U.S. efforts to prevent origin laundering are expanding beyond traditional inspections of customs documentation. Authorities are increasingly using AI to integrate data on shipping routes, corporate ownership, factory capacity, and component origins. Supply chain transparency has become a new threshold for companies seeking access to the U.S. market. Shin-Horng Chen, Vice President of the Chung-Hua Institution for Economic Research (CIER), said the White House report, The Great Transshipment Scam, classifies Taiwan, Canada, the European Union, India, Israel, Japan, Mexico, and South Korea as Tier 1 “Diversification Leaders” for transshipment risk. The classification does not accuse Taiwan of engaging in illegal transshipment. However, it means Taiwanese companies can no longer rely solely on origin certificates to demonstrate compliance. They must also maintain comprehensive evidence covering their entire supply chains.
According to a report by the White House Office of Trade and Manufacturing Policy, the United States estimates that potential illegal transshipment amounts to between US$40 billion and US$303 billion annually. Under a central scenario of US$75 billion, such practices could affect approximately 450,000 U.S. jobs and between US$113 billion and US$150 billion in gross domestic product. Federal revenue at risk is estimated at between US$19 billion and US$26 billion. Chen said U.S.-China technology competition has expanded beyond semiconductors, tariffs, and export controls to encompass critical minerals, AI models, software, and supply chain governance. Global industries are gradually moving toward a world governed by multiple competing systems.
AI-Powered Border Enforcement Shifts Scrutiny from Documents to Entire Supply Chains
Chen indicated that the United States is developing an “AI-powered border detective” system that cross-checks freight data, product classifications, shipping routes, corporate ownership, factory capacity, and other information. The system assesses whether products have been routed through third countries to disguise their origin or alter their trade routes before entering the United States. Scrutiny is also expanding beyond individual shipments to examine whether companies possess the necessary production capacity, where their components originate, and which affiliated entities are involved.
Taiwanese companies must therefore do more than demonstrate that their products are manufactured in Taiwan. They must maintain traceable records covering the share of production inputs, substantial transformation, manufacturing equipment and capacity, corporate control, procurement, and customs declarations. Supply chain compliance will no longer be solely the responsibility of corporate trade departments. It will increasingly become an integral part of corporate governance.
Tier 1 Classification Does Not Indicate Illegal Conduct, but Raises the Burden of Proof for Companies
Chen emphasized that Taiwan’s Tier 1 classification does not mean the United States has determined that Taiwan is involved in illegal activity. Rather, Taiwan exports a large volume and diverse range of products to the United States, while some industries have long maintained cross-strait supply chain arrangements. These factors have prompted the United States to place greater emphasis on supply chain transparency. For Taiwanese companies, the “Made in Taiwan” label may become only a basic requirement. The ability to provide complete and timely supply chain evidence will be critical to reducing trade risks.
Since January 15, 2026, the United States has also imposed a 25% Section 232 tariff on information and communications technology products containing certain advanced chips, including servers, graphics cards, modules, and bare-bones systems. The measure is designed to encourage companies to shift manufacturing to the United States through technical thresholds, exemption requirements, and investment-based quotas.
Chen observed that the United States is gradually moving away from the traditional trade principle of nondiscrimination in the name of national security. It is instead adopting differentiated treatment based on the country, industry, and even individual company involved. Eligibility for tariff relief has also expanded beyond trade-related factors such as product origin. It may now depend on whether a company invests in the United States, how much U.S.-sourced material it uses, and even its corporate governance and business practices.
However, individual companies export a diverse range of products to the United States, and the scope of their investments may not fully overlap with the products covered by Section 232. Many details therefore remain unclear, including which products may qualify for exemptions based on a company’s investment in the United States.
A “Non-Red Supply Chain” Is Not an Automatic Pass to Market Access: Governance Must Evolve from BOMs to AIBOMs
Chen said global supply chains’ ties with China cannot be understood solely through the lens of origin laundering. Some companies still find it difficult to fully sever their links with Chinese supply chains because of costs, industrial clusters, and market demand. Meanwhile, U.S.-China competition in AI is gradually expanding beyond hardware and semiconductors to encompass open-source models, software toolchains, and standards.
Advanced processes and heterogeneous integration remain important strengths for Taiwan. However, hardware advantages could be diluted by broader system architectures if Taiwan overlooks interconnect protocols, compilers, and open standards. Companies also cannot assume that participation in a “non-red supply chain” will automatically earn market trust. In addition to traditional bills of materials (BOMs), they will need to maintain software bills of materials (SBOMs) and AI bills of materials (AIBOMs), covering model provenance, datasets, weights, algorithms, and cybersecurity risks.
Chen said Taiwanese companies will find it increasingly difficult to maintain their previous strategy of serving both sides as U.S. and Chinese regulatory systems continue to diverge. Companies should strengthen their Know Your Customer, Know Your Product, and Know Your Supply Chain practices while establishing segmented supply chains and comprehensive traceability mechanisms for different markets. For Taiwan, the priority is not merely to alleviate concerns about origin laundering, but to strengthen supply chain governance. This will allow “Made in Taiwan” to evolve from representing trusted products to representing trusted supply chains.
Author: CIER Editorial Team
Date: September 9, 2026