The Visibility Gap: The Case for a North American Trusted Trade Laboratory

Every good that crosses a border today clears customs on the strength of a claim that rarely gets checked: that we know with certainty where it came from. What gets verified is the country stamped on the shipping label. What seldom does is what lies behind it—the steel in the car frame, the lithium in the battery cell, the semiconductor in the circuit board, the raw inputs that passed through three or four countries before the question was asked. Outside a handful of closely watched sectors, neither the importer nor the agency clearing the shipment know for sure.

In global trade that is called the “visibility gap,” the distance between what customs agencies assume about a supply chain and what it can actually verify. Much of the debate over trade today asks whether governments can build a system to close the gap, but in North America, that system is already being built.

For decades, paper documentation and a border check were enough. Supply chains were simpler, geopolitics were more forgiving, and trade volume was a fraction of what it is now. Two developments in 2001 ended that era for good. China’s entry into the World Trade Organization changed what crosses borders, scattering production across dozens of countries. And the September 11 attacks changed how closely governments look at goods crossing, shifting customs work from valuing a shipment to scrutinizing what might be moving alongside it. Today’s trusted-trader programs descend from the security shock rather than trade, a sign that scrutiny has always advanced one crisis at a time.

Why The United States Can’t Ignore the Visibility Gap

Three forces are converging to make the visibility gap harder to ignore. First, tariffs are increasingly calculated by content, not just where a good was assembled. The duty on a microwave oven can change depending where its steel was first melted, and a vehicle’s preferential treatment under the United States-Mexico-Canada Agreement (USMCA) hinges on how much of its content is North American. Second, AI and large-scale data analytics have made component-level tracing realistic at scale for the first time. Finally, the sheer pace of change through a rapid succession of new reciprocal trade agreements and hundreds of tariff schedule revisions by the United States has made paper-based verification structurally unable to keep up.

The instinct under this pressure is to reach for blunt instruments. However, tariffs applied across broad categories of goods raise the cost of trading for everyone while leaving the firms and routes that warrant closer scrutiny untouched, and a supply chain is no more visible after the duty is imposed than before. At the border, the same instinct produces sweeping information requests, long holds while documentation gets sorted out, and a default to the highest applicable duty whenever a shipment cannot prove otherwise. Neither can tell a compliant producer from a bad actor, so both punish them equally, and in industries running on single-digit margins, that can decide whether a firm survives the year. The moment calls for tools sharp enough to separate legitimate trade from circumvention.

No region has more at stake in building that precision than North America, where the failure of blunt tools is already visible. Tariffs aimed narrowly at China cut the U.S.-China goods deficit by more than half since 2018, but the total U.S. trade imbalance did not shrink; it relocated, with the deficit with Taiwan up 865 percent and Vietnam up 351 percent over the same period. The lesson has become clear with time: If you aim a blunt tool at one supplier, the flows simply reroute toward another. When roughly $2 trillion in trilateral trade crosses through North American countries every year—just over $3.8 million each minute—the stakes for these supply chains are high.

A Solution Against Chinese Overcapacity

Consider a situation where a shipment of steel arrives and the importer cannot say where it was melted and poured. That answer now carries a duty of up to 200 percent. The cost of not knowing is rising faster than the cost of finding out, and an importer who cannot verify where a component came from no longer gets the benefit of the doubt. They get the tariff.

The reason this now matters to all three North American economies at once is not forced labor, steel, or AI chips; it is Chinese industrial overcapacity. China produces roughly 30 percent of the world’s manufactured goods, yet it consumes only about 18 percent of them, and the surplus is sold into other markets at prices no other commercial producer can match. Left unanswered, overcapacity does more than undercut prices. It hollows out the industrial base of the countries on the receiving end. Factories that cannot compete close, with their suppliers close behind, and dependence on a single foreign producer sets in for goods a country once made itself.

Blunt enforcement cannot meet a threat that reroutes, transships, and re-badges itself through third countries until the paperwork looks clean. The only durable defense is the ability to see with precision where a good and its inputs came from. The same tracing that follows a t-shirt back to a labor violation can follow a subsidized auto part to its true source, which is why this is ultimately a matter of economic security. It is how the United States, Mexico, and Canada protect their supply chains against subsidized goods that current tools cannot see.

The Trusted Trade Laboratory

The visibility gap is global, but North America is already testing an answer, without any coordinated mechanism behind it. Country-of-melt-and-pour rules on steel now extend to derivative products. Pilot programs are testing private sector identifiers alongside government risk systems. Decades of trusted-trader programs already share security profiles across all three customs authorities.

