The Trump administration is expanding its focus from individual shipments to whole supply chains, making compliance dramatically more burdensome for exporters. The need for documentation is growing, manufacturing processes are coming under closer scrutiny and the risk of inspections and shipment delays is on the rise.
For companies exporting to the United States, it may no longer be enough to know where a product comes from. Increasingly they may have to be able to show provenance quickly, clearly and with evidence that can stand up to regulatory scrutiny.
On Aug. 13, 2026 the U.S. issued “The Great Transshipment Scam,” a 25-page report that places alleged tariff evasion through third countries at the center of President Donald Trump’s growing trade enforcement agenda.
The report, released by the White House Office of Trade and Manufacturing Policy (OTMP), examines what it describes as an increasing practice of routing goods, especially products that originate in China — through intermediary countries in an effort to disguise their true origin and avoid higher US tariffs and other trade restrictions.
The practice, the report says, “may involve relabeling, repackaging, re-invoicing, minor processing, false country-of-origin claims, or other actions intended to secure tariff treatment that would not apply if the goods’ true economic origin were declared.”
The report lists more than 40 countries as being at increased risk of illegal transshipment and categorizes them into three tiers. The eight Tier 1 jurisdictions are the European Union, Israel, Japan, Canada, Mexico, South Korea, and Taiwan.
History of CBP enforcement against illegal transhipment
The policy path leading directly to the current crackdown began in April 2025, when Trump’s reciprocal tariff order extended China’s tariff treatment to Hong Kong and Macau. The move reflected growing concerns that third countries could be used as channels to circumvent US tariffs.
Investigations conducted under United States Customs and Border Protection (CBP)’s Enforce and Protect Act (EAPA) soon produced concrete examples of alleged circumvention.
In May 2025, CBP found that mattresses originating in China had been transhipped through third countries and falsely declared as products originating in those jurisdictions. A separate investigation in June 2025 involved Chinese steel products allegedly transhipped through Thailand.
The administration’s focus on origin and tariff circumvention expanded further in April 2026, when Trump’s metals proclamation authorised CBP to address “illegal transhipment, undervaluation, and other tariff evasion methods” involving aluminium, steel, copper and certain derivative products.
Then, on June 3, Trump’s “Strengthening Customs Enforcement” order pushed regulatory scrutiny deeper into the supply chain. The order instructed the Department of Homeland Security (DHS) and CBP to strengthen importer vetting, bonding requirements and supply-chain disclosure obligations.
It also called for more detailed information concerning an imported product’s production history and supporting documentation, establishing much of the enforcement framework that would later be reflected in The Great Transshipment Scam.
Changed interpretation of “substantial transformation”
The new report signals a potential major paradigm shift in the way the administration interprets country of origin and substantial transformation, said Cindy Allen, CEO and MD of Trade Force Multiplier, a US-based customs and international trade advisory firm.
“The biggest problem is that the report seems to expand the definition of illegal transhipment,” she says.
Transshipment has traditionally meant the transfer of goods between conveyances. Illegal transshipment, however, is usually fraudulent.
For example, goods produced in China may be transported to a third country, where the country-of-origin markings are removed or changed, before the products are falsely declared to originate in the third country.
Such a situation is fundamentally different from a genuine manufacturing process of substantial transformation.
To show the difference, Allen gives the example of an electric motor manufactured in China and shipped to Vietnam, where it is installed in a chair. The finished product is then imported into the United States as a motorized chair.
Under the conventional definition of substantial transformation, the motor is now a part of a brand new product and the finished product is imported into the United States as a chair.
But Allen thinks the administration may now be wondering if simply installing the motor in the chair is enough.
“The administration seems to be asking itself if just slapping the motor in the chair is enough. It is suggesting that the motor itself may have to be transformed considerably and may retain its own essential character,” Allen says.
That would be a dramatic departure from decades of U.S. case law and Customs rulings.
“If the finished product is deemed to retain the country of origin of a significant component, the implications for valuation, classification and country of origin determination could be significant,” says Allen.
If the origin of a finished product can be challenged based on the origin and transformation of its individual components, exporters will need a lot more than a simple country-of-origin declaration.
The origin claim will need an evidence trail
“Country of origin stops being a declaration and becomes a claim you must be able to prove on demand,” says Jackson Wood, Vice President, Trade Regulations at Descartes.
The pressure on exporters could intensify even before formal regulatory changes are introduced. US importers are increasingly likely to incorporate origin-verification requirements into supplier contracts and demand more detailed evidence showing where and how products were manufactured.
For exporters, this means moving beyond a certificate or declaration and assembling a complete evidentiary package before a shipment even begins its journey.
“It is not a document; it is a package, assembled before the goods move,” Wood says.
At the centre of that package should be a detailed bill of materials identifying every component, its origin, value and Harmonised System (HS) classification.
“Nothing else stands without it,” he says.
Exporters should also document the manufacturing process in detail through step-by-step production narratives, equipment records and cycle times. The claimed manufacturing process should then be directly connected to the specific shipment through lot numbers, production dates, machine logs and quality-control records.
Supplier declarations may also come under greater scrutiny.
Wood recommends relying on “signed, dated supplier affidavits, tested for consistency against factory records,” rather than informal assurances.
Government-issued certificates of origin could also gain greater importance, particularly when issued by a ministry rather than a private organisation.
Wood points to Vietnam as an example, following the transfer of certificate-issuing responsibility from the Vietnam Chamber of Commerce and Industry (VCCI) to the Ministry of Industry and Trade (MOIT).
Consistency across all trade documentation will also become essential.
“Origin stated identically on invoice, packing list and transport documents” is critical, according to Wood, as inconsistencies between documents could themselves trigger additional scrutiny.
