India Was Put in Tier 1 of the White House Transhipment Report. Almost None of That Exposure Sits Inside a Marine Policy

In August 2026 the White House released a report on shadow transhipment: goods of Chinese origin routed through third countries and re-declared to escape US tariffs. Business Standard reported on 14 August that it placed India in Tier 1, the highest risk tier, alongside Taiwan and South Korea. NDTV Profit had run the story the previous day under the label of a Tier-1 hub in a China-led tariff evasion network. The Financial Times put the scope at more than 40 countries accused of helping China avoid US tariffs.

The numbers explain why it will not be quietly dropped. The Associated Press reported that the White House says it is losing USD 19 billion to USD 26 billion a year in tariff revenue to this routing, a figure Livemint carried the same day alongside the note that anti-transhipment penalties are under consideration. The Economic Times described a USD 67 billion trade trail leading US investigators to India, and asked where the proof was. Mathrubhumi English reported that the document singles out Pune, Chennai and Gujarat as clusters of concern. India's Ministry of External Affairs responded on 14 August, per NDTV Profit, by pointing to the strength of its own rules-of-origin laws, and GTRI urged the government to seek fuller details of the alleged network.

Every one of those stories is about diplomacy, tariff arithmetic, or the evidentiary standard. None asked the question a risk manager at a Pune auto-components exporter or a Chennai electronics assembler has to answer this month: if a container is held at Long Beach on an origin-fraud suspicion, which policy pays? For most Indian exporters the honest answer is none of them, and the reason is an exclusion that has been in the wording all along.

Indian marine cargo policies and the Institute Cargo Clauses (A) that most open covers incorporate both exclude capture, seizure, arrest, restraint or detainment. In ICC(A) that sits in the war exclusion group, and the standard Institute War Clauses (Cargo) then carve back war risk while expressly retaining the exclusion for loss arising from detainment by reason of infringement of any customs or trading regulations. Indian insurers place the same architecture on domestic wordings.

A US Customs and Border Protection hold on an origin-fraud suspicion is therefore a detention by a government acting under customs law. It is excluded from the base cover, and excluded again from the war extension that an exporter might assume picks up government acts.

Under a Tier 1 designation the realistic scenario is not confiscation. It is a hold of several weeks while CBP requests origin substantiation, during which detention charges accrue at the terminal, the buyer's delivery window closes, and the goods either clear late or are re-exported at the exporter's cost. A marine cargo programme does not respond to any part of that, and no transit or storage extension closes the gap, because the loss is economic rather than physical. The conversation belongs with trade credit, contract drafting, and the sanctions and penalty exclusion language discussed later in this piece.

The instinct after the marine answer is to reach for trade credit, and it is half right. A trade credit policy, whether ECGC or a commercial insurer, insures the receivable against buyer insolvency and against protracted default where an approved buyer fails to pay within the waiting period. Political risk extensions add import licence cancellation, transfer risk, and in some wordings contract frustration by a government act. What sits outside that structure:

• Buyer refusal after a regulatory rejection. Where the US importer refuses to accept goods because CBP has questioned their origin, the non-payment is a rejection of the goods rather than a credit event. Most wordings require goods to have been accepted, or delivered in conformity with the contract, before the receivable attaches.
• Non-payment caused by the insured's own documentation failure. If the certificate of origin, the bill of materials, or the value-addition working cannot be substantiated, the insurer will characterise the loss as arising from the insured's breach of the sale contract. That is outside the insured risk in almost every wording, and it is the exclusion that will decide most Tier 1 claims.
• Disputed debts generally. Trade credit wordings suspend cover on a receivable the moment the buyer raises a bona fide dispute, until it is resolved in the insured's favour. An origin challenge is a dispute in exactly that sense.

The usable part is narrower. Where the US importer becomes insolvent because a retrospective duty demand exceeds its working capital, that is a straightforward insolvency claim and a genuine second-order risk of this enforcement wave. Where a buyer accepts conforming goods and then does not pay, protracted default applies as usual. The difference between ECGC and a commercial trade credit policy on discretionary limits and dispute clauses is worth reading before this exposure crystallises.

The financial mechanics of a US origin-fraud finding run through the importer of record. The US importer posts a customs bond, and CBP can demand liquidated damages against it, issue a retrospective duty demand covering prior entries, and impose penalties under the false-declaration provisions of US customs law. The importer's surety pays, then recovers from the importer.

None of that touches an Indian policy directly. It reaches the Indian exporter through the sales contract: an origin warranty, an indemnity clause, a set-off against outstanding invoices, or a refusal to pay open invoices while the importer quantifies its own liability.

This is where the exposure becomes uninsured almost by definition. A contractual indemnity for a counterparty's customs penalty is not covered by marine cargo, is a disputed debt under trade credit, and falls within the contractual-liability exclusion of a general or product liability policy, which respond to bodily injury and property damage rather than to financial loss assumed under contract.

The control that matters here is the sales contract rather than the insurance programme. Origin warranties should be scoped to the exporter's own manufacturing operations and its documented supplier declarations, indemnities should be capped and time-limited, and a right of set-off against unrelated invoices should be resisted. An open-ended origin warranty converts a regulatory risk into an unlimited and uninsurable balance-sheet liability.

For exporters running through a related US entity, the position is worse, because the group carries both sides of the exposure and the intercompany indemnity offers no external recovery at all.

