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Transshipment Crackdown Burdens US Importers

[ August 21, 2026   //   Gary Burrows ]

An executive order and new White House report signal increased scrutiny of country-of-origin claims, importer ownership, production records and international cargo routing.

U.S. importers could face expanded documentation requirements, more intensive vetting and closer examination of overseas production as the Trump administration moves to strengthen enforcement against illegal transshipment and tariff evasion.

A new White House report alleges that between US$40 billion and US$303 billion in Chinese-origin goods enter the U.S. through third countries each year, potentially costing the federal government tens of billions of dollars in tariff and duty revenue.

The unusually broad estimate reflects multiple government and private-sector analyses cited in the report. The White House identifies more than 40 countries as potential participants in what it calls a global “Shadow Transshipment Network,” ranging from major U.S. trading partners and established manufacturing economies to smaller jurisdictions with free-trade zones, bonded warehouses or limited customs-enforcement capacity.

The report divides potential transshipment activity into two categories. Production-side activity may include assembly, finishing, testing, packaging, labeling or component integration that does not amount to a substantial transformation under U.S. customs rules. Logistics-side activity can involve routing, consolidation, warehousing, relabeling, reinvoicing or issuing new export documentation without materially changing the product.

Not all processing or movement through a third country constitutes illegal transshipment. A product’s country of origin generally depends on whether the work performed results in a substantial transformation into a new and different article.

However, the White House argues that existing origin standards are complex, reliant on customs rulings and case law, and vulnerable to inconsistent application. The report says some transactions may satisfy the letter of current rules while failing to meet the administration’s intended policy objective.

That position could create added uncertainty for companies that have moved manufacturing from China to Mexico, Southeast Asia and other markets but continue to use Chinese components, suppliers, financing or ownership structures.

Customs Order Establishes Deadlines

The White House report follows President Donald Trump’s June 3 executive order directing the Department of Homeland Security and U.S. Customs and Border Protection to overhaul importer eligibility, disclosure and enforcement practices.

Executive Order 14411 instructs CBP to increase bonding or domestic-asset requirements, collect more beneficial-ownership and business-affiliation information, recurrently vet companies involved in importing and establish a “good standing” requirement for importers of record.

It also calls for heightened disclosure of supply-chain and production information, including product identifiers, specifications and documents submitted to foreign customs authorities.

Several measures are to be initiated within 90 days of the order, while changes involving importer eligibility, the importer registry, recurrent vetting and good-standing requirements carry 180-day deadlines.

The order further directs the government to increase audits, enforce maximum penalties in some cases and prioritize investigations involving transshipment, undervaluation, misclassification and forced labor.

Foreign importers of record face additional restrictions. The order calls for prohibiting them from using informal entry and generally preventing them from relying on continuous bonds for formal entries unless CBP determines that federal revenue and compliance are adequately protected.

AI System Would Reconstruct Supply Chains

The White House report describes an emerging AI-enabled enforcement architecture it calls the “Detective Border.”

The proposed system would analyze shipment data, routing histories, product classifications, component content, factory capacity and corporate relationships to identify anomalies and direct enforcement toward high-risk entries.

The report says CBP already uses artificial intelligence and machine learning in cargo targeting, nonintrusive inspections and anomaly detection. The envisioned system would integrate those capabilities more broadly, comparing a shipment’s declared origin with its physical movement, production history and supply-chain relationships.

For importers, that could mean an origin claim would no longer be evaluated primarily through documents accompanying a single entry. Customs authorities could instead compare those documents with historical bills of lading, supplier networks, related-party transactions, manufacturing inputs and the claimed factory’s ability to produce the exported volume.

Importers advised to strengthen documentation

Trade law firm Sandler, Travis & Rosenberg said importers should prepare for more CBP requests involving bills of materials, production records, descriptions of manufacturing processes, labor and factory-capacity information, supplier relationships and country-of-origin substantiation.

The firm advises companies to verify factory capabilities, input sources, ownership structures and supply-chain traceability rather than relying solely on certificates supplied by vendors.

Sourcing arrangements involving meaningful local processing, local components and substantial factory investment are likely to be easier to defend than models built around relabeling, packaging changes or minimal assembly, according to the firm.

STR also cautioned that first-sale valuation arrangements could attract additional scrutiny, although the White House report does not propose eliminating the practice and current U.S. law permits first-sale valuation when its legal requirements are satisfied.

The administration is urging Congress to codify country-of-origin standards, but the report does not present proposed statutory language. It also does not establish a budget, completion date or detailed operating structure for the “Detective Border.”

The immediate impact will therefore come from CBP’s implementation of the June executive order. Until the agency issues additional regulations and guidance, importers face the challenge of preparing for greater scrutiny without knowing precisely how the new risk standards will distinguish legitimate international manufacturing from illegal origin shifting.

Tags: Sandler Travis & Rosenberg, U.S. Customs and Border Protection