US to Crack Down on Transshipment Scam Using AI
On 13 August 2026, the Office of Trade and Manufacturing Policy released a 25-page report entitled ‘The Great Transhipment Scam.’ The report outlines how China has built a global network of about 40 countries to go around the high tariffs imposed by the US on goods made in China. Peter Navarro heads the OTMP and wrote an OpEd in the New York Times to explain the gist of the report.
The main culprits are Mexico, Malaysia and Vietnam. But allied countries such as Singapore, South Korea, Japan and India are not spared. Actually, the report categorizes the suspicious countries into three tiers.
By transshipment scam, the report means minimal assembly, repackaging or reinvoicing to change the certificate of origin to make the product to be made in a country with a lower tariff into the US compared to that imposed on China.
In light of these findings, the US intends to crack down on these third-party countries. Firstly, the Trump Administration plans to plug any loophole in Section 301 of the Trade Act and to review Trade Agreements by adding an anti-transshipment clause. The report recommends custom tariffs must be accompanied by stiff rules of origin to be truly effective.
Then, the US will deploy the AI Border Detective to investigate cases of transshipment violations. The upcoming USMCA tripartite Free Trade Agreement among the US, Mexico and Canada will thus be amended.
The report claims some USD 30 to 300 billion are illegally transhipped, which is a rather large range. The OTMP report is aligned with an earlier report from the Department of Commerce that estimated the illegal transhipment volume to be aroud USD 60 billion. This new report comes weeks before a proposed visit of China’s President XI Jinping to the USA.
