A Republican senator close to the White House says Homeland Security is not doing enough to catch tariff evaders, as transshipment through third countries strains a customs agency asked to police the highest average duty rates in nearly a century. The enforcement gap is now a bipartisan talking point.
WASHINGTON, Aug. 13, 2026
The most pointed criticism of United States tariff enforcement this week did not come from an importer, a foreign government or a Democratic committee chair. It came from one of President Trump’s closest allies in the Senate.
Senator Bernie Moreno, Republican of Ohio, has told the Department of Homeland Security that it should be doing considerably more to enforce trade laws and penalize tariff evasion, according to Bloomberg reporting published Aug. 12. In a letter to Homeland Security Secretary Markwayne Mullin, Moreno pressed for a crackdown on transshipment schemes that allow Chinese manufacturers to obscure the origin of goods and avoid American duties, arguing that the practice costs the Treasury billions of dollars in foregone revenue and threatens domestic manufacturing employment, with particular damage to the automobile supply chain in his state.
The Bloomberg piece framed the underlying tension bluntly, describing an administration whose approach to trade policy has moved faster than the government’s capacity to ensure compliance with the tariffs it imposes.
For importers, customs brokers and compliance officers, that framing is not new. It has been the operating reality since 2025. What is new is that the complaint is now being made loudly from inside the president’s own coalition, which materially raises the probability of enforcement escalation over the next several quarters.
THE STRUCTURAL PROBLEM
The enforcement gap is arithmetic before it is politics.
The United States now applies the highest average effective tariff rates in generations. Section 301 duties of 10 percent and 12.5 percent took effect on July 24 against 60 trading partners accounting for roughly 99.4 percent of American imports, following investigations into those economies’ failure to prohibit and enforce against goods produced with forced labor. Section 232 national security duties cover steel, aluminum, copper and their derivatives, with a proposal published Aug. 6 to add 14 further derivative articles including aluminum powder and brass window hardware. A separate Section 232 action announced the same week imposes a 15 percent duty and minimum import prices on polysilicon and its derivatives, effective Dec. 4. Chinese vehicles face rates near 100 percent.
Higher rates change importer behavior. When the duty on a product line is 2.5 percent, misclassification is a compliance nuisance. When it is 50 percent, misclassification becomes a business model. The differential between a lawful entry and a fraudulent one is now large enough to fund an entire logistics apparatus dedicated to creating that differential.
The three principal evasion techniques are well understood inside the trade bar.
Transshipment involves routing Chinese origin goods through a third country, most commonly in Southeast Asia, with minimal or no substantial transformation, then declaring the third country as origin. The physical goods are unchanged. Only the paperwork moves.
Undervaluation involves declaring a customs value below the actual transaction price, often supported by a second invoice, so that the ad valorem duty applies to a smaller base. It is the oldest customs fraud and remains among the most common.
Misclassification involves declaring goods under a tariff subheading that carries a lower rate or falls outside the scope of a trade remedy order. Antidumping and countervailing duty orders, which are written by product scope rather than by broad category, are especially vulnerable.
All three are harder to detect when import volumes are high, when origin determinations depend on facts occurring entirely offshore, and when the front line agency is simultaneously processing the largest customs refund program in American history.
WHAT THE GOVERNMENT HAS ALREADY BUILT
The administration has not been idle, and the enforcement architecture assembled since 2025 is substantial.
On June 3, 2026, the president issued an executive order on strengthening customs enforcement, directing DHS and CBP to undertake reforms addressing importer of record eligibility, foreign importers of record, customs bond sufficiency, supply chain disclosures, broker due diligence, penalty structures, seizure procedures and enforcement transparency. Each of those items targets a specific known weakness. Foreign importers of record, for instance, have long been a problem because a shell entity abroad can serve as the responsible party on an entry with negligible assets in the United States against which a penalty could be collected.
