The Customs Executive Order: Dealing with Downstream Consequences

One of the characteristics of Trump’s decisionmaking style is to act either without thinking about or dismissing possible downstream consequences. When they inevitably arrive, his response is to come up with a patch to fix the problem he caused. The most notorious example has been his farm policy. In his first term, tariffs led to retaliation that hit the farm community hard. His response was to use $23 billion of taxpayer money to bail the farmers out. The same thing is happening in Trump 2.0, thanks to Chinese retaliation against his tariffs, and it looks like the response will be similar.

Another example, though not a perfect one, is the recent executive order on customs enforcement. Trying to cheat customs authorities is not a new problem—people have been doing that for centuries—but it is going to get worse because of Trump’s tariffs, so we have a new patch to fix a problem that he did not cause but exacerbated. Customs fraud, aside from outright smuggling, usually involves either claiming a product is something other than what it is to obtain a lower tariff or falsifying its country of origin to avoid higher tariffs because of dumping or subsidization. In the pre-Trump trade world, tariffs on most items were low, and since they were assessed on a most favored nation (MFN) basis, there was no incentive for tariff arbitrage, aside from trying to avoid dumping and subsidy tariffs.

In Trump 2.0, with MFN out the window and with potentially different tariff rates for different countries, if the courts ultimately approve his plans, incentives to manipulate the process are greater. For example, if the tariff for UK imports is 10 percent, and the tariff for EU imports is 15 percent, U.S. customs authorities will see more imports from the United Kingdom and fewer from the European Union, as some exporters in Europe route their shipments through the United Kingdom and try to claim they were made there. The fact that the tariffs are higher—the average U.S. tariff before 2017 was less than 2.5 percent—means there is more money on the table, which is also an incentive to find a cheaper way to get stuff into the United States.

The customs executive order will probably succeed in reducing customs fraud, but it will come at the cost of making importing more complicated and more expensive. Its provisions focus on clarifying the status of importers of record (IORs), the people responsible for providing Customs and Border Protection (CBP) with information on imports and ensuring it is accurate. IORs will be required to supply more information about themselves, including their chain of ownership and the extent and nature of their assets in the United States. (One of the problems has been IORs with no U.S. assets who simply walk away from illegal transactions, leaving CBP with no one to fine and no assets to seize.) Greater transparency about ownership will make it easier for CBP to determine which IORs are foreign and which are domestic, although the new rules raise the possibility that long-time trusted and reliable U.S. IORs will suddenly become foreign if they are part of an acquisition. Distinguishing between foreign and domestic IORs is important because the former will be treated differently from the latter.

The most significant distinctions relate to entries and bonds. Foreign IORs will no longer be able to make informal entries, a process for lower-value imports under $2,500 that involves less paperwork and usually does not require a bond. Instead, they will have to use the formal entry process that requires more forms and more precision regarding classification. Many importers hire a licensed customs broker to navigate the formal entry process for them. In addition, foreign IORs will no longer be able to obtain continuous bonds unless they are approved by CBP and found compliant with the Customs Trade Partnership Against Terrorism, a post-9/11 voluntary program to promote supply chain security. Continuous bonds cover all anticipated duties for a year. The alternative is to obtain a single-entry bond for each entry, a much more time-consuming and expensive process. And, of course, with higher tariffs, bonds are more expensive, posing an additional challenge for small importers who may not be able to come up with the necessary collateral.

There are other provisions, including a requirement for CBP to submit proposals for legislation, and the net effect of all of them will be to make IORs more transparent, which will probably force some of the shady ones out of business. It will also create more bureaucracy and costs and encourage more importers to hire licensed customs brokers to navigate the process for them, which adds to the cost. Because it treats foreign IORs differently from U.S. IORs, the order probably violates World Trade Organization (WTO) rules requiring national treatment—that foreign and domestic parties be treated the same. WTO violations have never persuaded the Trump administration not to do something, but it could cause other countries to, once again, take the United States to the WTO dispute resolution process.

Many of these ideas are not new; they have been discussed with customs brokers and trade associations in the past along with other measures that would streamline and facilitate entry for trusted and known importers. The Trump administration has characteristically chosen to implement the sticks and ignore the carrots. That may crack down on the bad guys, but it will also make life, and importing, more difficult and expensive for the good guys.

Author’s Note: I retired from CSIS on March 29, 2026. I plan to continue writing this column and participating in the Trade Guys podcast, so please continue to read and listen. However, my CSIS email address will no longer be working, so if readers or podcast listeners want to contact me directly, they should do so at [email protected].

William A. Reinsch is a senior adviser (non-resident) and Scholl Chair emeritus with the Economics Program and Scholl Chair at the Center for Strategic and International Studies in Washington, D.C.