 White House Targets Transshipment as Customs Crackdown Continues |
Source |
American Shipper |
Post Date |
08/31/2026 |
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A recent White House report focusing on the use of transshipment to avoid U.S. import tariffs and trade remedies offers yet another signal that federal authorities are strengthening customs enforcement efforts and that importers, customs brokers, and others should consider more proactive measures to attenuate related challenges.
What the Problem Is
The core argument of the report is that substantial volumes of Chinese-origin goods (between $40 billion and $303 billion annually) are entering the U.S. through third countries, resulting in the loss ?ens of billions of dollars?a year in import duty and tariff revenue as well as bigger trade deficits, fewer domestic jobs, and lower economic growth.
The report asserts the existence of a ?lobal network of production hubs, logistics platforms, free-trade zones, bonded warehouses, processing corridors, and re-export centers?that facilitates illegal transshipment ?hrough both production-side and logistics-side channels.?The former may include light assembly, finishing, testing, packaging, labeling, inspection, or component integration before export to the U.S., while the latter may include routing, consolidation, warehousing, re-invoicing, relabeling, or new export documentation.
The report further argues that there are more than 40 countries involved in this network, from major trading partners with diversified industrial bases (Canada, Mexico, the European Union, India, Israel, Japan, South Korea, and Taiwan) to countries that are closely integrated into China-linked production and supply networks (Brazil, Indonesia, Malaysia, Thailand, T?kiye, and Vietnam) to smaller jurisdictions that offer specific advantages like low labor costs, limited customs enforcement capacity, or preferential access to the U.S. market (Argentina, Azerbaijan, Bangladesh, Cambodia, Chile, Colombia, Costa Rica, Dominican Republic, Georgia, Jordan, Kazakhstan, Kenya, Laos, Morocco, Myanmar, Oman, Panama, Peru, Philippines, Singapore, Sri Lanka, Switzerland, United Arab Emirates, and Uzbekistan). The report identifies the principal operating roles that each of these trading partners perform within this network.
The report also complains that ?urrent standards for determining country of origin are complex and cumbersome?and ?ased on customs case law, rather than a precise statute, which can lead to inconsistent application and provide an easy mechanism for tariff evasion.?Imports conforming to these standards may meet the letter of the law, the report states, but ?ail to meet the spirit of the law.?
What the Government is Doing ?and May Do
Stating that effective enforcement ?equires distinguishing legitimate manufacturing and substantial transformation from pass-through trade and origin shifting,?the report points out that the U.S. is already taking steps in this direction. New agreements on reciprocal trade include provisions designed to prevent agreement benefits from accruing substantially to third countries. U.S. Customs and Border Protection has built targeting tems to leverage ?he enormous amounts of trade and travel data available?that are already starting to incorporate artificial intelligence. An utive order issued earlier this year directs CBP to tighten importer of record requirements, increase bonding and domestic asset requirements, require additional ownership and business affiliation disclosures, impose good standing requirements, strengthen penalties, and improve trade transparency.
However, the report also foresees the development and implementation of a ?etective Border?that builds on these efforts and ?ever sleeps, never tires, and never forgets.?This emerging tem will be tasked with ?ngesting and analyzing global trade data with lightning speed, identifying anomalous routing patterns, validating production capacity, and directing enforcement toward the highest-probability offers.?The customs EO would then give CBP the ?nforcement leverage?to translate information from this tem into ?mmediate interdiction, penalty tariffs, sanctions, and potential loss of market access.?
The report also urges congressional action to am and codify standards for determining country of origin.
Takeaways for Importers
In the shorter term, importers should expect greater scrutiny of and requests for bills of materials, production records, manufacturing process documentation, labor and capacity information, supplier relationships, and country-of-origin substantiation, especially when sourcing from the jurisdictions identified above. Gathering, confirming, and maintaining these types of information will help importers withstand that scrutiny and minimize the shipment delays and penalties that could result.
In the longer term, importers should consider that sourcing models based on genuine local value addition, significant processing, local component sourcing, and factory investments will likely be more defensible than those built around minimal assembly, relabeling, packaging changes, and similar operations. As they consider such changes, importers should bear in mind the need to validate factors like production capacity, factory capabilities, input sources, ownership structures, and supply-chain traceability.
A Note on First Sale
Current U.S. law expressly permits first sale valuation when the legal requirements are met, and the report does not assert that first sale is illegal. However, it clearly presents first sale as contrary to the objective of maximizing tariff revenue and suggests that existing customs rules may not adequately support that objective.
This makes first sale transactions more likely to attract audit, documentation, and policy scrutiny going forward.
Companies using first sale should therefore at the very least expect from CBP more CF-28s (requests for information), more audits, and more validation of transaction structures and related-party arrangements. They should also be on guard for potential regulatory or statutory efforts to tighten first sale requirements, although none are specifically proposed in the report and previous steps in this direction have been unsuccessful.
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