Transshipping: Legal Practices vs Tariff Evasion

Transshipment is starting to become one of the more divisive topics in global trade. At its core, transshipment – the process of transferring goods from one method of transport to another during its journey – is not new. It’s a standard logistics practice. But in recent years, it has also become more synonymous with tariff evasion and questionable shipping practices. 

In this blog, we’ll explore what transshipping really is and why it has become such a hot topic in global trade– especially in the wake of 2025’s tariff environment. We’ll look at the legitimate uses, as well as how some bad actors are using it to avoid duty payments through illegal means. 

What is Transshipping? 

Legal transshipping is a common and effective practice in global shipping. It occurs when merchandise moves from one transport method to another along its route. For example, a shipping container might arrive at a port then be loaded onto a truck or train for delivery to its destination. This is extremely common and happens for a multitude of legitimate reasons.  

In many cases, only certain ports can handle the largest cargo ships. Containers often need to be relocated to smaller vessels before continuing on. Other reasons include the lack of a direct route to the destination or reduced costs.  

In short, legal transshipping is an essential part of a successful, efficient supply chain. 

Illegal Transshipping 

Illegal transshipping is making waves across the industry. Following the implementation of sweeping tariffs throughout 2025, importers and bad actors have been looking for creative ways to save money and avoid hefty duty payments – including many illegal schemes.  

Transshipment has been one of the most common methods used to circumvent tariffs. The problem has become so signification that U.S. Customs & Border Protection (CBP) released a notice in July addressing the growing threat of illegal transshipping. 

There are multiple ways these entities try to skirt the regulations, but the end goal is to misrepresent the origin of the goods to evade higher tariff rates.  

CBP has specifically pointed out some red flags that generally indicate questionable shipping practices. Some of those include: 

• Misrepresentation of Country of Origin: Declaring a false country of origin or relabeling goods to appear from a lower tariff country.  

• No Substantial Transformation of Goods: Performing superficial changes like repackaging the goods or minor reassembly in an attempt to fool customs. 

• Deceptive Routing: Intentionally routing goods through multiple countries or stops with no logistical reason, to obscure the actual origin or make it appear as if the goods came from a low-tariff country. 

• Discrepancies in Trade Volume: Reporting smaller import/export volumes to customs agencies to modify the valuation of goods to get lower payments. 

Why it Matters 

Beyond being illegal, transshipment schemes undermine global trade and fair competition. Governments enforce trade laws and barriers for specific reasons, and evading these policies is a direct threat to the global order of trade. It takes money away from the governments of the countries receiving the goods and it creates an unfair trade imbalance for those importers who abide by applicable rules and regulations. Between January and August, CBP uncovered more than $400 million in unpaid duties due to illegal transshipping and similar schemes. 

These practices could also be masking other illicit activity. Bad actors sometimes use convoluted routing not only to avoid duties but to obscure forced labor or ties to drug trafficking activity. These risks extend well beyond compliance.  

Consequences can also end up being quite severe. From reputational damages to significant fines and penalties, the risk is not worth saving a few dollars up front. Organizations like CTPAT (Customs-Trade Partnership Against Terrorism) will remove members that are found to be engaging in illegal practices, leading to a loss of credibility and trust around the industry. 

Conclusion 

Legal transshipment is a cornerstone of the global supply chain. It helps increase efficiency, lower overall costs, and ensure goods reach their final destinations. But understanding the intricacies and processes of transshipping is crucial.  

As tariffs and trade policies continue to evolve, there will always be bad actors looking for shortcuts. Knowing how to protect yourself from getting caught up in activity like that is crucial to maintaining compliance, security, and a positive reputation. 

If you ever have questions or would like a second opinion on your freight forwarding, contact Scarbrough today for tailored solutions to all your shipping needs.