Trade Crime

Trade crime is the deliberate, systematic abuse of U.S. trade laws to gain unlawful competitive advantage. Because it hides inside routine, paper-driven commerce, it scales easily and often goes unpunished. This creates a massive strategic vulnerability for the United States.

Re-industrialization, re-shoring, and tariffs mean little without proper enforcement.

This Study Guide equips current and future policymakers with the tools needed to challenge those looking to bypass trade laws, and offer a framework to understand which policy levers are the most—and least—effective.

What You’ll Learn

The following Study Guide begins with first principles before moving into historical case studies, contemporary policy debates, and detailed policy debriefs. By the end of this Study Guide, you will be able to:

Define trade crime and how it happens
Understand why it persists (incentives, scalability, and enforcement lag)
Map the enforcement system and clarify responsibilities across CBP, DOJ, Commerce, USTR, DHS, and why this fragmentation creates gaps in authority
Identify priority reforms that increase certainty and speed of consequences
Utilize and recognize sources and experts for further study

This Study Guide was created in partnership with the Alliance for Trade Enforcement NOW, utilizing their interactive and continuously-updated online resource, which can be accessed here.

Part I: What is it?

Trade Crime 101

Online Report by Alliance for Trade Enforcement NOW

This is economic warfare. U.S. trade laws only matter when they are enforced. “Trade crime is the deliberate, systematic violation of U.S. trade laws to gain unlawful competitive advantage in cross-border trade—undermining fair competition, American workers, and national security.”

Three primary categories of fraud

(1) Customs Fraud: The systematic evasion of U.S. customs duties through deliberate misrepresentation of goods. Trade criminals use these methods—often in combination—to minimize their tariff bills and gain illegal competitive advantages. This comes in three forms:

Transshipment. Goods are routed through third countries—especially Southeast Asian nations like Vietnam, Thailand, and Cambodia—to disguise their Chinese origin and avoid tariffs.
Undervaluation. Importers declare goods at a fraction of their real value to reduce duty payments.
Misclassification. Importers deliberately use incorrectcodes to qualify for lower tariff rates.

(2) IP Theft: illicit acquisition of protected know-how to gain unfair advantage.

(3) Forced Labor: Work exacted under coercion through threat, debt, restriction of movement, or other penalties—prohibited in U.S. supply chains.

See the breakdown

How we got here

Before we dive deeper into the scope and solutions of Trade Crime, let’s first look at the question: How did we get here?

The Alliance for Trade EnforcementNOW’s timeline breaks it down:

1993 — The Customs Modernization Act. Shifted responsibility for classifying and valuing goods from the government to the importer. This single law created the self-declaration honor system every fraudster exploits today.
1995 — The WTO. The World Trade Organization replaced GATT, dramatically expanding international trade volume.
2000–01 — China. Congress granted China Permanent Normal Trade Relations (2000); China joined the WTO (2001). U.S. imports from China exploded from ~$100B to ~$540B by 2018. Trust at five times the volume.
2003 — 9/11 Reorganization. The U.S. Customs Service — under the Treasury Department since 1789 — was pulled into the new Department of Homeland Security as CBP. Mission shifted from revenue collection to border security. Trade enforcement professionals remain — but the institutional priority shifted.
2000s–10s — Tariffs fell below 2%. Average applied tariff fell to 1.5–2%. A tariff infraction looked like an administrative mistake, not a calculated scheme. Little incentive to cheat — and little to invest in catching cheaters.

These developments reflected a drift away from the American tradition that treated the integrity of lawful commerce as a core responsibility of the state.

Change was mistaken for progress, and first principles gave way to assumptions about globalization that did not hold. The result was a customs regime no longer equipped with the authority, capacity, or institutional center of gravity needed to preserve trade integrity.

Part II: Scope

Tens of billions of dollars in estimated trade fraud annually are met with fewer than ten resolved cases per year. The largest matters often settle at 50–70% discounts from initial exposure.

Closed cases average more than eight years from first violation to resolution, and while criminal charges do occur, they do so inconsistently and late in the enforcement cycle.

Taken together, these figures suggest an enforcement posture whose scale, pace, and throughput are materially misaligned with the volume, sophistication, and persistence of the underlying conduct.

Part III: China

Why the Trade System Became Vulnerable

Trade rules were built for reciprocity and good faith, but enforcement assumptions no longer hold against bad-faith actors.

Globalization and trade volume quickly outpaced institutional capacity, and compliance complexity created hiding places.

Institutional lag means that years-long cycles turn enforcement into a cost of doing business rather than a real deterrent. Moreover, when working with autocratic states like China, enforcement becomes even more difficult.

Non-Market Competition and the China Shock

State-backed systems can absorb losses to win market share; supply chains become instruments of leverage. China, for example, offers a structural challenge to U.S. enforcement mechanisms.

How? Disputes with Chinese companies are not like typical trade disputes. Through state subsidies, coercion, and evasion, their system can adapt faster than the U.S. can enforce.

In 2016, economists David Autor, David Dorn, and Gordon Hanson, popularized the term “China Shock” to describe the rapid surge of Chinese manufacturing exports into the United States and other advanced economies beginning in the late 1990s and accelerating after China joined the World Trade Organization in 2001.

Their research examined how this sudden increase in import competition affected U.S. labor markets, especially in regions dependent on manufacturing.

They found that communities exposed to Chinese imports experienced significant job losses, declining wages, and higher unemployment as local industries struggled to compete with lower-cost Chinese production, ultimately leading to a backlash that put Donald Trump in White House in 2016.

