Transshipment Risk 2026 – How Thai Plants Prove Origin

In August 2026, the White House office responsible for trade and manufacturing policy released a report on the scale of transshipment, and within days Thai media were reporting that eight sectors of Thai industry could fall within the scope of enforcement. What put those sectors on the list was not defective paperwork. It was a contradiction between what factories were actually running and what they were shipping – capacity utilization falling while exports to the United States kept climbing. This article sets out what data a plant in Thailand needs to hold in order to place itself outside that suspicion, looking at both the standard used to determine country of origin and the way production data on the shop floor should be designed.

What Happened in August 2026 – Enforcement Starts Looking at Factory Utilization Data

Start with the facts. Leaving them vague and concluding “we are probably fine” is the most dangerous position a company can be in.

The Scale Set Out by the Office of Trade and Manufacturing Policy

The White House Office of Trade and Manufacturing Policy, headed by Peter Navarro, published a 25-page report titled “The Great Transshipment Scam: Rise, Scope, and Costs” on 13 August 2026. It argues that more than 40 countries are complicit in transshipment, the practice of routing Chinese-made goods through a third country in order to avoid US tariffs.

Under its central scenario, the report puts illegal transshipment at roughly 75 billion dollars a year. It estimates that this has cost the United States about 450,000 jobs, reduced GDP by 113 billion to 150 billion dollars, and cut federal tariff revenue by 19 billion to 26 billion dollars (Source: Just the News).

Arguing over whether those figures are exactly right is not a good use of time. What matters is that this is not an internal analytical memo. It is a document published to set the direction of US trade policy. Once numbers of that magnitude are on the record, enforcement resources move toward catching transshipment.

“Detective Border” Puts Capacity Indicators Into the Screening Criteria

For Japanese manufacturers, this next part matters far more than the dollar estimates. The same report proposes an AI-driven targeting system for US Customs and Border Protection (CBP) called “Detective Border”.

The information the system is said to integrate is as follows.

• Shipment data
• Shipping route history
• Tariff classification
• Ownership relationships
• Capacity indicators such as equipment utilization rates
• Anomaly detection
• Image analysis (computer vision)

(Source: Fortune)

The fifth item is the one to note. Capacity indicators such as equipment utilization rates are explicitly named as inputs used to narrow down which cases get examined. Until now, customs practice has been a world of documents – certificates of origin and invoices. A new question is being added to it: does that factory actually have the operating record to have made that export volume?

Put another way, the scope of review is expanding from the trade department’s filing cabinet into the systems that run the shop floor. That makes this a question about production management systems and OT/IoT data platforms, not about customs procedures.

Three Days From the Report to Thailand’s Eight Sectors

On 16 August 2026, three days after the report was published, English-language media in Thailand reported a more specific analysis. Eight sector groups within Thai exports were identified as potentially subject to transshipment suspicion, and their combined 2025 exports to the United States came to 52.23 billion dollars, or 72.33% of Thailand’s total exports to the US (Source: Nation Thailand, Asia News Network).

In other words, more than seven-tenths of Thailand’s exports to the United States sit inside a zone that could attract scrutiny. If your company manufactures in Thailand and ships to the US, the chance that your product category touches one of those eight sectors is far from small.

Why Thailand’s Eight Sectors Were Named – A Pattern of Utilization Against Exports

So what was the basis for judging these sectors “suspect”? This is where the article really begins.

The Basis Is a Statistical Contradiction, Not Individual Enforcement Cases

The reasoning presented was a contradiction observed from 2021 to 2025: equipment utilization was falling, yet exports to the United States kept growing. The starting point was not an accumulation of cases against specific companies. It was an inconsistency visible in sector-level statistics.

The logic is simple. If utilization at factories is falling, the volume being made in that country should be falling too. If exports to the US are nevertheless rising, where did the additional volume come from? That gap is where the suspicion arises that goods manufactured elsewhere are being routed through.

Among the eight sectors, the ones with the largest declines in utilization look like this.

The steepest fall is in automobiles and auto parts, down by more than 16 points. Alongside these four, the eight sectors also include machinery and parts, steel products (fabricated goods, classified separately from steel as a raw material), copper and copper products, and measuring, medical and optical instruments (Source: Nation Thailand). That list covers almost every area in which Japanese manufacturers operate.

