Trump order tightens importer rules to plug duty evasion loopholes

President Trump signed the 'Strengthening Customs Enforcement' executive orderExecutive OrderA written directive from the President directing federal agencies to implement or change policy without requiring congressional approval.Key ConceptExecutive OrderA written directive from the President directing federal agencies to implement or change policy without requiring congressional approval.Open conceptBookmark on June 3, 2026, directing DHS and CBP to overhaul importer-of-record rules that have allowed foreign shell companies to import goods into the U.S. with minimal financial accountability. The order builds on a year of escalating customs enforcement under the Trump administration's trade agenda.

The executive orderExecutive OrderA written directive from the President directing federal agencies to implement or change policy without requiring congressional approval.Key ConceptExecutive OrderA written directive from the President directing federal agencies to implement or change policy without requiring congressional approval.Open conceptBookmark text specifically cites existing customs laws — including 18 U.S.C. § 545 (smuggling) and the Countering America's Adversaries Through Sanctions Act — as frameworks importers must now certify compliance with when filing entry documents, according to the White House fact sheet released June 3, 2026.

The order's most consequential structural change is the bonding overhaul. CBP currently requires a continuous import bond valued at a minimum of 10% of the prior year's duties, taxes, and fees — a floor set decades ago that doesn't account for the scale of tariff increases since 2018. Under the new order, DHS and CBP must increase bond amounts and require all importers of record to maintain minimum tangible domestic assets at all times.

Shell importers — foreign entities with no U.S. assets, registered as nominal IORs — have exploited the gap between low bond values and high duty liabilities. When CBP assesses penalties, it can only collect up to the bond face value from a dissolved shell company. The asset requirement directly closes that exit route.

Only U.S. importers of record may now file informal entry — the lower-documentation pathway for shipments valued under $2,500. Foreign IORs face heightened formal entry requirements, which include surety bonds, detailed commercial documentation, and greater scrutiny at the port of arrival. This provision shifts the composition of who can participate in the informal entry system and who bears greater upfront compliance costs.

Foreign sellers have exploited informal entry as a low-scrutiny channel, filing multiple sub-threshold shipments to avoid formal entry requirements. The restriction to U.S. IORs shifts all foreign-origin informal shipments into a higher-documentation regime.

The order establishes a 'good standing' requirement for all importers of record: any IOR found out of compliance with customs laws can be blocked from importing until the violation is resolved. CBP previously lacked a streamlined administrative suspension mechanism — importers could often continue operating while contesting penalty assessments.

The 50% minimum penalty floor limits CBP's mitigation discretion. CBP has historically reduced assessed penalties by 50 to 80% through a formal mitigation process. The new floor sets 50% of the assessed penalty as the lowest possible outcome, fundamentally changing the cost-benefit calculation of evasion.

The order mandates detailed disclosure of ownership structure, business operations, and supply chain information from all importers. Importers must certify compliance with the Countering America's Adversaries Through Sanctions Act (Public Law 115-44) and disclose foreign tax identifiers and global business identifiers. This supply chain transparency provision targets the practice of obscuring Chinese-origin goods through third-country transshipmentTransshipmentThe practice of routing goods through an intermediate country to falsely claim a lower-tariff country of origin.Key ConceptTransshipmentThe practice of routing goods through an intermediate country to falsely claim a lower-tariff country of origin.Open conceptBookmark.

TransshipmentTransshipmentThe practice of routing goods through an intermediate country to falsely claim a lower-tariff country of origin.Key ConceptTransshipmentThe practice of routing goods through an intermediate country to falsely claim a lower-tariff country of origin.Open conceptBookmark — routing Chinese goods through Vietnam, Mexico, or India to claim lower duty rates — cost the U.S. an estimated $38 billion in 2025, according to Altana's analysis published in Dow Jones Risk Journal on April 28, 2026.

The enforcement backdrop quantifies the problem: CBP issued 2,432 trade penalties in fiscal year 2025 — up from 2,204 in FY2024 — and recovered $235.5 million through audits, surpassing the FY2024 total of $117.7 million. Still, enforcement recoveries represent roughly 0.2% of the revenue lost to evasion that year.

An estimated $107 billion in tariff revenue went uncollected through evasion in 2025, per Altana's April 2026 report. Goldman Sachs economists separately estimated that Section 301 tariff evasion alone cost between $110 and $130 billion since 2018.

In May 2026, Perfectus Aluminum Inc. and related companies agreed to pay $549.5 million to resolve FCA allegations — the largest customs fraud settlement in U.S. history — after DOJ's Trade Fraud Task Force found they evaded antidumping and countervailing duties on Chinese aluminum extrusions by mischaracterizing them on entry forms. Whistleblowers from a competing U.S. aluminum association received $96 million, or 17.5% of the settlement.

