The US government has announced a strict new measure aimed at deterring tariff evasion through transshipment. While full guidance is still pending, officials have confirmed that a 40% penalty tariff will be applied to shipments found to be routed through third countries to avoid tariffs.
Unlike other penalty scenarios, no mitigation will be allowed—meaning importers caught in violation will face the full cost of the penalty. This underscores the seriousness of enforcement and signals that regulators are prioritizing transshipment as a high-risk compliance issue.
Understanding Legal vs. Illegal Transshipment
Not all transshipment is unlawful. Legal transshipment occurs when goods are transferred between vessels or carriers in accordance with established guidelines, ensuring all items are properly documented and remain under customs control. When goods pass through an intermediate country without entering that country’s commerce—and undergo only necessary operations such as loading, unloading, or preserving their condition—they may still qualify as imported directly from the originating country.
Many free trade and preferential trade agreements explicitly allow duty exceptions for such in-transit goods. Supporting documentation, such as bills of lading identifying the US as the final destination, can verify that the goods meet the requirements for legal transshipment. In these cases, the duty rate applicable to the true country of origin is assessed.
By contrast, illegal transshipment involves deceptive practices intended to disguise the true country of origin to avoid tariffs or other trade restrictions. This can include (1) diverting goods through a third country and falsely claiming that country as the origin despite no substantial transformation occurring there, or (2) simply misdeclaring the origin altogether without physically routing the goods through that country.
What This Means for Importers
For importers and logistics providers, this raises the stakes for due diligence. Companies will need to closely examine supply chains, verify country-of-origin documentation, and strengthen compliance programs to reduce exposure to potential penalties.
As enforcement evolves, staying proactive will be key. Importers should prepare for heightened scrutiny and take steps now to ensure their sourcing and routing practices can withstand government review.
Mohawk Global Trade Advisors is actively monitoring these developments. Reach out to our team for guidance on managing risk, strengthening compliance, and protecting your business.