The Department of Justice (DOJ) recently trumpeted the success of the Trade Fraud Task Force, which racked up $1 billion in recoveries, penalties, forfeitures, and charged losses before reaching its first birthday. A large part of the Task Force’s remit is customs fraud, which involves underpaying duties owed to the United States for imports. Customs and Border Patrol, the entity that collects and enforces customs duties, assessed over $2.1 billion in commercial trade penalties in fiscal year 2025-2026.  

Illegal transshipment, which involves lying about products’ country of origin, has been a growing customs fraud problem. Tariff rates can vary dramatically country-to-country, so claiming goods originate in a lower-tariff country can significantly lower the duty due upon import. Currently, high tariffs apply to many goods made in China. By 2020, the U.S. imposed Section 301 tariffs on Chinese products that covered roughly 70% of Chinese imports to the U.S. A barrage of other China tariffs have followed, including anti-dumping/countervailing duty tariffs that can be very high – sometimes over 100%. 

To avoid high duties on goods made in China, some unscrupulous importers route these products through a second country before sending them on to the United States. They then claim the second country as the country of origin and take advantage of lower tariff rates. (To be clear, it can be perfectly legal to declare a second country as the country of origin when goods are in fact “substantially transformed” there. It’s not legal when they’re just shipped through with no changes or only minor ones.)    

An August 2026 White House report entitled, “The Great Transshipment Scam: Rise, Scope, and Costs” provides a range of estimates of the financial impact of transshipment. It summarizes five government and private-sector estimates of the scope of transshipment, which conclude that a flow of goods worth between $40 billion and $303 billion is transshipped annually. Based on those estimates, the report calculates an annual revenue loss of $14 to $106 billion in tariffs avoided. (These estimates deliberately exclude lost revenue from anti-dumping and countervailing duties, which would push the totals even higher.) The report also lists 40 countries all over the globe identified as high-risk locations for transshipment, ranging from Malaysia to Mexico to Turkey. 

Of course, it is always tricky to estimate the volume of fraud; the whole point of activities like transshipment is concealment. But by any of the estimates in the report, the scale is enormous. At the upper-mid-range estimate of $40 billion in duties avoided, the number is almost five times the $8.2 billion Fiscal Year 2026 budget for the nutritional program for Women, Infants, and Children (WIC). At the lowest estimate of $10 billion, it is equivalent to 2.5 times the Federal Aviation Administration’s facilities and equipment modernization $4 billion request for Fiscal Year 2026. 

The False Claims Act is a powerful force for fighting customs fraud, including transshipment. We can expect more enforcement activity in this area, since the government continues to prioritize trade fraud enforcement.  

Just this May, the DOJ announced a staggering $549.5 million settlement with Perfectus Aluminum Inc., resolving allegations that the company knowingly evaded anti-dumping and countervailing duties. In the same month, two steel-companies agreed to pay $19 million to settle allegations that they intentionally misrepresented the country of origin on steel imports to avoid import duties. These settlements only represent a small portion of recent settlement efforts and indicate that customs fraud enforcement is not slowing down anytime soon.  

The piece was written by Liz Soltan, Counsel at Whistleblower Partners LLP.