A Legitimate Reason for Lower Utilization Does Not Clear the Suspicion by Itself

At this point the objection raised by Japanese managers is entirely reasonable. Utilization usually falls for legitimate reasons – shifts in demand, changes in the product mix, shorter cycle times following automation investment.

But statistics do not explain reasons. Sector-level aggregates show only the resulting numbers, and what lies behind them is something each company has to demonstrate for itself. If automation now lets you produce the same volume in fewer operating hours, that is a perfectly good explanation for falling utilization alongside steady output – but supporting it means being able to show the relationship between machine-level operating records and production results.

The situation is therefore split in two. Whether your sector attracts suspicion is not something any single company can change. Whether your company stands on the side that can explain itself is entirely within your control. That distinction runs through the rest of this article.

The Same Contradiction Shows Up on the Trade Flow Side

Utilization is not the only place the pattern appears. Analysis of import and export flows points the same way: the pace of import growth from China into Thailand is reported to be outpacing the pace of Thai export growth to the United States (Source: Nation Thailand).

Inflows from China have grown faster than outflows to the United States. Whether that difference was consumed inside Thailand or left the country in a different form is something the statistics alone cannot settle – but it is more than enough material on which to build a suspicion.

The Thai government is not standing still either. It has proposed a six-point response, and one element of it is worth noting in this context: building an AI-assisted Thai origin tracking system. That tells you the Thai government itself recognizes that the legitimacy of origin needs to be traced through production data rather than through documents.

For the basics of export and import documentation and customs procedures, our earlier coverage of Southeast Asia trade fundamentals – certificates of origin, customs clearance, and stronger inventory traceability – goes into that groundwork (currently available in Japanese). The present article goes one layer beneath those procedures, into the evidence that underpins them.

How Origin Is Determined – What Substantial Transformation Actually Means

Now to the side of the argument where suspicion gets cleared. That requires an accurate understanding of how the United States determines country of origin.

Has the Article Acquired a New Name, Character, and Use

The central concept in US origin determination is substantial transformation. Under 19 C.F.R. section 134.1(b) of the US Code of Federal Regulations, the test is whether processing in a given country has resulted in an article with a new name, a new character, and a new use (Source: U.S. Customs and Border Protection).

Conversely, operations such as the following are not on their own accepted as substantial transformation.

• Relabeling or changing the country-of-origin marking
• Simple finishing operations
• Unpacking and repacking
• Changes of title on paper, or transshipment

Routing goods through a warehouse in Thailand and repacking them into Thai boxes does not make Thailand the country of origin. That line has existed for a long time, but as enforcement intensifies, cases with degrees of processing that were never questioned before start being pulled in for verification.

Rulings Are Made Case by Case, and They Take Time

CBP makes substantial transformation determinations case by case. Because the conclusion depends on the specific goods and the specific operations, even a request for an advance ruling can take several months.

The outcome of that ruling determines whether additional tariffs apply. For a company this is not a documentation issue but a procedure with serious economic consequences for cost structure and price competitiveness. The months spent waiting for a determination, during which shipping plans hang in the air, are themselves a cost.

Actually Processing in Thailand Does Not Automatically Settle the Question

This is where many Japanese companies go wrong. The reasoning runs: we genuinely assemble the product at our Thai factory, so of course the origin is Thailand.

The existence of real processing is certainly the starting point. But what gets tested in a determination is not whether the processing happened; it is whether you can prove it happened. If it happened and you cannot show it, then from the reviewer’s point of view it is the same as if it had not happened at all. That gap is the subject of the next section.

What CBP Actually Checks Is Production Data, Not Paperwork

The belief that holding a certificate of origin is enough does not survive in the current enforcement environment. A certificate is a piece of paper stating a conclusion, and you will be asked separately for the evidence that supports it.

The Kinds of Evidence Required

The evidence typically examined when substantiating substantial transformation includes the following.

• A bill of materials (BOM) that allows every input material to be traced back to its country of origin.
• Production records by process, showing which operations were performed, where, and in what order.
• Value-added calculations showing how much value was added locally, together with the basis for those calculations.
• The certificate of origin.
• Location information for sub-suppliers.
• Labor input data.

