The $100 Billion Transshipment Problem

Illegal Trade is Undermining U.S. Tariffs, American Workers, and Domestic Industry

Article

October 20, 2025

Executive Summary

Exiger analysis has detected more than $100 billion in goods entering the United States annually through trade flows exhibiting strong indicators of illegal transshipment and country-of-origin violations.

Illegal transshipment occurs when goods are routed through a third country to conceal where they were actually produced. The goods may be relabeled, repackaged, minimally processed, or accompanied by inaccurate documentation before being exported to the United States under a false country-of-origin declaration. This allows foreign producers and U.S. importers to evade tariffs, antidumping and countervailing duties, quotas, or other trade restrictions.

The $100 billion figure represents the estimated annual value of imported goods associated with potential country-of-origin violations—not the amount of unpaid tariffs. The corresponding revenue loss depends on the tariff or duty that should have applied to each shipment. More importantly, the figure demonstrates that illegal transshipment is not a collection of isolated customs violations. It is a systemic threat to the effectiveness of U.S. trade policy.

Exiger calculated the estimate by analyzing U.S. imports and the international trade, corporate, and supply-chain activity behind them. The analysis identified potential country-of-origin discrepancies using the same types of warning signs outlined by U.S. Customs and Border Protection (CBP), including implausible production capacity, discrepancies between imports and exports, unexplained routing through third countries, a lack of substantial transformation, unusual transaction structures, and sudden departures from established trade patterns.

When tariffs are evaded, foreign producers gain an artificial price advantage over American manufacturers and companies that comply with the law. Domestic businesses lose sales and market share, investments in U.S. production become less economically viable, and workers do not receive the protection that Congress and the executive branch intended tariffs to provide.

The central policy conclusion is straightforward: tariffs cannot strengthen American industry unless the United States can determine where imported goods were actually made and collect the duties legally owed on them.

Key Findings

Exiger has detected more than $100 billion in annual U.S. imports associated with strong indicators of illegal transshipment and potential country-of-origin violations.
The $100 billion figure measures the value of affected trade, not the amount of unpaid tariffs or duties.
The analysis applies indicators identified in CBP’s Customs Trade Partnership Against Terrorism, or CTPAT, guidance on illegal transshipment.
Transshipment is most difficult to detect when enforcement relies principally on the country of origin and other information declared at the border.
Uncollected tariffs create an artificial price advantage for foreign producers, undermine compliant importers, and weaken the intended protection for American workers and industries.

The Scale of the Problem

Transshipment is a routine and lawful part of international commerce. Goods often pass through multiple countries on their way to their final destination. Transshipment becomes illegal when it is used to misrepresent a product’s country of origin, conceal the identity of its producer, or evade a tariff or trade restriction.

A common scheme begins with goods manufactured in a country subject to U.S. tariffs or antidumping and countervailing duties. The goods are shipped to an intermediary country, where they may be repackaged, relabeled, or subjected to limited processing. They are then exported to the United States as products of the intermediary country, even though no substantial transformation occurred there.

The physical product may remain essentially unchanged. What changes is the paperwork—and, as a result, the tariff applied at the border.

CBP has identified illegal transshipment, false country-of-origin marking, false manufacturer declarations, misclassification, and inaccurate product descriptions as methods used to avoid antidumping and countervailing duties. Its CTPAT guidance warns companies to examine whether products underwent substantial transformation, whether declared origins are consistent with local manufacturing capabilities, and whether trade volumes and shipping routes make commercial sense.

Exiger’s analysis indicates that goods associated with these warning signs account for more than $100 billion in annual U.S. imports. That total is large enough to affect the competitive conditions facing entire industries.

It is important to distinguish three related figures:

VALUE OF AFFECTED TRADE

The entered value of imports associated with strong indicators of illegal transshipment or country-of-origin violations. Exiger estimates this amount at more than $100 billion annually.

POTENTIAL UNPAID DUTES

The difference between the tariffs and duties assessed under the declared origin and those that would apply under the likely true origin.

ECONOMIC
HARM

The broader effect on U.S. manufacturers, workers, investment, market share, and lawful importers. This harm can substantially exceed the direct loss of tariff revenue.

The $100 billion finding is therefore a measure of the scale of trade potentially circumventing U.S. enforcement—not a claim that the federal government has failed to collect $100 billion in tariffs.

How the $100 Billion Estimate Was Calculated

Exiger’s methodology evaluates whether the country of origin declared on U.S. imports is consistent with the commercial, manufacturing, and trade activity associated with those goods.

