Singapore may be expected to tighten measures after US ‘transhipment scam’ report: economists

[SINGAPORE] After being flagged in a US report on China’s “shadow transshipment network”, Singapore may be expected to take tougher measures on potential trade fraud, said economists.

“Singapore may be asked to tighten measures to enforce rules of origin and step up checks,” Chua Hak Bin, regional co-head of Maybank’s macro research team, said in response to queries from The Business Times.

On Aug 13, the White House named Singapore among 40 lower-tariff markets used by Chinese exporters to evade US tariffs, in The Great Transshipment Scam report.

Singapore was put in “Tier 3” as a “small, opportunistic Chinese target”, alongside other smaller economies with lower transshipment volumes but “specific weak-link advantages”.

These advantages include low-cost labour, free zones, port or border access, bonded warehousing, niche assembly capacity, preferential US access or limited customs enforcement capacity, said the report.

The White House report comes a year after the US announced an additional 40 per cent tariff on goods determined to have been illegally transshipped to evade duties.

Responding to BT queries, a Ministry of Trade and Industry (MTI) spokesperson said that the Republic “takes trade compliance seriously”, adding: “Companies transhipping goods through Singapore must fully comply with Singapore’s laws and regulations.”

The spokesperson noted that in June 2025, Singapore Customs reiterated the importance of accurate “country/region of origin” declarations in Singapore’s permit applications, in a circular issued to all traders and declaring agents.

MTI added: “Singapore does not condone businesses using their association with Singapore, and using fraudulent and dishonest means to circumvent or violate the laws and regulations of other countries.”

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Firms transhipping through Singapore must declare the true country of origin of goods: MTI

Under pressure

The report also laid out the US’ intention to have a “detective border” enabled by artificial intelligence. This is backed by a Jun 3 executive order directing US authorities to tighten importer-of-record requirements, among other measures.

The report did not specify any action to be taken with Singapore specifically, but economists noted that simply being named could be a form of pressure.

Song Seng Wun, economic adviser at Singapore-based fintech company SDAX, said: “By naming Singapore, the US is putting compliance pressure on the region’s largest gateway and signalling that scrutiny will extend to major transshipment hubs, not only manufacturing centres.”

There is also an aspect of “geopolitical signalling”, as Singapore “sits in the middle” of US-China competition, said Song.

The Republic is the largest US foreign direct investment source, at over S$35 billion in 2025. But it is also the southern hub of China’s New International Land-Sea Trade Corridor and a key node for Malacca Strait flows through which much of China’s imported oil flows, he noted.

Listing Singapore is a diplomatic lever – warning the Republic not to “become the go-to for circumvention” – even as the US still needs Singapore for finance, tech and defence cooperation, he added.

Singapore will likely respond by emphasising rule-following and transparency, while preserving access to both US and Chinese supply chains, concluded Song.

Compliance costs?

Maybank’s Dr Chua does not expect the US to impose blanket tariffs, but instead have “targeted penalties for any firms in breach of shadow transshipment”.

“There could be more friction and compliance costs, but not any major detrimental impact on Singapore’s transshipment hub activities,” he said.

However, Singapore may be expected to improve enforcement. Some countries in the region have already made moves, noted Song, citing Malaysia’s tightening of its country-of-origin rules.

Song expects the Maritime and Port Authority of Singapore and Singapore Customs to tighten audits, demand more documentation and do more info-sharing.

However, he noted that because the country’s straits are transit routes under the United Nations Convention on the Law of the Sea, Singapore has no legal power to block ships.

Dr Chua noted: “Singapore can probably invest in the technological and monitoring requirements more quickly and credibly than most other trading hubs.”

The MTI spokesperson stressed that Singapore will “not hesitate to take firm and decisive action” against any violation of its laws, citing charges brought by Singapore Customs on Aug 14 against a Singapore-registered company and three individuals.

The charges were for alleged involvement in a scheme to falsely declare the origin of bedding products and other goods exported from Singapore to the US, in an apparent attempt to circumvent US duties.

For companies, the US moves will mean higher compliance costs, said Song: “US buyers will ask for more proof of origin, and US customs may target shipments routed through Singapore.”

This will push firms to keep clearer records or even shift the final assembly of their products to meet “substantial transformation” rules, he added.

“Some shipping lines are already reflagging to Singapore to avoid US port fees on China-built ships, so traffic may actually rise even as scrutiny rises,” Song noted.

Shifting around

Asked how effective US efforts against shadow transshipment might be, Dr Chua said: “It will be near impossible and akin to whacking a mole.”

“If the US closes in on one node, shadow exporters may just shift their factories to another country and reroute.”

He noted how US tariffs on China, for instance, have had a limited effect on reducing the US trade deficit and China’s exports and trade surplus. This is “because of how trade flows and supply chains can reconfigure and adjust to any fresh trade barriers”, Dr Chua said.

Song agreed that trade flows will simply adapt around new barriers: “People will work around rules. It just means more money and more time. And American consumers will pay in the end.”

For Singapore, while the US report might imply more compliance work and diplomacy, it could also be an opportunity for the Republic to position itself as the “trusted, traceable” hub versus less-regulated alternatives, he noted.