Trump Signs Executive Order Addressing Structural Gaps in Trade Enforcement

High tariffs create strong incentives to evade them. More than 40 percent of textile shipments flagged for analysis by U.S. Customs and Border Protection (CBP) were either “mis-declared or mis-described” on entry. If the problem was already acute in textiles, the stakes are much greater for semiconductors, critical minerals, and dual-use technologies.

On June 3, President Donald Trump signed an executive order reforming and strengthening customs enforcement — a significant step to address structural issues hindering trade enforcement. The order directs CBP to overhaul its eligibility and disclosure requirements for Importers of Record (IOR), targeting systematic inefficiencies and loopholes that long undermined CBP’s ability to effectively enforce trade policy, including transshipment, insufficient customs bonds, and shell companies obfuscating problematic foreign ownership.

Enforcement Hindered by an Outdated System

U.S. foreign policy increasingly relies on tools of economic statecraft, such as sanctions, tariffs, import restrictions, and export controls. But the agencies and systems responsible for implementing these tools were not designed for today’s geopolitical environment, in which adversaries routinely weaponize trade to undermine U.S. economic and national security interests.

A reported $112 billion gap last year between China’s export figures and CBP’s import numbers illustrates the core problem: shell companies and transshipment schemes continue to enable customs fraud and tariff evasion at scale. The problem extends beyond CBP. Recent guidance from the Bureau of Industry and Security (BIS) exposed significant transshipment risks in the current export control framework, underscoring that designating restricted parties and enforcing those restrictions are distinct — and often disconnected — challenges. Pending legislation to establish a trade crimes task force at the Department of Justice (DOJ) reflects a recognized gap in the government’s capacity to prosecute trade crimes.

Disclosure of Beneficial Ownership Is a Trade Enforcement Imperative

The executive order outlines how shell companies and artificial corporate structures impede CBP’s ability to enforce trade laws and identifies beneficial ownership disclosure as a critical enforcement tool.

Shell companies with opaque foreign ownership enabled China’s attempted acquisition of a highly specialized U.S. chipmaker and Iran’s procurement of U.S.-origin technology for its nuclear and military programs. A 2024 Financial Crimes Enforcement Network advisory warned that shell and front companies pose as legitimate exporters or importers, or firms in entirely unrelated sectors, enabling Mexican cartels’ ability to procure fentanyl precursors from China-based suppliers, fueling the national fentanyl crisis.

For effective enforcement of imports, CBP needs to know who is importing a shipment and from where it originated. In the fentanyl trade, investigators understand that precursor chemical suppliers in China and India route shipments to Mexican cartels through the United States and Canada to reduce suspicion. Yet without visibility into real ownership, enforcement agents are limited by what companies are willing to disclose.

The executive order recognizes that shell companies and corporate opacity threaten U.S. national security, though the problem extends well beyond CBP, affecting the Committee on Foreign Investment in the United States, the Department of Defense, and other agencies across the government. Congress passed the Corporate Transparency Act (CTA) in 2021, requiring all U.S.-registered companies to disclose beneficial ownership information. Yet the administration chose not to fully enforce the CTA, and the law now faces outright repeal — driven largely by business objections over compliance burden.

Government-Wide Enforcement Is Key

This executive order is a necessary and overdue step toward aligning U.S. economic security institutions with today’s threat landscape, and the effort should be extended to trade enforcement agencies across the government, such as BIS and DOJ. It recognizes that beneficial ownership transparency is a national security imperative, and the requirement to address ownership visibility gaps at CBP reflects the importance of this information for trade enforcement.

At the same time, the administration must fully enforce other rules and regulations that mandate beneficial ownership information disclosure, such as the CTA. Enforcing the CTA government-wide, while addressing potential threats from foreign-registered shell companies at a department and agency level in line with the executive order, is a more effective way to counter the threat shell companies pose to U.S. national security.

Elaine Dezenski is senior director and head of the Center on Economic and Financial Power (CEFP) at the Foundation for Defense of Democracies (FDD), where Susan Soh is a research associate. For more analysis from Elaine, Susan, and FDD, please subscribe HERE. Follow Elaine on X @ElaineDezenski. Follow Susan on X @SusanSoh827. Follow FDD on X @FDD and @FDD_CEFP. FDD is a Washington, DC-based, nonpartisan research institute focused on national security and foreign policy.