The analysis does not treat every shipment routed through a third country as illegal. Instead, it looks for combinations of indicators that suggest the intermediary country did not produce or substantially transform the goods being exported to the United States.

1. Identify Trade Exposed to Circumvention

The analysis begins with U.S. import activity, organized by product, declared country of origin, supplier, importer, value, and time period.

Particular attention is given to trade flows in which the same or comparable products face materially different tariff treatment depending on their country of origin. These differences create an economic incentive to conceal the true origin of the goods.

2. Trace the International Trade Behind U.S. Imports

Exiger then examines whether an intermediary country is importing the same or closely related products from a country subject to higher U.S. tariffs and subsequently exporting those products to the United States.

3. Apply CBP’s Transshipment Indicators

Exiger evaluates trade flows against the red flags identified in CBP’s CTPAT guidance.

No substantial transformation: The product is repackaged, relabeled, or minimally processed in the intermediary country without undergoing manufacturing sufficient to change its country of origin.
Manufacturing-capability mismatch: The country or declared producer exports goods that it does not appear capable of producing at the reported scale.
Import-export discrepancies: The volume, timing, or classification of goods entering and leaving the intermediary country indicates that products may be passing through it.
Illogical routing: Goods are routed through a lower-cost or preferential-tariff country without a clear supply-chain or commercial justification.
Unjustifiably complex transactions: The trade involves unnecessary intermediaries, newly established entities, or other structures without an evident legitimate business purpose.
Deviation from normal activity: A company or country experiences an abrupt change in trade volumes, products, counterparties, routes, or prices.

4. Score, Validate, and Aggregate the Results

Potential violations are assessed using the number, strength, and convergence of the relevant indicators. The annual trade value associated with the qualifying transactions is then aggregated while controlling for duplication across shipments, companies, and supply-chain relationships.

This process produced Exiger’s estimate of more than $100 billion in annual U.S. imports associated with strong indicators of illegal transshipment and potential country-of-origin violations.

Why Uncollected Tariffs Threaten American Workers and Industry

Tariffs are intended to change the economic conditions under which foreign and American companies compete. They may offset unfair foreign subsidies, respond to dumping, protect strategically important industries, or reduce reliance on countries that pose economic and national security risks.

Illegal transshipment defeats those objectives.

Consider a foreign product with a customs value of $100 that should face a 25 percent tariff. If the producer routes the product through a third country and enters it under an origin subject to no comparable tariff, the importer avoids $25 in legally owed duties.

That $25 becomes an artificial competitive advantage. The advantage does not result from greater efficiency, better technology, or lower production costs. It results from evading U.S. law.

Across billions of dollars in trade, the consequences compound.

American manufacturers lose the protection tariffs were designed to provide

Domestic manufacturers make decisions about hiring, capital investment, and production capacity based partly on expected market conditions. If tariffed foreign goods continue entering the market at artificially low prices, the expected commercial case for expanding U.S. production may never materialize.

Law-abiding companies are placed at a competitive disadvantage

Importers that correctly identify country of origin and pay the required duties face higher costs than competitors using concealed or inaccurate supply chains. Weak enforcement therefore penalizes compliance and rewards opacity.

Workers bear the consequences

When artificially inexpensive imports suppress prices and displace domestic production, the effects are felt through reduced orders, delayed investments, plant closures, and lost employment. A tariff written to protect an industry provides little practical benefit if competing goods can avoid it by changing their shipping route and paperwork.

The government loses legally owed revenue

Illegal transshipment deprives the Treasury of duties enacted or imposed under U.S. law. CBP reported uncovering more than $400 million in unpaid duties through Enforce and Protect Act investigations during only part of 2025, illustrating the significant revenue involved even in the cases that reach formal investigation.

Trade policy loses credibility

Foreign producers adjust their behavior based on whether U.S. trade measures are likely to be enforced. If tariffs can routinely be avoided through an intermediary country, circumvention becomes an expected cost of doing business rather than a meaningful enforcement risk.

Conclusion

Exiger’s identification of more than $100 billion in annual U.S. imports associated with illegal-transshipment indicators demonstrates the scale of the challenge facing U.S. trade enforcement.

The problem is not simply that some importers fail to pay the correct duty. Illegal transshipment undermines the central economic purpose of tariffs: changing the competitive balance so that American workers and industries are not forced to compete against unfairly traded foreign goods.

The United States cannot rebuild its industrial base if more than $100 billion in potentially illegally transshipped goods can enter the country each year. Tariff enforcement is not separate from reindustrialization. It is one of its foundations.