages – including low-cost labor, free zones, port or border access, bonded warehousing, niche assembly capacity, preferential US access, or limited customs enforcement capacity – that make them attractive opportunistic targets for China-linked rerouting."

Surprisingly, Australia and New Zealand, which are close US allies at the WTO, are omitted from the list for seemingly inexplicable reasons, said people familiar with the developments.

According to Washington's seemingly authoritarian interpretation, the underlying rationale of the “scam” is that "[t]ariff arbitrage lies at the heart of modern illegal transshipment, the Great Reallocation, and the Shadow Transshipment Network."

"When a Chinese product facing a high US tariff can be routed through a country with a lower tariff rate, the difference becomes a profit pool," the US has argued. "The spread is what turns transshipment from a marginal customs abuse into a global business model. For example, ship $1 billion of Chinese goods directly to the United States, and the applicable China-specific tariffs can generate hundreds of millions of dollars in duties, depending on the product mix. Route those same goods through a lower-tariff country and falsely claim a new origin, and much of that duty can disappear."

The US, the world's largest economy, is increasingly adopting the tactic of playing the victim card despite being the world's "predatory hegemon" – a term coined by Harvard academic Stephen M. Walt in an article in Foreign Affairs on 3 February.

Washington argues that it is facing a "growing challenge from the illegal transshipment of goods through third countries to evade applicable tariffs and other trade remedies." It says that "exporters in higher-tariff jurisdictions can abuse differences in US tariff treatment across countries to route goods through lower-tariff jurisdictions before entering the American market."

The US maintains that "illegal transshipment may involve relabeling, repackaging, re-invoicing, minor processing, false country-of-origin claims, or other actions intended to secure tariff treatment that would not apply if the goods' true economic origin were declared."

The 40 countries listed in the “Great Transshipment Scam” “vary significantly in economic scale and function.” While some are major trading partners with diversified industrial bases and large volumes of overall commerce, others are closely integrated into China-linked production and supply networks, says the US. It says the third group consists of "smaller jurisdictions that offer specific advantages, including low labor costs, permissive free-zone rules, strategic port access, bonded warehousing, limited customs capacity, niche assembly operations, or preferential access to the US market."

In conclusion, it says, as data on the magnitude of the “scam” becomes available, "the Trump Administration will evaluate whether, and to what extent, its anti-transshipment measures are working. That continuing assessment reflects the Administration's commitment to ensuring that the American people receive the full benefits of President Trump's trade and tariff program.”

100% tariff on drone imports

In another announcement on 13 August, concerning the signing of a proclamation based on the "national security threat" arising from "imports of drones and their components," the Trump administration sought to impose "a 100% ad valorem tariff on drones of a certain size or with certain capabilities that are particularly sensitive for national security purposes, docking stations of these drones, and certain critical components of these drones."

The drone tariffs appear to be primarily targeted against China, which seems to account for a large share of drone and drone-part imports.

In the second category – "drones with a maximum takeoff weight of more than 25 kilograms and drones with thermal imaging capabilities" – Washington "imposes a 25% ad valorem tariff on certain drones that are smaller in size and lack certain capabilities that particularly implicate national security, and on other drone components."

The third category of 15% tariffs will be imposed on "drones and components from the European Union, Japan, Liechtenstein, the Republic of Korea, Switzerland, and Taiwan, and a 10% ad valorem tariff for drones from the United Kingdom, provided that substantially all hardware, software, and technology originates from within these countries and the United States."

The tariffs are determined by the US Department of Commerce. "The Proclamation authorizes the Secretary of Commerce to establish an onshoring program for companies making new investments in manufacturing drones and drone components."

The tariffs on drones and drone parts will take effect 21 days after signing. However, tariff exemptions are granted according to the requirements of the defence and defence-adjacent industrial base.

Tariffs on polysilicon

In another proclamation, ostensibly intended "to protect America's polysilicon industry and supply chain from imports that threaten national security," President Trump on 6 August chose to impose a minimum import price programme on imports of polysilicon and polysilicon derivatives "to create a level playing field for American producers of these strategic goods." The proclamation imposes a 15% ad valorem tariff on derivative products. 

All these seemingly unilateral and illegal measures in violation of WTO rules only serve to indicate that the Trump administration will not stop its "predatory" actions regardless of WTO reforms, which appear to be primarily aimed at appeasing the elephant in the room, said people familiar with the developments.

Clearly, real WTO reform hinges on whether members address once and for all the unilateral and illegal tariff and other trade measures imposed by the US, instead of changing the core principles of the Marrakesh Agreement that established the trade body in 1995.