Transshipment: Risks, Penalties, and Compliancy

In today’s interconnected supply chains, the concept of transshipment is not new. At its most basic definition, transshipment simply refers to the movement of goods through an intermediate port or country before reaching their final destination. This is a routine and legitimate part of global logistics. But when transshipment is used deceptively – specifically to avoid tariffs, duties, or trade restrictions – it crosses the line into an illegal practice that carries steep consequences.

What Transshipment Looks Like in Practice

CBP has flagged industry sectors like steel, aluminum, textiles, electronics, autos, solar panels, and agriculture as particularly vulnerable to illicit transshipment schemes. A common example involves goods manufactured in a country subject to high U.S. duties, such as China, being routed through a third country. There, the goods may be lightly processed or simply repackaged and falsely labeled as originating from that country. For instance, Chinese wooden bedroom furniture might be shipped to Vietnam, relabeled “Made in Vietnam,” and exported to the U.S. as Vietnamese origin to evade antidumping duties.

Beyond antidumping and countervailing duty (AD/CVD) evasion, CBP has also documented cases where transshipment is used to avoid Section 301 tariffs on Chinese goods, Section 232 tariffs on metals, or to fraudulently claim Free Trade Agreement (FTA) benefits. These tactics distort fair market competition and erode the integrity of U.S. trade policy.

Penalties Are Severe

Illegal transshipment isn’t a harmless shortcut.  It is a direct violation of U.S. customs law. If discovered, importers can face:

• Civil penalties and steep fines under 19 U.S.C. § 1586
• Seizure or forfeiture of goods at the border
• Suspension or removal from programs like CTPAT
• Loss of import privileges and business disruption
• Criminal charges for fraud or conspiracy

The reputational damage can be just as costly. Once exposed, companies risk losing customer trust, market share, and access to preferred supplier relationships.

New Layers of Enforcement

Recent policy shifts add another layer of complexity. President Trump’s July 2025 notifications to Southeast Asian partners introduced a new transshipment-based tariff framework. Even goods that traditionally meet rules of origin requirements could face higher tariffs if they contain a threshold level of Chinese content. For example, under the U.S.–Vietnam trade framework, a product “substantially transformed” in Vietnam may still be taxed at a 40% tariff if its Chinese inputs are deemed excessive.

This effectively creates a “Chinese content test” for origin claims, forcing importers to calculate and disclose the percentage of Chinese materials in finished goods. Should this model spread to other trade agreements, companies will need to revisit their origin declarations, supply chain mapping, and tariff strategies.

What Importers Can Do to Stay Compliant

CBP and BIS stress that prevention starts with due diligence and proactive compliance. Key steps include:

1. Exercise Reasonable Care – Importers are legally obligated to verify the accuracy of all Customs filings and supporting documents prepared by brokers or third parties.
2. Know Your Suppliers – Vet foreign partners thoroughly.
3. Check Country of Origin Markings – Under Section 304 of the Tariff Act of 1930, goods must be correctly marked with their true origin. Repackaging or light assembly does not constitute substantial transformation.
4. Train Staff on Red Flags – Look out for suspicious pricing, unusual routing, or certificates of origin that don’t align with a supplier’s known capacity.
5. Adopt Best Practices – Use reputable freight forwarders with strong compliance programs and avoid routed transactions unless long-standing trust is established.

In conclusion, transshipment is legal when used for logistics, but illegal when used to disguise origin and dodge tariffs, duties, or sanctions. CBP is intensifying enforcement through its recently created Trade Fraud Task Force Agency. In addition, penalties are steep, and new rules may impose even higher tariffs based on Chinese content in goods routed through third countries.  

In order to avoid costly penalties and reputational harm, importers must stay vigilant by strengthening compliance programs, investing in supply chain transparency, and building trusted relationships with suppliers.

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

Allyn International provides high quality, customer-centric services and solutions for the global marketplace. Allyn's core products include transportation management, logistics sourcing, freight forwarding, supply chain consulting, tax management and global trade compliance. Allyn clients range from small local businesses to Fortune 500 firms. Allyn conducts business in more than 20 languages and has extensive experience in both developed and emerging markets. Highly trained experts are positioned throughout North and South America, Europe and Asia. Allyn’s regional headquarters are strategically located in Fort Myers, Florida, U.S.A., Shanghai, P.R. China and Prague, Czech Republic. For more information, visit www.allynintl.com