Executive Order 14326 established a 40 percent tariff on goods determined by CBP to have been transshipped to evade applicable duties, and directed the agency not to mitigate penalties in such cases. The instruction against mitigation matters. Customs penalty practice has historically involved substantial negotiated reductions, and removing that discretion changes the expected cost of getting caught.
On the criminal side, the Department of Justice’s Criminal Division has designated trade and customs fraud, including tariff evasion, as a high impact focus area and has reorganized resources accordingly. The Trade Fraud Task Force, launched in August 2025, has surpassed $1 billion in civil and criminal recoveries, penalties, forfeitures and publicly charged losses, according to enforcement summaries published by trade counsel this year. The appropriations package enacted on Jan. 16, 2026 allocated an additional $2 million specifically to the task force.
In July, DOJ and DHS jointly published a comprehensive trade fraud enforcement guide, a document that trade lawyers have read closely as a statement of prosecutorial priorities.
The False Claims Act has emerged as the government’s most productive civil instrument. Because the statute reaches reverse false claims, meaning conduct that avoids an obligation to pay the government rather than obtaining a payment from it, duty evasion fits neatly within it. Treble damages and qui tam relator provisions create incentives that no customs penalty statute matches. Competitors, former employees and disgruntled logistics partners have become an important source of case origination.
WHY MORENO IS STILL COMPLAINING
Given that architecture, the obvious question is why a Republican senator aligned with the administration is publicly telling Homeland Security to do more.
Three explanations are consistent with the available reporting.
The first is capacity. CBP’s officer corps and its Office of Trade did not expand proportionally with the tariff program. The agency has simultaneously been running the CAPE refund system, processing more than 330,000 importer claims arising from the Supreme Court’s February decision invalidating the reciprocal tariffs. Refund adjudication and fraud detection draw on overlapping expertise. Resources spent on one are not available for the other.
The second is the difficulty of origin determination. Establishing that goods declared as Vietnamese or Malaysian are in fact of Chinese origin requires either physical evidence, supply chain documentation the importer may not possess, or foreign site visits that depend on host government cooperation. Substantial transformation analysis is fact intensive and slow. A transshipment operation can relocate faster than a case can be built.
The third is constituency pressure. Moreno represents a state whose automotive and steel sectors have been vocal about competing against goods they believe are entering at fraudulent origin. His letter reflects an industrial base that supported the tariff program and now perceives that the protection it was promised is leaking.
INDUSTRY REACTION
The response from the trade community has been notably split, and the split does not follow the usual free trade versus protection lines.
Domestic producers in steel, aluminum, solar and automotive parts have broadly welcomed calls for tougher enforcement. Their position is that a tariff that can be evaded is worse than no tariff at all, because it imposes compliance costs on law abiding importers while leaving the underlying price competition unchanged.
Compliance focused importers have taken a similar view for different reasons. Firms that invested in origin verification programs, supplier audits and classification reviews are competing against firms that did not. Rigorous enforcement raises the return on that investment.
The objections come from a third quarter, and they concern process rather than principle. Customs practitioners have raised concerns about the June executive order’s direction to limit penalty mitigation, arguing that mitigation has historically been the mechanism through which genuine mistakes are distinguished from intentional fraud. A regime in which a good faith classification error and a deliberate double invoicing scheme attract the same treatment does not obviously improve deterrence, and it substantially increases the cost of ordinary commercial activity.
Similar concerns attach to expanded importer of record eligibility requirements and bond sufficiency reviews. Both are sensible responses to real weaknesses. Both also raise the fixed cost of importing, which falls disproportionately on small and mid-sized firms already struggling with the tariff burden itself.
THE ENFORCEMENT RECORD IN CONTEXT
It is worth situating the current debate against the longer history of American customs enforcement, because the scale of the present challenge is genuinely without precedent.
