Trade crime is soaring as Trump’s tariffs incentivise fraud

WASHINGTON – As US President Donald Trump’s tariffs have ratcheted up in recent months, so have the mysterious solicitations some US companies have received, offering them ways to avoid the taxes.

Shipping companies, many of them based in China, have reached out to US firms that import apparel, auto parts and jewellery, offering solutions that they say can make the tariffs go away.

“We can avoid high duties from China, which we have already done many in the past,” read one e-mail to a US importer.

“Beat US Tariffs,” a second read, promising to cap the tariffs “at a flat 10 per cent”. It added: “You ship worry free.”

The proposals – which are circulating in e-mails as well as in videos on TikTok and other platforms – reflect a new flood of fraudulent activity, according to company executives and government officials.

As US tariffs on foreign products have increased dramatically in recent months, so have the incentives for companies to find ways around them.

The Chinese firms advertising these services describe their methods as valid solutions.

For a fee, they find ways to bring products to the US with much lower tariffs. But experts say these practices are methods of customs fraud.

The companies may be dodging tariffs by altering the information about the shipments that is given to the US government to qualify for a lower tariff rate.

Or they may physically move the goods to another country that is subject to a lower tariff before shipping them to the US, a technique known as transshipment.

The Trump administration said in May that it would focus more on fighting trade fraud, including tariff evasion.

The administration is also trying to convince other countries to step up their own enforcement efforts, including in trade talks with Vietnam, Mexico and Malaysia.

But many US companies say the scale of illicit activity now far outweighs the ability of these governments to thwart it.

These schemes are costing the US government billions of dollars in tariff revenue annually, executives and officials say.

And they are leaving honest companies that pay tariffs deeply frustrated and worried about being left at a financial disadvantage to dishonest competitors.

“If nothing is done, those willing to cheat are going to continue to win the day here,” said Mr David Rashid, the executive chair of Plews & Edelmann, a car parts company that has appealed to the government to crack down on unfair trading practices by its competitors.

Mr Rashid said that unfairly traded products have filtered into supply chains throughout the US.

As long as the US has had tariffs, there have been schemes to evade them. But as Mr Trump has raised tariffs to levels not seen in a century, companies say that customs fraud is also reaching new heights.

In his first months in office, Mr Trump put a 10 per cent tariff on most products globally, as well as a 25 per cent tariff on steel, aluminium and cars.

He raised, lowered and suspended tariffs for various countries with little warning, putting intense pressure on companies that depend on trade.

The triple-digit tariffs that Trump imposed on China in April, before lowering them for 90 days, were particularly tough for importers. Some companies suspended orders in the face of the tariffs, but the taxes seem to have also prompted a wave of fraud emanating from China.

Ms Leslie Jordan, an apparel manufacturer who has been in business for nearly four decades, said that fraudulent schemes were becoming “rampant” in her industry, with companies offering her and other importers clearly illegal ways to bypass tariffs.

For years, Chinese shippers had offered to help her factories doctor customs forms, telling them there was little chance of being caught because US customs officials would never examine the shipping containers, she said.

Ms Jordan has always refused. But tariffs were making business difficult for honest companies like hers, leaving her owing the government tens of thousands of dollars in import duties on some shipments.

Ms Jordan said the tariffs had encouraged “opportunist cheaters in both China and the United States” and put “many honest companies at a competitive disadvantage”.

“People can’t afford it,” she said. “They’re desperate.”

Tariff dodging 101

The US government charges tariffs based on the item, its declared dollar value and its country of origin. Several schemes exist to try to evade tariffs by changing those factors.

One method, people in the industry say, involves reporting a lower value for a product than its actual worth. Doing so lowers the tariff that must be paid, since it is charged as a percentage of the import price.

Another scheme is to misclassify the item. An importer might report to the US government that a shipment of shirts is made with a material that is subject to a lower tariff.

A third method involves physically sending the products to another country before they go to the US to take advantage of different tariff rates applied to different countries.

That tactic became far more profitable in 2025 as Mr Trump raised tariffs on Chinese imports to a minimum of 145 per cent but left taxes on goods from neighbouring countries, like Vietnam, Malaysia and Cambodia, at just 10 per cent.

A company looking to avoid tariffs may ship Chinese products to those countries before sending them on to the US at a lower tariff rate.

The US charges tariff rates based on where a good was last manufactured.

So in the eyes of the government, whether this practice is illegal depends on if the company actually has some significant manufacturing step in Malaysia or Vietnam.

If the company takes parts of a shoe made in China and puts them together in Malaysia, for example, the shoe may technically qualify as Malaysian.

But if a product is actually manufactured in China and is just routed through another country to disguise its origin, that is a violation of US law.

One ad sent to an importer this spring explicitly advertised this scheme. “Malaysia Transshipment Route: Re-load into new containers in Malaysia under a Malaysian exporter’s CO,” it read, referring to a “certificate of origin”, a document that indicates to US customs where the item came from.

The scale of this problem is hard to quantify, since it can be hard to tell what is going on inside foreign factories. But since Mr Trump started putting tariffs on Chinese imports in his first term, the volume of Chinese products, parts and raw materials exported to other countries before coming to the US has increased substantially.

In April, for example, Chinese exports to the US fell 21 per cent compared with the previous year, but Chinese exports to South-east Asian countries rose by the same percentage.

US officials are also increasingly focused on the role Mexico plays as a funnel for Chinese goods to the US.

An analysis by Exiger, a data analytics firm, found that more than 3,000 companies in Mexico depended on Chinese shipments for 75 per cent or more of their supply chain.

Many of these companies are subsidiaries of Chinese state-owned enterprises, and most sell products to the US, the report said.

Chinese companies are also now marketing a method, which they call “delivered duty paid”, or DDP, that ostensibly reduces the US importers’ legal liability for tariff fraud.

Typically, a US company takes legal ownership of a product at a factory in China and then is responsible for shipping it overseas and paying duties to the US government.

But in this case, the Chinese company acts as the US importer, retaining ownership over the product as it is shipped across the ocean and into the US.

The Chinese company then pays US customs fees before handing the item over to the US company.

With this method, the US company does not have direct knowledge if tariffs are evaded.

And if the US government tries to pursue legal action against the Chinese firm, it may find it is just a shell company with no one to pay the bill.

Mr John Foote, a customs lawyer at Kelley Drye & Warren, cautioned that this was still “a very fraught proposition” for any US company.

He said that the method might reduce a US purchasers’ liability but would not absolve it entirely, particularly if the terms of trade would be unachievable if not for customs fraud.

Ms Trish Driscoll, a spokeswoman for Customs and Border Protection (CBP), said in a statement that the department uses enforcement tools, intelligence and partnerships to combat tariff evasion and, as a result of recent presidential actions, is now imposing the most severe penalties permitted by law.

She said that during the week of May 5 through 9, CBP took in more than US$630 million (S$811 million) by reviewing more than 2,000 shipments detected for duty evasion. NYTIMES