By Jeffrey A. Newman, Esq. MBA with ai assistance

The White House published a report that describes in detail tariff evasion related to Chinese goods imported into the United States. It relates to the country-of-origin declarations importers file with U.S. Customs and Border Protection. It concludes that the United States is being cheated out of tens of billions of dollars in duties it is legally owed.

Competitors, customs brokers, and freight forwarders with information on customs fraud can report the fraud by filing suit under the False Claims Act (FCA), which awards successful whistleblowers a percentage of what the Government recovers.

What the report says

A tariff is a tax that depends on where a good was made. If the tax on Chinese goods is high and the tax on Malaysian goods is low, a Chinese good that can be made to look Malaysian is worth more than one that cannot. The report explains that illegal transshipment “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.” Here’s a copy of the report: https://www.whitehouse.gov/wp-content/uploads/2026/08/The-Great-Transshipment-Scam.pdf

“Minor processing” is the crux. It is entirely legal, and often desirable, for a Chinese component to travel to Vietnam, be combined with other inputs, and emerge as a genuinely Vietnamese product. For non-preferential origin, the rules governing Section 301 tariffs, marking, and antidumping scope, the test is substantial transformation, drawn from Anheuser-Busch v. United States (1907): did the work in the third country produce a new and different article with a new name, character, or use? (Preference programs such as the USMCA use different rules built on tariff shifts and regional value content, which matters given how prominently Canada and Mexico feature in the report.) Real factories pass these tests every day. What the report describes is the counterfeit version: a container unloaded, cartons restickered, a fresh invoice printed, and the goods reloaded for Long Beach with a new nationality and the same contents.

The data supports the findings that the amount of this fraud is significant.

– **Goldman Sachs estimates $40 billion** a year in illegally transshipped goods
– **Council of Economic Advisers estimates $60 billion**, described as a rounded midpoint of a $34.2-$89.6 billion range
– **Exiger estimates $75 billion**, built up from $51.1 billion in directly screened flows, with an upper bound near $100 billion
– **Commerce Department’s Office of Trade and Economic Analysis estimates $67 billion** at the transaction level, or **$109 billion** on a trade-transfer benchmark
– **Altana estimates $303 billion**


### The map

It says it identifies more than forty countries where transshipment *occurs* and sorts them into three tiers within what it calls a “Shadow Transshipment Network.”

**Tier 1**, diversified scale leaders, lists eight: Canada, the European Union, India, Israel, Japan, Mexico, South Korea, and Taiwan.

**Tier 2**, countries with significant integration into Chinese supply chains, lists six: Brazil, Indonesia, Malaysia, Thailand, Turkey, and Vietnam.

**Tier 3**, which the report labels “Small, Opportunistic Chinese Targets,” names more than twenty more, among them Cambodia, Costa Rica, the Dominican Republic, Jordan, Kenya, Morocco, Panama, Singapore, Switzerland, and the United Arab Emirates.


The report then narrows to nine specific corridors, each pairing a foreign hub with the American region it competes against. Among them: electric motors through Mexico’s Guanajuato-Queretaro belt against Detroit, Grand Rapids, and Indianapolis; semiconductors through Gyeonggi Province against Phoenix, Austin, Portland, and San Jose; circuit protection and switching apparatus through Ho Chi Minh City against Chicago, Milwaukee, and Rockford; pumps and compressors through Pune, Gujarat, and Chennai against Cincinnati, Dayton, and Columbus; plastics through Penang and Kulim against Akron, Canton, and upstate South Carolina. Separately, it singles out Jebel Ali in Dubai as a “maritime gateway super node” where re-invoicing happens at scale.

It also distinguishes two functional roles: **production-side nodes**, which perform light assembly, testing, packaging, and labeling, and **logistics-side nodes**, which handle re-invoicing, relabeling, warehousing, and re-export documentation. The second category is the more revealing, because it means a substantial share of the fraud involves no manufacturing at all. It is a document-production business.


The report’s point is that somewhere between $19 billion and $26 billion a year in revenue is legally owed and not collected.

Ordinary tariffs are only part of the exposure. Antidumping and countervailing duties, imposed when foreign producers sell below cost or benefit from state subsidies, run at rates that make Section 301 tariffs look modest. The report cites the arithmetic:

– Aluminum wire and cable from China: dumping rates of **58.51 to 63.47 percent**, with subsidy rates reaching **165.63 percent**
– Quartz surface products: dumping margins up to **336.69 percent**
– Large residential washers: antidumping margins of **38.43 to 57.37 percent**
– Solar cells and modules: combined AD/CVD exposure well above **30 percent**

This is why AD/CVD-covered goods figure so heavily in the enforcement docket, and why Commerce has repeatedly found Chinese-origin merchandise completed in Cambodia, Malaysia, Thailand, and Vietnam before shipment to the United States.

