Country-of-Origin Fraud and Transshipment: Where Were the Goods Really Made?

Country of origin fraud uses a false country claim to escape customs duties. Goods leave a Chinese factory, pass through a warehouse in another country and arrive in the United States with that other country on their paperwork. The factory stayed put. The origin changed on paper.

The honest competitor pays the duty the dishonest importer skipped, and taxpayers lose the revenue. A certificate from the stopover country is only as good as the production behind it.

How to Prove Country of Origin?

Country of origin evidence starts at the factories when the country of shipment is different from the country of manufacture. Production records, bills of materials, input-sourcing records and costs show where the goods were made and what work happened in the second country. Shipment and invoice numbers connect that production history to the goods that entered the United States.

The claimed output has to fit the factory. The White House’s August 2026 transshipment report makes that distinction concrete: factory-side inquiries examine capacity, inputs, labor and equipment, while logistics inquiries examine warehouses, invoices, bills of lading, container routes and time spent in transit or storage.

An origin certificate states a conclusion about those operations. The production records show the work behind it. For a sourcing manager who knows the actual plant, or a competitor who knows the equipment the product requires, that gap can be the beginning of the case.

Repacking in a Third Country Leaves the Factory Question Unanswered

Proof of customs origin fraud involving repacking in a third country starts with what actually happened to the goods. Replacing a carton, changing a label or storing the goods does not make the warehouse their place of manufacture. A small assembly or finishing operation may also leave the original origin intact.

In its country-of-origin marking guidance, U.S. Customs and Border Protection describes substantial transformation as creating a new article with a different name, character and use. Saying goods were routed through a country or finished in it leaves that work unexplained.

We compare the handling records with the processing the importer claimed.

What Is the Difference Between Preferential and Non-Preferential Origin?

Preferential origin determines whether goods qualify for a reduced duty under a trade agreement or preference program. Non-preferential origin serves other purposes, including marking and ordinary customs treatment. Marking and duty rules can assign different origins to the same goods.

A false certificate of origin can support customs fraud by claiming a preference the production does not qualify for. For a claim that depends on regional content, the producer’s materials and costs matter.

Country of origin violations also affect antidumping and countervailing duties and the additional tariffs on Chinese goods. The product, the actual producer, the claimed origin and the particular duty belong in the same inquiry. We identify which declaration changed the duty.

What Evidence Is Needed for Qui Tam?

A qui tam case is a whistleblower case under the False Claims Act. For customs origin fraud, the useful evidence connects the real production to the customs declaration, the duty avoided and what the business knew. Factory records explain manufacture. Commercial invoices and payments explain the sale. Bills of lading, warehouse records and broker instructions connect the movement to what the importer told Customs.

These records come from different desks. The carrier’s manifest, the commercial invoice and the entry summary are separate documents, often created by separate parties. For ocean cargo, the earlier Importer Security Filing also identifies the manufacturer or supplier, origin and container-stuffing location. A supplier’s account of the factory can therefore be compared with the importer’s declaration and the carrier’s route for the same goods.

The money can reveal another false story alongside the origin. A customs invoice below the amount actually paid raises a valuation question. Buyer-supplied molds, tools or components may also be part of customs value even when the factory did not charge for them. Re-invoicing through a middle country can put another document between the real manufacturer and the U.S. entry. The bank payment, production file and shipment record help connect the transaction again.

The Paper Trail Continues After Release

The goods can leave the port before Customs has finally calculated the duty. Release addresses whether the cargo can enter. The entry summary states value, classification and the duty rate, with an estimated payment. Liquidation is the later calculation of the final duty.

That sequence matters to the person who sees the goods after import. Customer conversations can expose a false manufacturing claim, while test purchases expose the goods and their markings. A later correction or a broker’s response to a Customs inquiry can show what happened after the original declaration. We connect those records to the same product and shipment period.

Country of origin mislabeling also reaches a separate duty question. Country of origin marking duty fraud can involve an unpaid duty of 10 percent of the goods’ value when required origin marking is missing. The tungsten-carbide settlement below covered allegations that the importer distributed unmarked goods without paying that duty.

What Shipment Data Can Show About Transshipment Tariff Evasion

Transshipment tariff evasion can leave a visible route change and discrepancies between trading partners’ records. Public vessel manifests can identify shippers, consignees, cargo and ports. Connecting those movements to the factory and the entry is the work that makes the information useful.

The World Customs Organization’s 2015 paper Mirror Analysis and Revenue Fraud describes comparing one country’s imports with its trading partners’ reported exports. Differences in quantities, weights and values help target an investigation.

