CBP's New AI Targets Transshipment. Are You Liable?

If you shifted sourcing away from China to Vietnam, Malaysia, or Cambodia over the last two years to dodge Section 301 tariffs, the paperwork on those shipments just got a lot more important. On August 13, 2026, the White House Office of Trade and Manufacturing Policy released a report called "The Great Transshipment Scam," and alongside it, confirmation that a new AI system will flag suspect shipments before they clear customs, not months later in an audit.1

For importers who have spent the last two years diversifying sourcing out of China, this is worth reading closely. Not because diversification is the problem, real manufacturing moves happen and are perfectly legal. The problem is that a lot of "diversification" has actually been repackaging: goods made in China, run through a warehouse in a third country for light processing or just a label swap, then declared with that third country as the origin. CBP is now built to catch the difference, and the importer of record, not the factory, is the one who pays for getting it wrong.

What the White House report actually claims

The report names more than 40 countries it says are functioning as pass-through points for Chinese-origin goods trying to avoid US tariffs.1 Malaysia is called out specifically as a "Tier 2" country, described as a scale leader with deep economic integration with China, where deep-water ports, manufacturing hubs, and free trade zones are allegedly being used to obscure origin.2

The dollar figures in the report vary a lot depending on which of five methodologies you use, anywhere from $40 billion to $303 billion a year in illegally transshipped goods, with a central estimate around $75 billion and $19 billion to $26 billion in lost federal tariff revenue annually.1 That range is wide enough that trade lawyers and economists have publicly disputed the methodology, and you should treat the headline number skeptically.1 What isn't in dispute is the enforcement posture behind it: CBP wants to catch this before the container gets released, not years later.

Detective Border: screening before clearance, not after

The new system, referred to in the report as Detective Border, scores shipments before CBP clears them, cross-referencing shipment routing histories, factory ownership and production-capacity data, packaging patterns, and port X-ray and computer vision imaging to catch cargo whose paperwork doesn't match what's actually inside.1 A flagged shipment isn't automatically denied entry, a human CBP officer still makes the final call, but it does mean your entry gets pulled for scrutiny at the moment it matters most: before your goods are in your warehouse, not after they've already sold through.

This is a real shift from how transshipment enforcement has worked. Historically, CBP caught misdeclared origin through post-entry audits, sometimes a year or more after the goods cleared. That gave importers time to fix supplier documentation or quietly change sourcing before anyone came looking. Full-scale rollout of Detective Border is targeted for the end of 2026, and CBP is already conducting surprise inspections at China-linked factories in Vietnam, examining value-added ratios to see how much real manufacturing is actually happening on the ground.3

The 40% penalty has no off-ramp

If you're sourcing anything through Vietnam, know the specific number: goods CBP determines were routed through Vietnam without genuine manufacturing there face a 40% transshipment penalty under HTS heading 9903.02.01, on top of whatever tariff applies to the true country of origin.4 That's not a typical duty rate that a broker can negotiate down or that qualifies for drawback. The penalty carries no mitigation or remission provision. If CBP determines the finding applies, it applies in full.4

This penalty was first established alongside the US-Vietnam tariff framework in July 2025 and was reissued under Section 301 authority after the Supreme Court's February 2026 ruling on IEEPA tariff authority, so it survived a legal transition that knocked out other tariff programs.4 That's a signal CBP intends to keep using it. If you've been reading our coverage of how tariffs stack on top of each other in 2026, add this to the list: a transshipment finding doesn't replace your existing duty, it stacks on top of it.

Run the math on a real order. Say you import $200,000 worth of goods declared as Vietnamese-origin, carrying whatever standard duty applies to Vietnam. If CBP later determines the goods were actually transshipped Chinese product, you owe the 40% penalty on top of that duty, an extra $80,000 on a single entry, with no negotiation and no waiver. Multiply that across a year of POs from the same supplier and the exposure stops looking like a rounding error on your landed cost model.

Why your supplier's certificate of origin doesn't protect you

This is the part that catches importers off guard. The legal test CBP applies is "substantial transformation": did the processing done in the third country produce an article with a new name, character, or use, or did it just repackage a Chinese-made good with new paperwork?4 A certificate of origin from your Vietnamese or Malaysian supplier is a starting point, not proof. If your supplier is transshipping and hands you a certificate that says otherwise, that document doesn't transfer the liability away from you.

Under US customs law, the importer of record, which for most direct importers is the US business itself, carries the burden of proof on origin claims. CBP's investigation starts with the buyer, not the factory.3 "I declared what my supplier told me" is not a defense once an entry is flagged. This is the same dynamic we've written about with the Section 301 probe into Vietnam and India sourcing: the exposure sits with whoever signs the customs entry, not whoever runs the factory.

What to actually do about it

You don't need to abandon third-country sourcing, and most legitimate manufacturing moves have nothing to worry about. What changes is how much documentation you need on hand and how early you need it, since an AI system flagging entries before clearance leaves no time to scramble for evidence after the fact.

• Map where the value actually gets added. For every SKU sourced through a third country, know what percentage of the bill of materials and labor cost happens there versus in China. If it's minor assembly or repackaging, that's a real risk, not a paperwork problem you can talk your way out of.

• Get documented proof, not just a certificate. Factory audits, production records, input sourcing documentation, and photos or video of the actual manufacturing process hold up far better than a one-page certificate of origin if CBP asks questions.

• Audit your full supplier list, not just your newest ones. Diversification moves made in 2024 and 2025 to get ahead of tariffs are exactly the shipments most likely to draw scrutiny now. Older, established suppliers you haven't re-verified recently are worth a second look too.

• Loop in customs brokerage support before you have a problem, not after. A broker who understands substantial transformation rules can flag weak origin claims in your supply chain before an entry gets pulled, which is a much better position than responding to a CBP inquiry after the fact.

The bigger picture here is that enforcement moved from reactive to predictive. CBP isn't waiting for a pattern to emerge across your shipping history anymore, it's scoring the entry itself, in real time, against a data set that includes your supplier's factory registrations and production capacity. If your sourcing story doesn't match what that data shows, you'll find out at the port, not eighteen months later in an audit letter.

If you're not confident your third-country sourcing would hold up under that kind of scrutiny, now is the time to find out, not after an entry gets flagged. Talk to our team about a compliance review of your current supply chain and origin documentation.