One thing stands out when you look at that list. The certificate of origin is one item out of six. The other five all live outside the trade department, in the data that production, purchasing and cost accounting are supposed to hold.

The Evidence Is Scattered Across Departments

In most Japanese-owned plants these six kinds of data are scattered across different places. The certificate of origin is managed by trade and export control. The BOM lives in production engineering or inside the production management system. Per-process production records sit in shop floor daily reports or in machine logs. Sub-supplier location information sits in the purchasing system. The numbers behind value-added calculations and labor input sit on the cost accounting side.

In normal times this causes no difficulty. The problem is that when an origin inquiry arrives, it arrives as a cross-cutting request: for this shipping lot, provide the origin of the input materials, the records showing the processes were performed, and the breakdown of value added. Data that each department holds vertically has to be rebundled horizontally around the shipping lot.

Doing that rebundling by hand, after the inquiry lands, takes weeks. And the older the shipment, the more holes appear – records that no longer exist, staff who have moved on, suppliers who have since been replaced.

Starting to Move When the Inquiry Arrives Is Already Too Late

Requests to explain origin do not necessarily come directly from customs. You should also expect them to arrive through your US customer, the importer, as a request to supply supporting documentation for a particular shipment.

What makes that awkward is that you do not control the deadline. The customer works backward from the date they themselves have to respond, so the window you get is usually too short to reassemble internal data, translate it, and check it for consistency.

There is more to it than compliance. How well you answer these inquiries affects whether the business continues. Given a supplier who can produce supporting documentation immediately and a supplier who takes a long time every time, it is obvious which one a risk-averse customer keeps. It is probably closer to the reality to see the ability to explain origin as a condition of competing as a supplier, not merely a compliance requirement.

Why Logistics Visibility Alone Is Not Enough

More companies are working on visibility for bonded warehousing and cross-border logistics. That work, on its own, does not cover the issue discussed here. Logistics visibility shows where goods traveled; origin determination asks where and how the goods were changed.

A record of the route traveled does nothing to dispel a transshipment suspicion. If anything, having a rich record of transit points and nothing else can create the impression that transit was all that happened. What is needed is a record of the fact that processing took place inside that site. We covered the logistics side of visibility in Preparing for Uncertainty in Bonded Warehousing and Cross-Border Logistics – The Visibility Infrastructure Every Thailand Operation Needs; this article deals with what happens inside the factory walls.

Plants That Can Clear the Suspicion and Plants That Cannot – Five Data Items

So what, specifically, do you need to hold? In practical terms it comes down to five data items.

The Five Items and the Granularity Required

If your company sits on the “common shortfall” side of that table, there is no reason to be pessimistic. The pattern is consistent: cases where the data does not exist at all are surprisingly rare, and the large majority are cases where granularity and linkage are missing.

Four Typical Patterns Behind “We Have It but Cannot Use It”

Here are the failure shapes that actually turn up on site. None of them happen because anyone is being careless. They happen because the systems were designed in a way that causes no difficulty in normal operations.

• Utilization data exists, but it is not linked to particular lots or to shipments for particular customers. There is a record that the machine was running, but no way to say which shipment that run was processing.
• The BOM exists, but the country-of-origin information for purchased materials is stale. It was entered years ago and never updated, and the actual supplier has since changed.
• The paper certificates of origin are in perfect order, but the underlying data cannot be produced on request. The source figures used when applying for the certificate exist only in one employee’s personal folder.
• Process records survive only on paper daily reports and cannot be searched electronically. Verifying anything about a past shipment starts with pulling cardboard boxes out of storage.

The fourth is especially serious as a matter of time. The deadline for answering an inquiry does not move to suit your schedule.

Tracing the Supply Chain Is Already Required for Other Reasons

It is worth adding that a mechanism for tracing materials back to their source is not something you build only for transshipment. Compliance with the EU deforestation regulation and conflict minerals due diligence both demand the same upstream traceability.

For implementing upstream tracing on sourcing in Thailand, see EUDR Compliance for Thai Rubber Sourcing 2026; for tracing upstream using the bill of materials as the axis, see Conflict Minerals Due Diligence 2026 – Turning CMRT Compliance Into a System. The regimes driving these requirements differ, but the data structures they need overlap substantially. Rather than launching a separate project for each regime, consolidating them onto a single traceability platform ends up cheaper and faster.

