Transatlantic Trade Monitor: Facts You Need Now | Trade Update – What You Need to Know About Transshipment

Transshipment has fast become the second most important word in trade, after tariff.

The reason is that the U.S. government is intensifying its oversight of importers suspected of using transshipment through third countries to evade duties on Chinese goods. And the risks and costs of violating the rules can be severe.

This increased scrutiny comes as shifting trade flows highlight how exporters are adjusting to the new tariff environment. In August, China’s exports to the U.S. fell 33% year-over-year, while shipments to ASEAN nations jumped 22.5%. The changing trade mix underscores Washington’s concern that rerouting goods through Southeast Asia may be masking their true origin.

What Are the Transshipment Rules?

Section 3 of Executive Order 14326, Further Modifying the Reciprocal Tariff Rates, July 31, 2025, provides that an article determined by CBP to have been transshipped to evade applicable duties “shall be subject to an additional ad valorem rate of duty of 40 percent, in place of the additional IEEPA reciprocal ad valorem duty rate and (ii) any other applicable or appropriate fine or penalty, including those assessed under 19 U.S.C. 1592, and (iii) any other United States duties, fees, taxes, exactions, or charges applicable to goods of the country of origin.”

What Constitutes Legal “Transshipment” Is Less Clear

While the penalties are clear, determining what qualifies freight as being transshipped is less so. The Administration’s position is that if a product contains significant content (such as 30% from any other country), it could be subject to an additional 40% tariff to reflect that other country’s higher tariff. How to apply this guideline has not been made official, however. And the communication does not provide details on the specifics of how the percentage is calculated. For example, how the duties will be charged when there are multiple countries of origin comprising over 30% of the content, or if the goods are made of over 30% from countries with a lower tariff compared to where the final product is transshipped.

It is important to know that transshipment isn’t illegal if it follows the standard and long-accepted guidelines for transferring cargo. There are already processes for ensuring goods are properly documented, accounted for, and in compliance. Many trade agreements allow a duty exception for in-transit goods shipped directly through other countries. When goods are legally transshipped, the duty applicable to imports is that of the country of origin.

When Is Transshipment Illegal?

Illegal transshipment is not a new phenomenon and involves using falsification and deception to avoid tariffs. Typically, this includes misrepresenting a shipment’s actual country of origin. Diverting goods through a third country and claiming it as the country of origin, despite little or no value-added work being performed there, is a common tactic. Another is an importer claiming an incorrect country of origin without physically transporting the goods through it at all. Illegal transshipment in any form can lead to large fines or much worse.

The problem, as it stands today, for U.S. importers is that the legal definition of “transshipped” remains vague but will likely be broader than simply goods rerouted through a third country for little more than relabeling.

Moving Forward

Importers shipping from ASEAN countries should expect to be watched more closely when it comes to documentation and inspections (especially those linked to locations such as China).

In other words, now is the time to strengthen due diligence. Here are steps importers can take:

• Audit supplier relationships and document chains of custody.
• Be prepared to present supporting documentation to demonstrate compliance.
• Tag SKUs at risk of being linked to China-origin components.
• Build contingency scenarios that model landed costs under higher penalty tariffs.
• Engage trade counsel to confirm compliance with country-of-origin rules.

Being proactive in these ways will not only reduce exposure but also position companies as responsible partners with regulators and customers. As scrutiny intensifies, importers who can demonstrate transparency and compliance will be best positioned to protect their supply chains in a fast-changing trade environment.

Compliments of Jaguar Freight – a member of the EACCNY