Transshipment

On July 9, President Donald J. Trump sent notifications to U.S. trading partners, primarily in Southeast Asia, advising each of the specific reciprocal tariff that will take effect on August 1 if a trade deal is not negotiated by then. In his letter he iterated that goods which are transshipped "to evade a higher Tariff will be subject to that higher Tariff.”

What is Transshipment?

Though the exact definition of “transshipment” has not yet been defined by the president’s administration, the term, in the context of U.S. trade, appears to target third-country goods containing Chinese content. It introduces a new rule of origin category. Using the recent trade agreement with Vietnam, for example, if a product is substantially transformed in Vietnam under current rules of origin, it qualifies as Vietnamese origin and is subject to applicable MFN/NTR tariffs. However, under this new framework, products that meet the traditional origin criteria but contain a certain level of Chinese content may be reclassified as “transshipped” and taxed at the higher tariff – in this case, at a 40% tariff. This has serious implications: it creates a new threshold-based rule of origin, potentially requiring importers to calculate and declare the percentage of Chinese content in their Vietnamese-origin products.

Broader Implications of Transshipment

The president’s notifications, as well as the trade deal with Vietnam, advise that transshipment-based tariffs will be applied to goods from countries that have absorbed production that was formerly based in China, presumably due to the Section 301 tariffs. The question arises to where the threshold for Chinese content will be set. The impact on global supply chains could be substantial.

If this framework is a model for future deals, importers will need to re-evaluate supply chains, origin declarations, and tariff planning across multiple countries – not just the country of origin under prior rules of origin.

At Allyn International, we are committed to supporting the global trade community with strategic, forward-thinking solutions to help navigate today’s complex tariff landscape. Whether you have questions about tariffs, trade agreements, or would like to explore strategies to reduce their impact on your business operations, our team is here to help. Contact us today for a consultation at sales@allynintl.com, call 239-489-9900, or reach out here.

Contributor: Rebecca Anderson

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About Allyn International

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