Matching the records is its own problem. A 2020 Center for Economic Studies paper, Are Customs Records Consistent Across Countries? Evidence from the U.S. and Colombia, compared Colombian exports with U.S. imports and found that identifying trading partners was much easier than matching their individual shipments:

The paper recommends standardized invoice, bill-of-lading or airway-bill numbers to connect transactions. That is the practical value of an insider’s shipment file: it can connect a public route to the particular goods, invoice and factory the case concerns.

Chinese Tungsten Carbide Declared as Taiwanese

Section 301 tariff fraud was one of the allegations behind Ceratizit USA‘s $54.4 million settlement, announced by the Department of Justice in December 2025. The company distributed tungsten carbide, a hard, wear-resistant material used in cutting tools and other components. The government alleged that Ceratizit knew the products were made in China, sent through Taiwan and then declared Taiwanese to avoid the China tariffs.

The whistleblower’s complaint went beyond the shipping route. It alleged that the Taiwan operation could not produce the volume being imported:

The settlement agreement also covered alleged use of a duty-free tariff classification instead of one carrying a 4.6% rate, and alleged failure to pay marking duties before distributing unmarked products. One product stream carried separate questions about where it was made, what it was and what its markings told the buyer.

A whistleblower brought the case behind the settlement. The agreement set the whistleblower’s share at $9.75 million.

Transshipment Tariff Evasion Cases Reveal Different Parts of the Scheme

Transshipment tariff evasion cases can expose a changed route, a substituted importer or a factory that does not support the declaration. Related cases about sham products show why the physical goods matter as much as the paperwork.

In the Allied Stone case, the whistleblower’s 2021 complaint alleged that Allied Supply concealed Chinese quartz in paper and plastic as granite and routed it through Singapore to Allied Stone through a newly created U.S. importer, Richen Stone, to avoid Chinese tariffs. That allegation connects the packaging, the route and the business named as importer. Looking only at the last shipping country would miss much of the alleged scheme.

Grosfillex illustrates the packaging side. In 2025, the Justice Department alleged that the company camouflaged some Chinese aluminum furniture parts as sham kits to avoid antidumping and countervailing duties. It also allegedly left earlier false declarations uncorrected after learning they were false. What was inside the carton, what customers would actually buy and what the company did after learning of the problem all mattered.

Evolutions Flooring shows how the production story can be examined. The Justice Department’s 2025 account described alleged false manufacturer and origin information for Chinese multilayered wood flooring. Customs visited factories in Thailand, used flooring specialists to review shipments, analyzed import records and interviewed witnesses. The inquiry followed the goods back to the claimed manufacturing operation.

What Did the Importer Know About the Real Factory?

A supplier’s certificate contradicted by the importer’s own production records or warnings it received is evidence of what the importer knew. The useful correspondence connects the contradiction to the people making the import decisions: an admission about the true manufacturer, instructions to the broker or a decision to keep the same origin on later entries.

The response after discovery matters too. Whether the business corrected earlier declarations and paid the missing duty connects the manufacturing problem to what it did about the money. Grosfillex’s alleged failure to correct earlier forms shows why the inquiry includes those earlier entries.

Who Can File a Qui Tam Lawsuit?

Employees and competitors can bring customs whistleblower cases. Suppliers, brokers and freight professionals may also hold the production, payment or routing information that exposes a false origin. A competitor may recognize an impossible production claim or a landed price that leaves no room for the duty. An insider in sourcing or logistics may know the real factory and hold the routing instructions.

A whistleblower case under the False Claims Act can pay 15% to 30% of what the government recovers. Knowingly using a false origin to keep duties owed to the government is a reverse false claim. The law provides for triple damages, plus penalties. We assess how your knowledge connects the goods, the declaration and the unpaid money.

What Is an EAPA Allegation?

An EAPA allegation asks Customs to investigate evasion of antidumping or countervailing duties under the Enforce and Protect Act. If you are considering whether to file an EAPA allegation, speak with us about the origin evidence and the potential whistleblower case. We evaluate how to pursue the suspected fraud with you.

Sources

• Justice Department: Ceratizit USA settlement announcement, December 18, 2025
• Justice Department: Ceratizit USA settlement agreement, December 2025
• U.S. District Court for the Eastern District of Michigan: whistleblower’s Ceratizit complaint, September 28, 2022
• White House: The Great Transshipment Scam, August 2026
• World Customs Organization: Mirror Analysis and Revenue Fraud, 2015
• Center for Economic Studies: Are Customs Records Consistent Across Countries? Evidence from the U.S. and Colombia, 2020

The Factory You Know

If you know the plant behind the goods, the work the stopover country actually performed or the instructions that changed the origin on paper, speak with our Whistleblower Experts about turning that knowledge into a customs fraud case. We build your strongest case with you, find customs fraud whistleblower lawyers who understand manufacturing and origin disputes, and stay beside you through the whole case.