For most of the post war period, the United States operated a low tariff regime in which customs enforcement was primarily a revenue integrity function. Average applied rates sat in the low single digits, and the principal fraud concerns involved narrow categories such as textiles and footwear where rates remained comparatively high. The enforcement architecture, including the penalty framework in 19 U.S.C. 1592 and the antidumping duty evasion procedures added by the Enforce and Protect Act in 2016, was built for that world.
The first Trump administration’s Section 301 tariffs on China, beginning in 2018, produced the first modern stress test. Even at that scale, covering roughly $370 billion in Chinese goods at rates between 7.5 percent and 25 percent, transshipment through Vietnam, Malaysia, Thailand and Cambodia became a documented phenomenon within eighteen months. Vietnamese exports to the United States in categories subject to the China tariffs rose at rates that could not be explained by domestic production capacity.
What the country faces now is that dynamic multiplied. The tariff wall is broader, covering nearly all trading partners rather than one. The rates are higher. And the legal basis has shifted repeatedly, from Section 301 to IEEPA to Section 122 and back to Section 301, with each change producing a distinct set of covered goods, effective dates and exclusion regimes. Complexity is itself an enforcement problem. Every additional exclusion, derivative list and country specific carve out creates another boundary that can be exploited, whether deliberately or through genuine confusion.
The Section 301 forced labor tariffs illustrate the point. The program applies rates of 10 percent or 12.5 percent depending on the country of origin, with what trade counsel have described as myriad product and country specific exceptions. An importer sourcing a single product from three countries may face three different rates and three different exception analyses on functionally identical goods. That structure creates strong incentives to declare the most favorable origin available, and it makes the difference between aggressive planning and fraud harder to police.
Enforcement officials have acknowledged the difficulty publicly in general terms. The joint DOJ and DHS trade fraud guide published in July was in part an attempt to reduce ambiguity by setting out how the agencies view the conduct they intend to prosecute.
THE ECONOMIC STAKES
Quantifying evasion is inherently difficult, but the order of magnitude can be inferred.
Total customs duty collections have risen sharply under the current program. The Tax Foundation’s tariff tracker and the Tax Policy Center’s parallel effort both show collections at multiples of pre-2025 levels. If even a modest single digit percentage of dutiable value is entering through fraudulent origin or undervalued declarations, the revenue loss runs into the billions annually, which is consistent with Moreno’s characterization.
The competitive damage is arguably larger than the fiscal damage. A domestic manufacturer that priced its output on the assumption of a 50 percent duty on a competing import discovers that the competing import is entering at 12.5 percent under a false origin declaration. The manufacturer’s investment case, which may have included new capacity, hiring and capital equipment, was built on a policy that is not being applied uniformly.
That dynamic is the one that most concerns industrial policy advocates, because it undermines the entire theory of tariff protection. Tariffs are supposed to create a predictable price wedge that justifies domestic investment. Uneven enforcement converts the wedge into a lottery.
IMPLICATIONS FOR IMPORTERS
For companies importing into the United States, the practical guidance is unusually clear.
Origin documentation should be treated as a primary compliance obligation rather than a secondary one. Importers relying on supplier certificates of origin without independent verification are exposed. Reasonable care under 19 U.S.C. 1484 has always required more than accepting a supplier’s word, but in an environment of aggressive transshipment enforcement, the practical standard has risen. Site visits, bill of materials analysis, production capacity checks against declared volumes and consistency reviews across shipments are now baseline expectations for higher risk sourcing.
Supplier onboarding should include origin risk screening. A supplier in a third country that appeared shortly after tariffs were imposed on China, that ships volumes exceeding plausible local capacity, or that quotes prices indistinguishable from Chinese pricing net of freight, presents a pattern that CBP is actively looking for.
Voluntary disclosure remains the most effective risk mitigation tool available. Prior disclosure under 19 U.S.C. 1592 substantially limits penalty exposure, and it is the single clearest way to distinguish a compliance failure from a fraud. Given the June executive order’s restriction on mitigation, the gap between disclosing and being caught has widened.