Designing Production Management and OT/IoT Data With Origin Proof in Mind

None of this has to be read as one more compliance burden. Change one assumption and it looks quite different.

The Data You Need Is a By-Product of Ordinary Production Management

Look at the five items again. Lot-to-BOM linkage, per-process production records, equipment utilization, sourcing records, and cost broken down by process. None of these are special data generated for the sake of origin proof. They are the data any properly run production management operation needs anyway.

Identifying the responsible lot when a defect appears requires lot-to-BOM linkage. Finding the bottleneck process requires per-process results. Deciding on capital investment requires continuous utilization data. Improving cost requires cost decomposed by process. In other words, you are not collecting new data for transshipment compliance. You are adjusting the granularity and linkage of data you already had reasons to collect, and in doing so making it usable as proof.

There is no need to set up a separate compliance-only project. That also happens to be a practical advantage, because it makes the return on investment much easier to justify internally.

Three Things Worth Deciding at Design Time

If you are building or replacing a production management system or an OT/IoT data collection platform, three points are worth writing into the design.

• Design your keys so that starting from the shipping lot you can trace in both directions, upstream to the material lots and downstream to the destination. This is the hardest part to add later.
• Keep equipment operating data on the same time axis as production orders and manufacturing lots. If utilization exists only as a monthly aggregate, you cannot demonstrate the processing behind any particular shipment.
• Align your data retention period with the record-keeping requirements that apply to customs. Production logs tend to be purged quickly for storage reasons, but inquiries arrive about shipments made years ago.

The third is easy to overlook and impossible to recover from once the data is gone. Log retention policy is usually set by the IT department, and in practice the requirements of the trade and compliance side often never reach them.

Where to Start – Trace One Lot Before Rolling Anything Out

On how to go about getting ready, drawing up a company-wide traceability program from the outset is not the best move. The scope grows large enough that decision-making stalls, and the usual result is that nothing moves at all.

A realistic sequence looks like this.

• Pick one representative lot from a recent shipment to the United States and actually trace it from material sourcing through to shipment.
• Record where the trail broke and how long the tracing took. Those points are your investment candidates.
• For each broken link, decide whether to close it with a system change or with an operational rule.
• Extend the same exercise to other product lines, starting with those that ship the highest proportion to the United States.

The advantage of working this way is that it makes the case to management concrete. A proposal to “strengthen traceability” rarely gets approved. A statement that “tracing a single representative lot took three weeks and we could not identify the country of origin of the materials” functions directly as input to an investment decision.

How This Relates to BOI and Other Investment Incentives

For projects receiving privileges from the Thailand Board of Investment (BOI), separate requirements about local processing content and the raw materials used may be attached as conditions of those privileges. Origin determination criteria and investment incentive requirements are separate regimes, but both come down to explaining what is being done in Thailand and to what extent.

How your specific privilege conditions interact with origin requirements depends on the details of your project. This is not a place for general reasoning, so we recommend checking it individually against the privileges you actually hold. It is also worth verifying once that the description of processing you submitted when applying for the privileges is consistent with your actual production records.

The TOMAS TECH View

When we build production management systems and OT/IoT data collection platforms at Japanese-owned plants in Thailand, the question we keep coming back to is this: if you are asked later to prove something, can you explain it with this data?

The difference between data gathered for shop floor improvement and data that stands up to external scrutiny is not volume, it is design. The former only needs to show trends; the latter has to be identifiable down to individual lots. Closing that gap after the system is built means a major rework. Decide how keys are held and at what granularity data is retained during the initial design, and the additional cost is close to nothing.

The transshipment crackdown is simply the external trigger that happens to have raised the question this time. Regulations will keep changing, but being in a state where you can explain with data what happened in your own factory works no matter which regime arrives next.

Frequently Asked Questions

What is transshipment?

It refers to routing a product manufactured in a country subject to high tariffs through a third country with lower tariffs, and then exporting it with that third country declared as the origin. When goods merely pass through physically and the processing in that country does not amount to substantial transformation, it is treated as origin fraud. The report in question states that more than 40 countries are complicit in this form of tariff avoidance.

