White House reports $112 billion gap in U.S. imports linked to tariff evasion
The administration says transshipment schemes, largely involving China, are costing billions in lost revenue and has issued new rules to curb foreign importers of record.
The White House released a report Tuesday detailing a $112 billion discrepancy between shipments reported by China’s customs agency and those recorded by the U.S. Census Bureau, suggesting extensive tariff evasion through transshipment. The administration estimates the practice costs the United States between $19 billion and $26 billion in annual tax revenue, with China identified as the primary source of shipments routed through more than 40 other countries.
The Office of Trade and Manufacturing Policy said the scheme has grown under the current administration, which has maintained high import duties on Chinese goods. “While the future may be murky, the past is not,” the report stated, noting that previous trade policies created incentives for fraud.
Industry experts linked the rise in evasion to the higher tariffs imposed in recent years. Ryan Petersen, chief executive of logistics platform Flexport, said the increased duties “created a huge incentive” for importers to misdeclare values, classifications or country of origin. Carrie Owens, a partner at Kelley Drye & Warren and former head of Customs and Border Protection’s enforcement division, added that higher overall tariff rates have amplified the problem.
The report also highlighted that the U.S. system allowing foreign “importers of record” to file customs entries can be exploited by shell companies, which are difficult for U.S. authorities to pursue. In response, an executive order issued on June 3 limits the use of continuous customs bonds by foreign entities and requires more detailed documentation for formal entries. Customs officials are deploying artificial-intelligence tools to analyze shipment data and flag inconsistencies.
Owens expects the new measures to produce results by October, but warned that continued evasion could lead to further tariff increases. “If everybody paid the tariffs they’re supposed to, I personally don’t think the tariffs will be as high as they currently are,” she said.