The compliance burden, therefore, is shifting from simply possessing the correct document to maintaining a complete and defensible origin file.
Marcus Eeman, Customs Director at Flexport, recently addressed the issue during a company webinar, noting that the disruption of recent years has largely revolved around tariffs.
“The chaos in the months and years coming ahead is going to be more around who gets to import, when they get to import, and how they know what those countries of origin are,” he said.
What does it mean for Indian exporters?
For Indian exporters, the consequences could extend well beyond the direct customs obligations created by the new US rules.
In an exclusive article, Nitish Rai, Founder and Chief Executive Officer of FreightFox, an India-based supply-chain technology company, argues that tighter requirements imposed on importers, combined with India’s designation as a Tier 1 transhipment-risk country, could increase the evidentiary burden even for fully legitimate manufacturers.
For exporters selling under Free on Board (FOB) or Cost, Insurance and Freight (CIF) terms, the US buyer may remain the Importer of Record (IOR). Nevertheless, that importer will increasingly rely on the Indian exporter to provide certificates of origin, manufacturing records, bills of materials, shipping bills and other supporting documentation.
“They will lean on the exporter to supply documents quickly and in a clear, audit-ready format,” Rai writes.
He warns that slow or incomplete documentation could delay shipments and encourage buyers to shift towards suppliers capable of responding more quickly.
The exposure becomes more direct for exporters selling on Delivered Duty Paid (DDP) terms, or directly to US consumers, while acting as the IOR themselves.
Rai points in particular to formal entry requirements, bonding obligations and Customs Trade Partnership Against Terrorism (C-TPAT) requirements.
“Weak record-keeping today can turn into an expensive bill twelve months from now, for a matter the business thought was long closed,” Rai writes.
He argues that exporters must move away from fragmented records scattered across emails, messaging platforms and spreadsheets and towards systems capable of quickly establishing origin, substantiating transformation and retrieving supporting documents when required.
As the rules become increasingly difficult to interpret, exporters will need stronger evidence to defend their origin claims.
AI could turn CBP’s supply-chain scrutiny into a wider net
The ability to prove origin is becoming increasingly important as CBP gains greater capacity to test those claims against wider supply-chain datasets.
The Great Transshipment Scam proposes “Detective Border”, an AI-enabled system designed to analyse shipment data, routing histories, product classifications, ownership links and production capacity in order to distinguish legitimate nearshoring from illegal pass-through trade.
However, according to Cindy Allen of Trade Force Multiplier, who previously worked on the Automated Commercial Environment (ACE), CBP’s ability to analyse trade data is not itself new.
What has changed, she says, is the expansion of supply-chain enforcement, particularly through forced-labour investigations.
“CBP received additional funding to identify the origins of products further back in the supply chain, particularly in connection with the Uyghur Forced Labor Prevention Act and products linked to China’s Xinjiang Uyghur Autonomous Region.”
At the same time, the private sector has developed tools capable of mapping suppliers and ownership relationships across multiple tiers of the supply chain.
“With AI added to these capabilities, CBP can analyse supply chains much more deeply. It can look at a fourth-tier supplier, assess what that company is capable of manufacturing, identify where it sources from and examine other supply chains connected to that supplier.”
The result could be a multiplier effect in enforcement.
A concern involving one supplier could potentially lead authorities to scrutinise other companies sourcing from that same supplier, expanding an investigation well beyond the original shipment or importer.
“AI makes it possible to analyse large volumes of customs and transportation data much faster than a person manually reviewing documents,” Allen says.
Enforcement pressure could push compliance upstream
Even legitimate manufacturers could find themselves under scrutiny if their trading patterns trigger regulatory red flags.
These could include sudden growth in exports, short port dwell times, HS code patterns resembling former Chinese trade flows or ownership links to Chinese manufacturers.
Wood expects such developments to result in “more inspections, shipment delays, duty demands and potential penalties.”
One of the most significant changes could be the wider use of automated targeting.
The report’s proposed AI-based screening system could combine information on trade flows, ownership structures, production capacity and supply-chain data to identify potential circumvention. This would allow CBP to concentrate enforcement resources on flagged corridors, commodities and companies.
“Enforcement capacity is finite,” Wood says.
Planned biannual CBP and Commerce lists identifying countries and facilities associated with circumvention could create an additional layer of risk.
Wood warns that appearing on such a list or trading with a listed company, could increase the likelihood that shipments will be held for further examination.
The consequences could extend beyond additional duties.
Exporters could also face exposure to penalties under the False Claims Act and broader fraud investigations.
At the same time, the ultimate scope of enforcement remains uncertain.
“Transhipment remains undefined in the operative rule,” Wood says. “So scope will be settled case by case.”
For exporters, that uncertainty makes advance preparation increasingly important.
“Build the origin file before you need it,” Wood advises.
Documentation for individual stock-keeping units (SKUs) should be organised in a way that allows it to be retrieved “in days rather than weeks.”
Companies should also continuously monitor changes in their bills of materials, supplier networks and manufacturing processes, while examining ownership structures alongside factory geography.
“Map ownership, not just geography. A factory in the right country with the wrong ownership is still exposed under the report’s definition.”
Wood also recommends continuous screening against future CBP and Commerce lists, considering binding rulings for borderline origin cases and calculating the potential financial consequences of additional duties.
“Model the downside explicitly,” he says.
Where companies identify genuine compliance issues, Wood recommends seeking advice on voluntary disclosure as quickly as possible in order to limit broader fraud exposure.
The central message emerging from the administration’s expanding enforcement agenda is increasingly clear: for exporters, declaring a product’s origin may no longer be enough. In the emerging US trade-compliance environment, origin is becoming a claim that must be supported by a complete, consistent and readily accessible body of evidence.