A certificate of origin is signed by a named individual. Under a Tier 1 designation, that signature acquires a personal dimension no commercial policy in the exporter's programme addresses.

US false-declaration and customs-fraud provisions reach the individuals who made or caused a false statement. Closer to home, an officer who signed origin declarations faces DGFT and customs proceedings, a shareholder or lender action if a major export market closes, and the personal-liability provisions the Companies Act 2013 applies to officers in default.

Only the directors and officers liability tower answers this. The company's marine, credit, and liability policies do not extend to an individual's defence costs in a regulatory investigation of that individual.

Where the D&O tower will be tested

1. Investigation costs. Most Indian D&O wordings cover the defence of an insured person in a formal investigation, often only once a notice naming the individual has issued. A CBP enquiry addressed to the company may not trigger it. Check where cover actually starts.
2. The conduct exclusion. Deliberate fraud and dishonesty are excluded, but in most current wordings only once established by a final adjudication or a written admission. Until a finding of deliberate misdescription is actually made, defence costs are typically advanced, repayable if the exclusion is later triggered. That final-adjudication drafting is the most valuable feature of the wording for this exposure.
3. Territorial and jurisdiction clauses. Many Indian-placed D&O policies carve out US and Canadian claims or apply a separate sub-limit and higher retention. An exporter with US volumes needs that extension priced in rather than discovered missing.
4. The fines and penalties carve-out. Penalties imposed on the company are generally uninsurable in India as a matter of public policy. The recoverable head is defence costs.

Above all of this sits a clause that can switch off cover regardless of how the other questions resolve. Nearly every Indian marine, trade credit and liability policy carries a sanctions limitation and exclusion clause providing that the insurer is not deemed to provide cover, and is not liable to pay any claim, to the extent that doing so would expose it to a sanction, prohibition or restriction under UN resolutions or the trade or economic sanctions laws of the EU, the UK or the USA.

Does a US customs enforcement action count as a sanctions event for that clause? On market-standard drafting, no: it is aimed at designated persons and prohibited trades, and an origin-fraud finding does not by itself designate anyone. Two drafting variants change that answer, and both are in circulation:

• Wordings extending the clause to any trade or economic restriction, prohibition or penalty rather than to sanctions specifically. That is broad enough for an insurer to argue a US customs penalty regime is captured.
• Wordings adding a separate fines and penalties exclusion covering any fine, penalty or punitive sum imposed by any government or regulatory authority, without limiting it to the insured's own jurisdiction.

The severability language matters as much as the trigger. A clause worded "to the extent that" preserves cover on the unaffected portion of a shipment or receivable, which is the difference between a partial recovery and none. Ask the insurer, in writing and before binding, whether a foreign customs enforcement action falls inside the clause. An answer on file is worth more than a favourable reading of ambiguous words.

The evidentiary standard is the whole contest here. CNBC TV18, on 14 August, framed the underlying question as when a Chinese input becomes a Made in India product. That question is answered by a file, not by protest. An exporter with US exposure should be able to produce the following within 48 hours of an enquiry, per export invoice rather than per product line:

1. Bill of materials with a value-addition working. Imported inputs by HS code, country of origin, landed value, and domestic value addition as a percentage, with the working shown. Substantial transformation and change-in-tariff-heading tests both need the input classification, not just the input cost.
2. Supplier declarations for every imported input. Signed, dated, tied to specific purchase orders, refreshed at least annually. A declaration obtained after the enquiry lands is worth less than one already on file.
3. Production records tied to named export invoices. Job cards, machine logs, labour hours, batch or lot numbers, and quality records showing the goods in that container were made on those dates in that plant. This is what separates genuine manufacturing from repackaging, and it is the piece most exporters cannot assemble quickly, because it lives in a shop-floor system never linked to the export documentation.
4. The origin certificate trail. Which authority issued it, on what representation, who signed, and what supporting documents were submitted at the time.
5. The policy extract. The exact sanctions, penalty, and confiscation wording in the current marine, trade credit and D&O policies, so the coverage position is known on day one rather than reconstructed under pressure.

The Tier 1 designation is not itself an insured event, and it may never produce a claim for any given exporter. It does change the probability enough to justify a short set of actions before the next renewal, particularly for exporters in Pune, Chennai and Gujarat and anyone with meaningful US volumes in electronics, auto components, solar, textiles or chemicals:

• Read the confiscation, detention and delay wording in the marine cargo policy and accept the answer rather than trying to endorse around it. Budget detention and demurrage as a retained cost.
• Check whether the trade credit policy requires acceptance of goods before the receivable attaches, and how the dispute clause is drafted. Ask how the insurer would treat a buyer refusal following a customs origin challenge.
• Review every US sales contract for origin warranties, indemnities, and set-off rights. Cap and time-limit the indemnity, and scope the warranty to the exporter's own operations and documented supplier declarations.
• Confirm the D&O tower has a US extension, a final-adjudication conduct exclusion, and an investigation-costs trigger that operates before a formal charge. Confirm that officers who sign origin certificates are named insured persons.
• Ask each insurer in writing whether a foreign customs enforcement action engages the sanctions or penalty exclusion, and keep the reply.
• Build the 48-hour origin file and test it on one consignment.

Whether a trade disruption or political risk structure can pick up the tariff and enforcement exposure that conventional wordings exclude is a longer conversation. It starts from the same place: knowing exactly which of the current policies would have paid nothing.