Understanding the CBP Alert on Illegal Transshipping: What Your Business Needs to Know

U.S. Customs and Border Protection (CBP) recently issued an important alert regarding illegal transshipping—a practice that poses significant legal and financial risks to companies engaged in international trade. As members of the trade community, it's crucial that we understand these risks and take proactive steps to ensure compliance.

What is Transshipping?

Transshipping is the legitimate process of transferring goods from one mode of transportation to another during their journey from origin to destination. However, it becomes illegal when used deceptively to circumvent duties, sanctions, or trade restrictions.

Why This Matters Now

CBP has observed a notable increase in transshipment activity as exporters and importers attempt to avoid trade enforcement measures. This trend is particularly prevalent in industries facing high antidumping and countervailing duties (AD/CVD) and tariffs on Chinese-origin goods.

Common Illegal Transshipping Schemes

The alert identifies three primary ways illegal transshipping is being used:

1. Avoiding AD/CVD Duties

   Exporters route products through third countries to mask the original country of origin. For example, Chinese-manufactured furniture might be shipped to Vietnam, re-labeled as "Made in Vietnam," lightly processed or repackaged, and then exported to the U.S. to avoid tariffs.

   
   

2. Evading Section 301 or 232 Tariffs

   This is especially relevant for goods from China, where exporters attempt to relabel Chinese-origin products as originating from nations without such tariffs.

   
   

3. Exploiting Free Trade Agreements

   Some bad actors falsely claim preferential tariff treatment under agreements like USMCA or CAFTA-DR through fraudulent certificates of origin or minimal processing.

The Consequences Are Severe

While illegal transshipment may appear to offer short-term financial benefits, the risks far outweigh any potential gains:

• Steep fines and penalties

• Seizure of valuable inventory

• Business disruption

• Loss of import privileges

• Criminal charges under 19 U.S. Code § 1586

• Reputational damage

• Loss of customer trust

• Market share decline

For CTPAT members, involvement in illegal transshipment can result in suspension or removal from the program.

Red Flags to Watch For

Be alert to these warning signs of potential illegal transshipping:

• No substantial transformation in the transshipping country (repackaging alone doesn't constitute transformation)

• Country of origin labeling that doesn't match manufacturing capabilities

• Discrepancies in trade volume exports/imports reported to Customs

• Routing through low-cost or FTA-friendly countries with no logical supply chain reason

• Unjustified transaction structures that are overly complex without clear commercial purpose

• Deviation from normal trade activities with dubious pricing

Industries at Higher Risk

While any industry can be affected, these sectors are often targets for illegal transshipment:

• Steel and aluminum

• Textiles and apparel

• Automobiles and auto parts

• Electronics

• Solar panels

• Agricultural products

Key Best Practices

To guard against illegal transshipment, we follow these essential practices:

• Pay heightened attention to red flag indicators

• Work only with trade facilitators and freight forwarders that maintain sound export management programs

• Know our foreign customers by obtaining detailed information on their credentials

• Avoid routed export transactions unless long-standing, trustworthy relationships exist

• Use information technology to augment due diligence measures

Reporting Concerns

Under the Customs Modernization Act of 1993, U.S. importers and exporters have a legal obligation to exercise reasonable care in all Customs transactions. If you become aware of any trade violations or suspicious activities, they should be reported to:

• Your CTPAT Supply Chain Security Specialist

• CBP e-allegations system

• Emergency contacts: 1-866-DHS-2-ICE or (1-866-347-2423)

The Bottom Line

CBP has intensified targeting operations, increased supply chain audits, and is leveraging its Enforce and Protect Act (EAPA) authority to investigate evasion schemes. The agency continues working closely with domestic and international partners to identify, disrupt, and penalize illicit transshipment operations.

As the alert emphasizes: Illegal transshipment is not a loophole—it's a crime.

Our commitment to compliance protects not only our business but also the integrity of global supply chains and fair market competition. By maintaining vigilance and following established best practices, we can continue to operate ethically and successfully in the international marketplace.

For more information about the CTPAT program and compliance requirements, visit CBP.GOV/CTPAT.

Reference: CTPAT Alert – Illegal Transshipping, Publication Number [5126-0825], Last Updated July 16, 2025