The Trade Transparency Challenge

Credit for this week’s column idea goes to loyal reader Chad Henry, who told me about the innovations in trade recordkeeping that I will be mentioning. Back in antediluvian days, trade recordkeeping was not complicated. Items arrived by ship at ports of entry or at land border entry points by truck or rail, where the goods and their accompanying documentation would be examined by government authorities and any duties assessed. Today, everything is more complicated.

First, of course, the volume of trade has increased markedly, facilitated by the invention of containerization more than 50 years ago. There is simply more stuff moving now than ever before. Conveniently, the digitization of the economy has helped customs brokers and government authorities keep up with the increase in volume, and AI may help more. Most “paperwork” these days is electronic, and much of it is filed in advance before a ship reaches port. Physical inspection of goods has gone the way of the dodo, occurring only around 3 percent of the time in the United States. If nothing else had changed, the increased workload would have been manageable, but three other elements have made the picture more complicated.

The first is the growing complexity of supply chains. Trade used to be simple: You made it here and shipped it there and called it an export. In the contemporary supply chain world, everything is made everywhere—parts and components come from all over the world to be combined into an end product in yet another location. That makes determining a product’s origin more complicated, while the multiplication of regional trade agreements makes it more important, since tariffs vary depending on a product’s origin. In addition, the Trump administration’s emphasis on reshoring manufacturing and increasing the amount of U.S. content in its end products is leading it to demand changes in rules of origin, particularly in the United States-Mexico-Canada Trade Agreement, adding to the complications of the system. These developments force companies to spend more time and resources tracing the origin of their products’ components.

The second element comes from national security hawks in both political parties: the emphasis on resilience and the elimination of U.S. dependence on unreliable foreign sources, particularly China. Accomplishing that requires knowing where parts come from, a burden that falls first on manufacturers to scrutinize their supply chains and then on customs authorities to determine and certify origin. There is now discussion about how to reform rules of origin to make sure Chinese parts do not end up in essential U.S. products. One idea is to determine origin not by content, which is the current approach, but by ownership of the producing company. In that method, a product made by a Chinese-owned company would be considered Chinese, whether it was made in China, the United States, or a third country. This concept would also address the growing problem of circumvention—items entering the country with false country of origin designations in order to avoid dumping or subsidy duties.

The third element comes from the political left: environmental, social, and governance principles (ESG). These include a variety of standards assessing a company’s environmental stewardship, such as the amount of carbon emissions in its production processes; its relationship with workers and communities on issues such as labor practices, diversity, and human rights; and how the company manages itself in terms of ethical conduct, executive pay, diversity, and transparency. While companies are responsible for keeping track of most of these requirements, some of them, such as determining that products are made in an energy-efficient and low-carbon-emitting way or that forced labor was not used in their production, also end up with customs authorities having to make decisions on whether the requisite standard has been met.

These elements push the customs process toward greater transparency by piling on additional recordkeeping requirements where products are increasingly broken down into component parts, with each one scrutinized to make sure it is consistent with government policy, whether it relates to country of origin, composition, or method of production. One current example of this is the European Union’s Digital Product Passport (DPP), which was developed to implement the Ecodesign for Sustainable Products Regulation. The DPP is a cloud-based digital record that tracks product identity, which, depending on the product, includes manufacturer details and any required conformity certificates, the raw materials used, and information on the product’s carbon footprint, recyclability, and environmental impact.

 A DPP will not appear in the United States during the Trump administration; it embodies the diversity, equity, and inclusion (DEI) ideas that Trump has vigorously attacked. But the government’s desire to know more about the origin and composition of imports for security reasons is leading to additional transparency requirements. This will mean a greater due diligence burden on manufacturers and importers, who will be challenged to detail and certify the provenance of their products. It will also mean increased work and potential liability for the customs brokers and freight forwarders who handle so much of this reporting. What does that mean for the rest of us? For the lawyers, as always, more business as country of origin decisions are inevitably contested—and for consumers, of course, higher prices.

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.