US to Crack Down on Transhipment Scam Using AI
On 13 August 2026, the Office of Trade and Manufacturing Policy released a 25-page report entitled ‘The Great Transshipment 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 Report points out Mexico, Malaysia and Vietnam as the main intermediaries. But allied countries such as Singapore, South Korea, Japan, India, and the EU are not spared. Actually, the report categorizes the countries into three tiers.
| TIER | DESCRIPTION | COUNTRIES |
|---|---|---|
| 1 | Large trading partners with high transhipment risk | Canada, EU, India, Israel, Japan, Mexico, South Korea, Taiwan |
| 2 | Medium trading partners with medium transhipment risk | Brazil, Indonesia, Malaysia, Thailand, Turkey, Vietnam |
| 3 | Small economies with opportunistic transhipment risk due to permissive or limited customs | 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, UAE, Uzbekistan |
Transhipment scam typically involves minimal assembly, repackaging or reinvoicing to fake the certificate of origin to take advantage of a customs tariff differential. On the other hand, legal transhipment involves load consolidation at transit hubs to optimize logistics, without changing the origin of goods. Since scammers usually bundle both, it is sometimes difficult to distinguish between legal and illegal transhipment without close control of the rules for country of origin.
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 that customs #tariffs must be accompanied by stiff rules of origin to be truly effective. In June 2026, President Trump issued Executive Order 14411 to strengthen customs enforcement to combat customs duty evasion, forced labor, and illegal transhipment.
Then, the US will deploy the AI Border Detective to investigate cases of transhipment 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 around USD 60 billion. This new report comes weeks before the proposed visit of China’s President XI Jinping to the USA.