The FCA's qui tamQui TamA legal provision allowing private citizens to sue on the government's behalf and share in any financial recovery.Key ConceptQui TamA legal provision allowing private citizens to sue on the government's behalf and share in any financial recovery.Open conceptBookmark provisions — which allow private parties to sue on the government's behalf and collect a share of any recovery — have become the primary mechanism through which competitors and employees report duty evasion. The DOJ added customs fraud to its Corporate Whistleblower Awards Pilot Program in May 2025, amplifying the financial incentive for insider reporting.

DHS Secretary Markwayne Mullin, confirmed by the Senate 54-45 on March 23, 2026, replaced Kristi Noem after Trump nominated Mullin on March 5. CBP Commissioner Rodney Scott, a 30-year CBP veteran confirmed in June 2025, leads the 69,000-person agency with a budget exceeding $19 billion.

Both officials are the primary implementing officers for the June 3 order. DHS must establish the new bonding levels, good-standing system, and disclosure certification process through notice-and-comment rulemakingNotice-and-Comment RulemakingAPA process requiring agencies to publish proposed rules and accept public comments before finalizing.Key ConceptNotice-and-Comment RulemakingAPA process requiring agencies to publish proposed rules and accept public comments before finalizing.Open conceptBookmark under the Administrative Procedure ActAdministrative Procedure Act1946 law governing how federal agencies develop regulations and make decisions through rulemaking and adjudication.Key ConceptAdministrative Procedure Act1946 law governing how federal agencies develop regulations and make decisions through rulemaking and adjudication.Open conceptBookmark — a process that typically takes six to eighteen months.

The Coalition for a Prosperous America, whose chairman is Zach Mottl and whose work USTR Jamieson Greer described as 'on the front lines of pro-tariff advocacy for years,' publicly praised the executive order. The order also aligns U.S. practice with most other major trading partners. Many countries either prohibit foreign entities from serving as IOR entirely or require foreign importers to partner with verified domestic parties. The White House fact sheet specifically cited this international alignment as a policy objective.

U.S. customs law begins with the Tariff Act of July 4, 1789 — the first substantive legislation passed by the First Congress and signed by President George Washington. Sponsored by James Madison, the act imposed duties on 84 categories of goods and, paired with the Collection Act of 1789, created the U.S. Customs Service and designated ports of entry. For the first century of the republic, customs revenue funded roughly 80% of federal government operations, including construction of Washington, D.C., and the military academies, per the CBP history archive.

The Smoot-Hawley Tariff Act, signed by President Herbert Hoover on June 17, 1930, raised duties on more than 20,000 imported goods and set off retaliatory tariffs from U.S. trading partners that contributed to a collapse in global trade during the Depression. The act also codified the first statutory ban on imports of goods made with forced labor — a provision that survives in modified form in current law and underpins the sanctions compliance requirement in the June 2026 executive order.

Congress created U.S. Customs and Border Protection on March 1, 2003, by merging the U.S. Customs Service, the Border Patrol, and immigration inspectors from the INS into a single agency under the newly formed Department of Homeland Security. The Homeland Security Act of 2002, signed by President George W. Bush on Nov. 25, 2002, authorized the merger in direct response to the 9/11 Commission recommendations. CBP inherited customs revenue authority alongside its border security mission — a dual mandate that shapes the June 2026 order, which treats trade enforcement as a national security function.\n\nThe agency grew rapidly: from roughly 41,000 employees at founding to more than 69,000 today, with a budget exceeding $19 billion. Yet its trade enforcement capacity — measured by penalty collections — has remained small relative to the evasion it faces.

Congress raised the de minimis exemption from $200 to $800 in the Trade Facilitation and Trade Enforcement Act of 2016, signed by President Barack Obama. The goal was to reduce CBP workload on small-value shipments and encourage e-commerce. De minimis entries grew from 140 million in 2014 to 1.36 billion in 2024, creating an enormous low-scrutiny channel. Foreign sellers used the exemption to split larger shipments into sub-threshold packages and avoid formal entry documentation. Trump suspended de minimis treatment for all countries on Feb. 20, 2026 — a precursor to the June 2026 IOR restrictions that further close informal entry to foreign importers of record.

The National Customs Brokers and Forwarders Association of America warned in early 2026 that sharply increased continuous bond requirements — which many importers had already received "bond insufficient" letters for after tariff rate increases since 2018 — would impose meaningful compliance costs on small and mid-sized importers who were already following the law. Bond premiums for a $1 million continuous bond run approximately $5,000 to $6,000 annually; a tenfold bond increase would add $50,000 or more per year per importer. Critics from the import compliance community argue that across-the-board bonding increases penalize compliant importers alongside bad actors, and that targeted risk-scoring would be more precise.