Internal controls should be documented contemporaneously. In False Claims Act litigation, the question of whether a company acted knowingly, including with deliberate ignorance or reckless disregard, turns heavily on what the company’s own records show it knew and when. A compliance program that exists on paper but generates no evidence of operation is of limited defensive value.
Companies should also expect increased scrutiny of the importer of record relationship itself. The June order specifically targets foreign importers of record and broker due diligence. Arrangements in which a foreign supplier or a thinly capitalized entity serves as importer of record on behalf of an American buyer are likely to face heightened examination, and the American buyer should not assume it is insulated.
IMPLICATIONS FOR EXPORTERS AND FOREIGN SUPPLIERS
Foreign suppliers selling into the United States face a related set of pressures. Their American customers are increasingly demanding origin documentation, factory access and contractual origin warranties backed by indemnities. Suppliers unwilling or unable to provide those assurances are being displaced, sometimes regardless of price.
For suppliers in Southeast Asia and Mexico that have legitimately absorbed production shifting out of China, the enforcement environment presents a genuine reputational problem. They are operating in the same jurisdictions being scrutinized for transshipment, and the burden of demonstrating genuine substantial transformation falls on them through their customers. Detailed production records, verified input sourcing and transparent capacity data have become commercial assets.
THE LITIGATION OVERHANG
Enforcement is proceeding against a backdrop of unresolved questions about the legality of the tariffs themselves, and that overhang complicates every calculation.
The Supreme Court invalidated the IEEPA reciprocal tariffs in February. The Section 301 forced labor tariffs that replaced them are now the subject of at least three separate challenges at the Court of International Trade, including a suit filed Aug. 3 by a coalition of 25 states arguing that the forced labor rationale is a pretext. Two importers, spice company Burlap and Barrel and watch retailer Collective Horology, filed the first challenge on July 24, the day the tariffs took effect.
The states’ complaint contends that the U.S. Trade Representative set rates without linking them to the alleged prevalence of forced labor goods in each economy, offered no mechanism for a country to escape the levies through remedial action, and maintained an effective 10 percent floor even for economies it acknowledged were taking steps. “In short, there is no rational fit between the purported problem of forced labor in international supply chains and the blanket global tariffs the USTR imposed,” the suit states.
For enforcement purposes, that uncertainty cuts in an awkward direction. Importers weighing whether to invest in expensive origin verification programs must consider that the underlying duties could be invalidated. Some are choosing to defer. Government lawyers building fraud cases must contemplate prosecuting evasion of a duty that a court may later hold was never lawfully owed, though the prevailing view among trade counsel is that the obligation to declare accurately survives regardless of the eventual fate of the rate.
That view is legally sound. Misdeclaration of origin or value is actionable independent of whether the duty is later refunded, because the false statement itself is the violation. But it is a difficult message to deliver to a compliance committee weighing budget allocations.
WHAT COMES NEXT
Several developments are worth monitoring through the autumn.
The first is whether DHS responds substantively to Moreno’s letter, and whether other Republican senators join. Enforcement pressure originating from the president’s own coalition is far more likely to produce administrative action than pressure from the opposition.
The second is the comment record on the Section 232 derivative expansion published Aug. 6. Broadening the derivative list for steel, aluminum and copper increases both the covered universe and the classification complexity, which is itself an evasion risk factor.
The third is the pace of False Claims Act settlements. The Trade Fraud Task Force crossing $1 billion in recoveries in its first year suggests an accelerating pipeline. Settlement announcements are the clearest public signal of where the government is looking.
The fourth is resource allocation at CBP as the refund program winds down. If officers and analysts currently assigned to CAPE adjudication return to enforcement work, detection capacity should improve measurably in the first half of 2027.
For now, the picture is of a tariff program whose rates have outrun the machinery built to collect them, and of an administration being told so by its allies.