A U.S. Customs and Border Protection technician examines overseas parcels after they were scanned at the agency’s overseas mail inspection facility at Chicago’s O’Hare International Airport on Feb. 23, 2024. Charles Rex Arbogast/AP hide caption
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Charles Rex Arbogast/AP
In a flurry of actions, President Trump has imposed sweeping tariffs on imports coming into the United States, before pausing or retracting many.
Still, tariff levels are higher than before Trump took office, as his administration seeks to boost U.S. manufacturing and raise revenue.
But collecting on these tariffs is another matter. The federal agencies that screen imports are frequently overwhelmed and understaffed, and experts say exporters are becoming cannier at evading taxes.
Here’s why collecting taxes on imports can be such a headache.
The incentives to smuggle just got bigger
Trade experts say higher tariffs specifically against China have created more of a demand for smuggling.
Even after the U.S. and China cut a deal last week, tariffs on China are hovering around 30%, which is still above U.S. tariffs on other countries — especially after Trump announced a 90-day pause.
“There is going to be more incentive for companies to attempt to skirt the law,” says Matt Lapin, a trade compliance attorney at the law firm Wiley. “The incentive for bad actors to act worse or for previously good actors to skirt the law — that incentive is just increasing.”
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One way to skirt the law is through a practice called transshipping, when businesses route their product through a third country.
David Rashid, who runs an auto parts company based in Illinois, is painfully familiar with this practice. Back in 2019, he welcomed the 25% tariffs Trump put on China during his first term, but Rashid was quickly disappointed with the results.
“After Trump’s 25% tariffs hit, what we realized was the price [of our competitors] didn’t change,” he says. “And so that put me on a path to try to understand how that was possible.”
Rashid discovered Chinese competitors were routing their product through third countries like Thailand and Vietnam to avoid paying American tariffs.
“Trade and customs fraudsters, including those who commit tariff evasion, seek to circumvent the rules and regulations that protect American consumers and undermine the Administration’s efforts to create jobs and increase investment in the United States,” Matthew Galeotti, who heads the Department of Justice’s Criminal Division, wrote in a recent memo.
A lack of resources to collect tariffs
U.S. Customs and Border Protection, or CBP, is the primary federal agency that screens imports and determines if a tariff should be collected.
But the agency now has a lot more work to do. On top of global retaliatory and reciprocal tariffs, CBP is also in charge of collecting a new tariff on the more than 1 billion low-value packages that come into the U.S. each year, most from Chinese e-commerce platforms, after the Trump administration ended what’s called the “de minimis” trade exception.
The agency said in a statement to NPR that it “stands ready” to enforce new taxes. And “as a result of recent presidential actions, enforcement will include the most severe penalties permitted by law.”
Logistics specialists dispute that agency’s readiness.
“CBP does not have the resources to effectively inspect and enforce [the de minimis rule],” says Ram Ben Tzion, who sells software to governments, mostly in Europe, to help them monitor trade fraud. “I think that there is no capacity in terms of workforce, in terms of skill sets, [and] in terms of supporting technologies to allow such a massive volume of customs entry.”
Parcels slide down a ramp after being scanned at the U.S. Customs and Border Protection overseas mail inspection facility at Chicago’s O’Hare International Airport on Feb. 23, 2024. Charles Rex Arbogast/AP hide caption
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Charles Rex Arbogast/AP
The union that represents Customs and Border Protection agents says CBP has long suffered from chronic understaffing. The union has also warned the agency is facing a surge in planned retirements soon, which would further deplete its ranks.
A former senior enforcement official at CBP, who requested anonymity because they were not authorized to speak about their previous job, told NPR that there is a long-term shortage of import specialists, each of whom needs one to two years of training to spot trade fraud.
By law, CBP must have a minimum of around 1,000 import specialists, but the former senior enforcement official says the agency often fell short: “I don’t know that we ever actually got to that number.”
“People don’t get caught”
So, what to do if one does suspect someone is evading tariffs?
Ask Milton Magnus. He runs M&B Hangers, a family wire hanger business based out of Alabama. Magnus says the wire hanger industry has been decimated by Chinese competitors transshipping their product through Taiwan and Vietnam.
More than a decade ago, Magnus personally hired private investigators to travel to Taiwan and Vietnam, where they discovered exporters were shipping basically the same product from China, to avoid paying tariffs on Chinese goods. Magnus then sent evidence of some 30 alleged trade violations to the Department of Homeland Security.
“They didn’t respond to a single one,” says Magnus.
Since then, he’s filed more trade complaints, to little effect. He says each time a new tariff is implemented, he gets a reprieve of just a few months before the offending company starts transshipping through another country.
“People don’t get caught. If they get caught, there’s no punishment for them. They just go somewhere else and do it again,” laments Magnus.
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Magnus and Rashid, who runs the auto parts company, and other U.S. business owners have proposed legislation asking for $20 million this year to fund a DOJ task force that prosecutes trade fraud cases.
Those who have worked on DOJ trade cases say they need the extra funding.
“There weren’t enough resources,” says a former DOJ official who worked on trade-related cases and who asked to remain anonymous because they were not authorized to talk publicly about their former job. “Agents are referring cases to us all the time, huge cases worth hundreds of millions of dollars, and we essentially have no one to work on them.”
There is currently a government-wide hiring freeze and a mandate to cut the federal budget, initiatives championed by Trump and his ally Elon Musk.
“[The DOJ’s Civil Division] is not hiring new people, and it has no authority to hire new people,” the former official says.
Plus, the DOJ’s trade fraud effort is now leaderless, after its head resigned.
“My sense is that nobody’s running it today,” says Rashid.
He argues not being able to prosecute trade crime hurts businesses, but also the U.S. government in terms of lost revenue. “There’s a lot of money being left on the table, is the bottom line,” he says.
