Chinese exporters are increasingly offering U.S. businesses pre-tariff prices on goods — deals that often involve fraudulent shipping practices, mislabeling, and customs evasion. These tactics, while lucrative on the surface, expose American importers to significant legal and financial risk. This report outlines how the schemes operate, their legal consequences, and what U.S. companies need to know to avoid becoming entangled.
“Duty-Inclusive” Deals Mask Illicit Tariff Evasion
At the heart of the scheme is the “delivered-duty-paid” (DDP) model, where Chinese sellers cover all import duties. But industry experts and legal analysts say these deals are often built on under-invoicing, false product declarations, and shell-company logistics structures that hide true import values.
Exporters — often via freight forwarders — misstate the value or misclassify goods in shipping documents to reduce declared customs duties. To complete the deception, shipments are routed through shell companies that serve as the “importer of record,” responsible for customs compliance.
These shell firms secure a minimum $50,000 customs bond, but when duty bills go unpaid, the bond is used and the company disappears — often without bankruptcy proceedings. A new shell is formed and the cycle repeats.
“Opening a shell company is easy. You can do that in a couple of hours,” said Ash Monga, CEO of Imex Sourcing Services. “The cost is a few hundred [dollars], so this whole process is easy to execute and can be replicated as many times as you want.”
Social Media Ads Promote Fraud-Friendly Shipping
On platforms like Xiaohongshu, searches for phrases such as “double clearance and all tax inclusive” surface promotions for furniture, appliances, and other high-value items, promising U.S. delivery with all tariffs covered. Sellers achieve this by declaring false values or using unrelated product categories to minimize duties.
Some U.S. buyers are reportedly requesting Chinese suppliers to use these methods to avoid newly imposed tariffs under President Donald Trump’s second-term trade policies.
Legal Liability for U.S. Companies
Many U.S. businesses wrongly believe they are legally insulated if not listed as the importer of record. But legal experts warn that any party benefiting from fraudulent practices can face steep penalties.
Dan Harris, a partner at Harris Sliwoski, said companies are already facing retroactive tariff bills and shipment seizures due to unpaid duties. Claiming ignorance is unlikely to hold up if businesses were clearly paying below-market rates during a tariff regime.
“There’s no way an American company that had been paying $20 for products paid only $25 [with new tariffs] unless something illegal was happening,” Harris said.
He advises requesting full customs documentation from suppliers to verify declared values and product classifications.
Competitive Pressure on Honest Importers
U.S. businesses that comply with trade rules are finding themselves at a pricing disadvantage. Cze-Chao Tam, CEO of California-based Trinity International, said buyers are resisting price hikes even as tariffs on some goods reach 55%.
“Consumers are most likely to choose the cheapest options,” Tam said. “It will be very difficult to compete with people who do business illegally.”
Customs Enforcement Under Strain
Enforcing tariffs on a massive volume of incoming goods is stretching U.S. Customs and Border Protection (CBP) thin. Former customs officer Alex Capri said only a small fraction of shipments can be physically inspected, leaving CBP reliant on a “laser-focused” risk-based selection system.
Compounding the problem are loopholes and technical issues. In April, a system glitch prevented importers from coding their shipments correctly, delaying tariff enforcement. Meanwhile, rerouting Chinese goods through third countries to mask origin — known as transshipment — remains a frequent tactic.
Scale of Evasion
Goldman Sachs estimated that in 2023 alone, U.S. tariff evasion related to China reached $110 billion to $130 billion. Mislabeling and under-invoicing each accounted for around $40 billion, with transshipment contributing up to $50 billion.
Government Crackdown and Legal Reforms
The U.S. government is ramping up its enforcement response. A new Department of Justice directive issued last week prioritizes trade and customs fraud — with tariff evasion marked as a key investigation target.
CBP says it is deploying advanced systems, legal authority, and operational protocols to strengthen compliance. A spokesperson confirmed that enforcement would now include “the most severe penalties permitted by law.”
Meanwhile, officials are pressuring exporting nations to improve inspection procedures before shipments leave their ports, hoping to prevent fraud at the source.
While Chinese exporters offer seemingly unbeatable prices by absorbing tariffs, many of these deals are underpinned by customs fraud. U.S. businesses participating — even indirectly — risk financial penalties, shipment losses, and legal exposure. As enforcement tightens, the cost of noncompliance may far outweigh the discounts.