How do I check whether my company is in one of the eight sectors?

Start by confirming the HS codes of your main export items and comparing them against the eight sector groups named in the reporting. Those named are electronics and electrical machinery, automobiles and auto parts, machinery and parts, steel, steel products, plastics and plastic products, copper and copper products, and measuring, medical and optical instruments. Being in one of those sectors does not itself imply suspicion. What matters is whether you hold the data that demonstrates the real processing behind your US-bound shipments.

Is holding a certificate of origin enough to be safe?

No. A certificate of origin is a document recording a conclusion, and when an inquiry arrives you will be asked to submit the underlying data that supports it – specifically, material traceability through the BOM, per-process production records, and the basis for value-added calculations. Your level of readiness is determined not by how well the certificates are filed, but by whether you can retrieve that underlying data at the level of individual shipping lots.

Does receiving BOI privileges have any bearing on transshipment suspicion?

They are separate regimes. BOI privileges belong to an investment promotion framework, while US origin determination is a distinct procedure carried out by CBP. That said, both require you to explain local processing, and if the description given in the privilege application diverges from your actual production records, explaining yourself becomes difficult in either setting. Because the interpretation of privilege conditions varies by project, check yours individually.

Do other ASEAN sites such as Vietnam carry the same risk?

The report names more than 40 countries, so Thailand is by no means the only target. This article focuses on Thailand because sector-level Thai data was reported in specific terms, but the data structures required do not change with the country a site happens to be in. If you run multiple sites, deciding on a group-wide approach to traceability is more efficient than handling each site separately.

What should I do first?

The first step is to pick one recent shipment to the United States and try to gather all five data items for that shipping lot. Doing it for real makes it obvious where the linkages break. Running this field check before drawing up a company-wide program lets you identify precisely where investment is needed, without expanding the scope into areas that do not need it.

Summary

Here are the points to take away on the US transshipment crackdown and data readiness at Thai plants.

• The report published by the Office of Trade and Manufacturing Policy on 13 August 2026 estimates illegal transshipment at roughly 75 billion dollars a year under its central scenario, costing the United States about 450,000 jobs.
• The AI system for CBP proposed in that report, “Detective Border”, includes capacity indicators such as equipment utilization rates among its screening inputs. The scope of review expands from customs paperwork to data on actual production.
• Eight sectors in Thailand were named, with combined 2025 exports to the United States of 52.23 billion dollars, or 72.33% of total exports to the US. The basis was the contradictory pattern of falling utilization against rising export value.
• The largest decline in utilization is in automobiles and auto parts, from 69.45% to 52.79%. Electronics and electrical machinery, plastics and steel are also covered.
• Origin is determined by substantial transformation. The test is whether the article has acquired a new name, character and use; relabeling or repacking alone does not qualify.
• Substantiation requires BOM-based upstream tracing, per-process production records, value-added calculations, sub-supplier locations and labor input. The certificate of origin is only one of these.
• Five data items need to be in order: lot-to-BOM linkage, per-process production records, continuous equipment utilization records, material sourcing records, and basis data for value-added calculation.
• These overlap with the data ordinary production management requires. There is no need for a separate compliance project; adjusting granularity and linkage is what real readiness consists of.

You cannot stop regulations from moving, but putting your factory in a state where data can explain what was done there is something you can start on today. TOMAS TECH is based in Bangkok and builds PEGASUS production management systems and OT/IoT traceability platforms for Japanese manufacturers, including reviews of data granularity in existing systems and the design of lot-based linkages. If you would like to discuss whether your shipping lots can be traced from materials through to process, or where to begin, we are happy to talk at the exploratory stage – just get in touch through our contact form.

References

• White House report details the great transshipment scam costing tens of billions – Just the News
• Detailed coverage of the White House report – International Trade Today
• The report contents and an overview of Detective Border – Fortune
• Eight Thai sectors placed on alert over transshipment – Nation Thailand
• US transshipment crackdown puts eight Thai sectors on alert – Asia News Network
• Japanese-language commentary on the eight Thai sectors and utilization data – Bangkok Shuho
• What Every Member of the Trade Community Should Know About U.S. Rules of Origin – U.S. Customs and Border Protection