The measures appear to target products originating in China and shipping through third countries with lower tariffs

PTI New Delhi

The 40 per cent trans-shipment tariff by the US will create major compliance issues for companies in India and the ASEAN region, with high risks for sectors like machinery, electrical equipment and semiconductors, Moody's Ratings said on Tuesday. In July 31, US President Donald Trump announced a 40 per cent tariff on goods deemed to have been transshipped, beyond the broader country-level tariffs.

Moody's, in its 'Trade - Asia-Pacific' report, said it remains unclear how the Trump administration defines trans-shipment, but the measures appear to target products originating in China and shipping through third countries with lower tariffs.

Stating that lack of clarity around trans-shipment tariff poses risks to ASEAN economies, Moody's said if the US maintains a narrow interpretation - targeting only goods imported from China, minimally processed or re-labelled and re-exported to the US - the economic impact on regional economies may be limited.

However, a broader and more punitive interpretation - where goods with any significant Chinese input are also deemed in violation - could prove economically damaging for the Asia-Pacific (APAC) supply chain, Moody's said.