Billions in U.S. Import Cuts From China Tied to Fraud

The numbers don't add up, and by a staggering margin. Trade data shows a record $112 billion gap between what China reported exporting to the United States last year and what U.S. Customs and Border Protection said actually arrived, a discrepancy implying that as much as a quarter of China's total shipments slipped through without paying the tariffs they owed.

As duties on Chinese goods climbed to the highest levels in a century, so did the financial incentive for fraud. The suspected evasion is penalizing companies that follow the rules and undermining a trade policy built on the assumption that tariffs would actually be collected.

Michael Kersey, president of the American Lawn Mower Company, receives the solicitations via WhatsApp and email, promising deals that seem too good to be legal: a way to move goods from China to U.S. shores while avoiding tariffs entirely. His century-old firm, known for its push-reel mowers and gardening shovels, plays by the rules. His competitors, he suspects, are not.

The mechanics of evasion have become familiar to investigators. Fraudsters route Chinese goods through countries in Southeast Asia, including Vietnam, Malaysia, Cambodia, and Singapore, to exploit jurisdictional loopholes. White House trade adviser Peter Navarro described the tactic directly: "About $5 of that is just Chinese product that comes into Vietnam, they slap a 'Made in Vietnam' label on it and they send it here to evade the tariffs." Other common schemes involve misclassifying goods, undervaluing cargo on customs forms, and using shell companies or non-resident entities as the importer of record. If authorities eventually come knocking, they often find a fake address or phone number listed for a shell firm that has since dissolved.

That vanishing act is precisely what limits large-scale enforcement. CBP acknowledged in a statement that it "is aware of such schemes and has heightened its enforcement of use of Importer of Record accounts associated with companies registered in China, Hong Kong, and other countries." But the agency's reach ends at the U.S. border, and authorities remain hamstrung by their reach and jurisdiction, unable to chase shell companies that evaporate overnight or easily pursue criminals operating overseas.

From January 20 to August 8, 2025, CBP uncovered more than $400 million in unpaid import duties through enforcement investigations, identifying 89 cases with reasonable suspicion of duty evasion. In August 2025, the Trump administration launched an interagency Trade Fraud Task Force to target evaders with criminal charges and started a whistleblower program, while also contracting AI-powered companies to improve real-time monitoring of global supply chains. The task force was allocated an additional $2 million in funding. By December, it had brought criminal charges against a corporate officer for duty evasion, and auto parts supplier Wanxiang America settled for $53 million to resolve allegations that it misclassified Chinese automotive components to avoid antidumping duties.

Whistleblower complaints about suspected duty dodging jumped 160 percent year-over-year between March and May 2025. False Claims Act settlements and judgments reached an all-time high of $6.8 billion in fiscal 2025, the largest annual recovery in the statute's history and roughly a 120 percent increase from the prior year. Whistleblower-initiated cases numbered 1,297 qui tam lawsuits in that period.

The price of the enforcement gap falls hardest on compliant importers. CBP collected a record-breaking $200 billion in tariff revenue in 2025. But the $112 billion cargo discrepancy signals the uncollected amount could be comparable in scale, with honest businesses absorbing the competitive disadvantage of paying duties their fraudulent rivals routinely avoid.