None of this was centrally planned, and that is its strength. North America is quietly building a “trusted trade laboratory,” assembling verification infrastructure through scattered, parallel experiments rather than one large blueprint. It is the federalist logic that has long defined the U.S. system—the idea that a single jurisdiction can test something and prove it works before anyone else has to adopt it—applied now across three countries instead of 50 states. The European Union, with a supranational authority and a single market behind its digital product passport initiative, does not expect a harmonized system before the mid-2030s. USMCA melt-and-pour tracing is operating today.

Visibility is what a Fortress North America requires: a system open and transparent within the bloc, yet selective at its perimeter. This spring, Bloomberg reported that roughly $300 billion in goods subject to U.S. tariffs are being rerouted around them every year, increasingly through Mexico; shipment patterns consistent with circumvention are up 76 percent in a single year. A tariff wall cannot tell a genuinely North American input from one merely routed through a North American port, but a verified supply chain can.

None of this erases the real obstacles. An electric vehicle (EV) battery can pass through a Chinese cathode supplier, a South Korean cell manufacturer, a Mexican assembly plant, and a Canadian facility before claiming preferential treatment at the U.S. border. Each tier adds a jurisdiction, a privacy law, and a watch list the others may not share. Closing those seams takes legal and data harmonization down to the state and provincial level, patient investment, and the political will to formalize trust that has so far only ever been informal.

The EV battery example shows the problem that a product passport is designed to solve. At its simplest, a product passport is a digital record that travels with a good through its supply chain, showing where its inputs came from and whether it qualifies for preferential treatment before the shipment reaches the border. An early Customs and Border Patrol pilot points to how this could work in practice: testing several private sector identifiers, including one that follows the product rather than the company, while officers check those commercial databases against the agency’s own risk systems.

The same precision that verifies a good’s origin can also verify its value, allowing customs to catch undervaluation and improve revenue for all three governments. It would also reduce duplication across agencies now rebuilding the same supply chain data for carbon, forced labor, and money laundering without coordinating their efforts.

What the USMCA Review Process Should Do Next

The USMCA review is a high-level forum that brings all three governments together on a fixed schedule, making it the natural place to turn scattered pilots into shared policy. The test for 2026 is not whether the review produces a product passport, but whether it advances four steps that begin to close the visibility gap:

1. Harmonize trade data. The three countries subdivide the same goods differently the moment they move past the six-digit tier that international standards govern, each appending its own national rate lines and statistical suffixes. The same physical product is described three separate ways as soon as anyone tries to trace it. Building a shared classification crosswalk, or aligning the national tariff lines, is fixable without touching market access. Skip it, and the region simply replaces paper fragmentation with digital fragmentation.
2. Build on trusted-trader recognition rather than starting over. The three countries run mutually recognized programs in C-TPAT, Partners in Protection, and Mexico’s Authorized Economic Operator scheme, but that recognition covers security screening alone. Extending it so that a company’s verified origin and sourcing data travels across all three borders will help widen a system that already works instead of demanding a new one.
3. Set the standard and let the market meet it. Government does not need to build the traceability platform itself, as the technology is moving faster than any agency could. Its job is to define the bar a credible solution has to clear, on origin, data reliability, and interoperability across the three customs systems, and then certify the tools that clear it. That division of labor is what turns scattered pilots into a system.
4. Aim the bar at the firms that create the data. Verification begins with the designers, exporters, freight forwarders, and small manufacturers who handle and shape a good first and know what went into it. A standard only the largest firms can meet does not close the gap. It pushes it further down the chain, where it is harder to see and harder to reach.
    

USMCA Is a Platform for Economic Security, Not Just an Agreement

USMCA was built to anchor investment, strengthen regional production, and ensure that preferential access to the North American market is earned through compliance. The barrier to a more secure trading system was never technology. It is trust—between governments, between agencies, and between the public and private sector.

The stakes are larger than customs efficiency. A region that cannot see into its own supply chains cannot defend them, and the thing it most needs to defend against—a flood of subsidized overcapacity that moves through the system looking like ordinary trade—thrives on exactly that blindness.

The USMCA review is where North America will decide how far and how fast to carry the experiment it has already started. Close the visibility gap, and three sovereign countries will have shown that without any central authority to force the issue, they can still build the verification backbone modern trade requires and defend an open commercial system that overcapacity steadily erodes. No other region has managed it, and much of the world is waiting to see whether it can be done at all.

Diego Marroquín Bitar is a fellow in the Americas Program at the Center for Strategic and International Studies in Washington, D.C.