The broader lesson of the “China Shock” literature is that while international trade can benefit the economy overall through lower prices and efficiency, it can also impose concentrated and lasting costs on particular workers and communities if the transition happens too quickly and policy does not help them adapt.

Beijing Rules

Book by Bethany Allen

Summary Bethany Allen offers a detailed examination by of how China has deliberately integrated state power, party control, and market access to weaponize economic relationships.

Allen shows how Beijing uses trade, investment, supply chains, and regulatory pressure to discipline foreign companies and governments. The book underscores how decades of globalization and corporate offshoring left the United States economically exposed to a strategic rival.

Why read? The book is a clear and well-reported account of how economic engagement with China evolved into a system of leverage benefiting the Chinese. The book provides concrete case studies from corporate coercion to supply-chain dependence that illustrate how economic interdependence can be used as a geopolitical weapon.

Study Questions How did Western assumptions about globalization and economic integration enable China to accumulate strategic leverage? What would a more economically sovereign approach to trade and supply chains look like for the United States?

Part IV: Enforcement

Trade enforcement starts in two primary ways:

Customs Border Protection. CBP reviews goods on a pre and post entry basis, using their databases to identify anomalies. They typically are able to review three percent of all entries, whether it be physical or post-entry review. They seize non-compliant goods and recover unpaid duties from compliant importers. For uncooperative importers, CBP can defer to the DOJ for prosecution.
Whistleblowers. U.S. manufacturers or other third-parties witnessing duty evasion can raise a red flag. They have several tools at their disposal. However, bad actors understand how to thwart the system.

Whistleblowers have a few tools at their disposal, including:

e-Allegations Program. An easy tool provided by CBP that anyone can use to submit a claim, but it’s a blackbox for filers who rarely observe an outcome.
EAPA (Enforce and Protect Act). Commerce determines dumping through industry petition. CBP enforces the ruling. This structured and costly process oftentimes stops competitors for a short period, until they emerge as a new entity.
False Claims Act (FCA). Tool for private individuals to sue entities defrauding the government, by inviting the DOJ to intervene but there is no guarantee they will.
DOJ Criminal Whistleblower. New program that allows whistleblowers to submit directly to DOJ, bypassing CBP’s process. Too early to tell efficacy.

Dive Deeper on Enforcement Tools

Institutional Reality

One of the central challenges in enforcing U.S. trade laws is that authority is fragmented across several different government agencies, each with its own mandate, tools, and institutional priorities. No single entity is fully responsible for investigating and prosecuting trade crimes.

Responsibility is divided among agencies such as:

U.S. Customs and Border Protection (CBP) → inspects and processes imports at the border
The Department of Justice (DOJ) → brings both civil and criminal enforcement actions
Department of Commerce → administers trade remedy rules like antidumping and countervailing duties
Office of the U.S. Trade Representative (USTR) → which handles trade policy and international disputes
Department of Homeland Security (DHS) → investigative bodies within Homeland Security Investigations (HSI)

Because these agencies operate under different statutes and institutional cultures, coordination is often uneven. Cases may stall or fall through the cracks as they move from one agency to another, and incentives for cooperation are not always aligned.

Another constraint is the limited visibility the government has into the underlying data behind global supply chains. Trade enforcement relies on analyzing shipping and customs data to detect fraud such as transshipment or tariff evasion, but incomplete data, limited interagency access, and outdated technology slow investigations and allow companies time to shift suppliers, structures, or routing.

Finally, there are important political economy dynamics that shape how aggressively trade crimes are pursued. Because many large firms benefit from low-friction global supply chains, stronger trade enforcement can raise compliance costs, leading well-organized industry groups to oppose reforms even when broader economic benefits exist.

Part V: Prioritization

So, what do we fix first? The Alliance for Trade Enforcement NOW offers the following framework as a guide:

A. Executive action

White House–led Working Group on Trade Law Enforcement: Coordinate enforcement across DOJ, DHS/CBP/HSI, Treasury, Commerce, USTR (and others).
Outcome-based performance metrics: Track measures such as time from allegation to resolution and report results publicly and to Congress.
Sequenced deliverables: Set milestones at 90, 180, and 270 days to build a unified federal trade enforcement performance framework.

B. Close structural loopholes

Non-Resident Importer (NRI) reform: Require the real beneficiary of imports to have a U.S. presence and assets, ending “ghost importer” structures.
Last Sale Valuation Act (introduced by Senators Bill Cassidy and Sheldon Whitehouse): Base customs duties on the final sale price before export to the United States.

C. Strengthen enforcement

Protecting American Industry and Labor Act (H.R. 1869): Create a dedicated trade crimes unit within the Department of Justice and authorize staffing and reporting.
Fighting Trade Cheats Act (H.R. 1284 / S. 3808): Increase penalties, allow import bans for repeat violators, and create a private right of action.
Leveling the Playing Field 2.0 (H.R. 1548 / S. 691): Strengthen enforcement of antidumping and countervailing duties by tightening anti-circumvention and successor-company loopholes.

D. Transparency

Country-of-origin (COO) transparency: Accurate country-of-origin reporting underpins most trade enforcement.
Manifest Modernization Act (H.R. 2653 / S. 1259): Extend public shipping manifest requirements beyond ocean freight to air, truck, and rail.
Online Country-of-Origin Disclosure (S. 294): Require e-commerce platforms to show product origin and seller location, enforced by the Federal Trade Commission (FTC).

Explore more details of this platform for change here.

A special thanks to the team at the Alliance for Trade Enforcement NOW—including David Rashid and former American Moment fellow Alma Duwal—for their collaboration on this Study Guide.