The damage to trade policy, and to the rule of law

If transshipment goes unchecked, tariffs stop functioning as policy instruments. A tariff that can be routed around is not a tariff; it is a tax on the companies too honest or too visible to evade it. The administration’s Agreements on Reciprocal Trade now include provisions designed to prevent “the benefits of this Agreement [from] accruing substantially to third countries”, recognition that a bilateral deal is worthless if a non-party can capture its preferences through a mail drop.

The enforcement statistics are not trivial. Comparing the 526-day periods before and after the inauguration, the report says shipments identified with post-release discrepancies rose 245 percent, from 93,744 to 323,677, while associated revenue assessments rose 169 percent, from $9.6 billion to $25.8 billion. The comparison is constructed politically, and should be read with the caveat the report itself supplies: “It is too early to determine the net effect of the Administration’s tariff and anti-transshipment policies.” Assessments are not collections, and a discrepancy identified is not a fraud proven.

Whistleblowers and the False Claims Act (FCA)

In the first five months of 2026, customs fraud recoveries under the False Claims Act exceeded $570 million, surpassing all prior annual totals, and cumulative recoveries in this area passed $918 million** as of mid-2026. The Justice Department’s Trade Fraud Task Force, created in August 2025 with the Department of Homeland Security, surpassed **$1 billion** in combined civil and criminal recoveries, penalties, forfeitures, and charged losses by July 14, 2026 just under a year after launch. The criminal side of that work is now institutionalized in a new Global Trade and Commerce Enforcement Section; the civil False Claims Act docket remains with the Civil Division’s Fraud Section.

Nearly all of the civil recoveries began the same way: a person who knew something filed a complaint under seal.

A customs duty is an obligation, arising by operation of law when goods enter the commerce of the United States. When an importer files an entry summary declaring Malaysian origin for Chinese goods, it makes a false statement material to an obligation to pay and avoids that obligation. The same analysis reaches the other typologies: **undervaluation** is a false transaction value, or omitted dutiable elements such as assists, royalties, or the true related-party price is a false statement about the base on which duty is calculated, and **misclassification** is a false statement about what the goods are.

The results of this mechanism over the past eighteen months show that whistleblowers are currently the sharpest instrument against customs fraud.

**Perfectus Aluminum** is the landmark for scale. In May 2026, Perfectus and related companies agreed to pay **$549.5 million** to settle allegations that they imported more than 2.2 million aluminum extrusions from China between 2011 and 2014 and declared them as finished “pallets” to escape antidumping and countervailing duties. The government alleged the pallets were not commercial pallets at all, extrusions spot-welded together to look functional, with no genuine customers and no sales. It is the largest customs-related False Claims Act recovery on record, exceeding the prior high-water mark many times over. The relators, two individuals and the Aluminum Extruders Council, will receive 17.5 percent of settlement proceeds returned to CBP, reported at roughly $96 million. Note that Perfectus is a misdescription case rather than a transshipment case, the goods came directly from China. It shows the scale of exposure, not the routing typology.

**Ceratizit USA** is the transshipment landmark. In December 2025 the company agreed to pay **$54.4 million** to resolve allegations spanning three theories: falsely declaring Taiwanese origin for tungsten carbide products of Chinese origin to evade Section 301 tariffs, misclassifying merchandise under the tariff schedule, and failing to pay marking duties on unmarked goods. The relator’s share was roughly $9.75 million.

Farjess Inc./Royal Canadian Steel**, $19 million in May 2026 with a $3.6 million relator share; **Allied Stone**, $12.4 million in August 2025; **Evolutions Flooring**, $8.1 million in March 2025 with a $1.2 million share; **Redi-Bag USA**, $7.3 million in July 2026; and **Grosfillex**, $4.9 million in July 2025 over patio furniture, with a $900,000 share.

Can a foreign national be a whistleblower?

One question comes up constantly is, *can someone outside the United States bring one of these cases?*

The answer is yes, and our firm has done it. Foreign nationals can serve as relators. There is no citizenship or residency requirement. However, the conduct at issue must be domestic, consisting of entries filed with CBP.

Jeff Newman Law has represented whistleblowers for over twenty-five years, including in customs fraud matters and clients located outside the United States. Jeff Newman Law successfully represented a whistleblower who worked for the Hong Kong affiliate of a California importer. See settlementpress release here.

*This article is general information, not legal advice, and does not create an attorney-client relationship. Prior results do not guarantee or predict a similar outcome in any future matter; every case turns on its own facts. Anyone considering a claim should consult qualified counsel promptly.*

If you have knowledge of tariff or customs fraud and want to understand your options confidentially, contact Jeff Newman Law. Consultations are free and confidential. www.Jeffnewmanlaw.com 617-823-3217 Jeff Newman’s email is Jeff@Jeffnewmanlaw.com