CBP issues red flag & best practice guidance on illegal transshipment
Date of publication: September 5, 2025
Recently U.S. Customs and Border Protection (CBP) published a CTPAT Alert focused on illegal transshipping (Publication No. 5126-0825). The Customs Trade Partnership Against Terrorism (CTPAT) is a voluntary, trust-based supply chain security program for companies that demonstrate strong security practices and compliance with U.S. laws.
The alert was issued to address an uptick in illegal transshipping used to evade U.S. trade enforcement measures. While transshipping—the transfer of goods between modes, vessels, or ports—is a normal logistics practice, it becomes illegal when used deceptively to obscure country of origin, avoid duties, or bypass sanctions and restrictions.
Reasonable care
The topic of transshipment is one of increased interest to the Trade because the Trump administration has indicated that, under some of the preliminary trade agreements it has reached with several countries, U.S. imports of goods transshipped through those countries may be subject to an additional 40 percent tariff. Also, there is risk of enforcement action if the move is deemed intentional for the purpose of avoiding higher tariffs. To date, no legal definition of “transshipment” for the purpose of tariff application has been provided.
Under the Customs Modernization Act of 1993, U.S. importers and exporters must exercise reasonable care in all customs transactions. They are responsible for ensuring the accuracy of all filings made by brokers, agents, and third parties with CBP and other agencies. This includes reviewing documents and declarations for correctness.
Illegal transshipment
Transshipping, as defined in the alert, is the process of transferring goods from one mode of transportation to another (often from one vessel or port to another) during their journey from origin to destination. When it is used to evade CBP enforcement in a number of scenarios, it can become illegal. CBP has observed increased attempts of illegal transshipment in the following areas:
- Antidumping/Countervailing Duties (AD/CVD) Example: Goods produced in a high-duty country (e.g., China) are shipped to a third country (e.g., Vietnam), lightly processed or repackaged, relabeled as originating there, and then exported to the U.S. to avoid duties.
- Section 301/232 Tariffs Goods—often of Chinese origin—are relabeled as originating in countries not subject to these tariffs.
- Free Trade Agreement (FTA) Preferences False preferential claims (e.g., USMCA, CAFTA-DR) are made via fraudulent certificates of origin or minimal processing that fails to confer origin.
- Related fraud schemes include undervaluation, misclassification, and misreporting quantities to reduce tariff liabilities.
CBP notes that the industries and products that are often the focus for illegal transshipment practices include steel and aluminum, textiles and apparel, automobiles and auto parts, electronics, solar panels, and agriculture.
These practices undermine U.S. trade laws, distort fair competition, and threaten supply chain integrity. CBP has responded by intensifying targeting, audits, and investigations under the Enforce and Protect Act (EAPA), as well as collaborating with domestic and international partners to identify, disrupt, and penalize evasion schemes.
Red flags
CBP notes that red flag indicators of illegal transshipment that companies should scrutinize shipments for include:
- No substantial transformation in the transshipping country (repackaging alone is insufficient to change origin)
- COO labeling inconsistent with the country’s actual manufacturing capabilities
- Discrepancies between reported export/import trade volumes and customs data
- Routing through low-cost or FTA-friendly countries without a logical commercial reason
- Unjustified or overly complex transaction structures lacking a legitimate purpose
- Significant deviations from a partner’s historical trade patterns, including dubious pricing
Best practices
The alert also provides a number of best practices that are provided by the Bureau of Industry and Security (BIS) to protect against the risks of diversion through transshipment trade.
- Best practice 1: Heightened attention to BIS Red Flag Indicators; communicate red flags across all divisions, especially when an exporter denies a buyer’s order or a freight forwarder declines to provide export services for dual-use items.
- Best practice 2: Use only trade facilitators/freight forwarders that run sound export management and compliance programs incorporating transshipment controls.
- Best practice 3: Know your foreign business partner/customer—obtain detailed bona fides to assess diversion risk.
- Best practice 4: Avoid routed export transactions for dual-use items unless there is a longstanding, trustworthy relationship among the exporter, the FPPI, and the FPPI’s U.S. agent.
- Best practice 5: Leverage information technology to enhance due diligence, “know your customer” screening, and assurance that shipments reach authorized end users and uses.
Additional operational guidance
- Country of Origin and Marking Section 304 of the Tariff Act of 1930 requires all foreign-origin articles to be properly marked with their country of origin (COO). Importers should verify that COO markings are accurate and consistent with actual manufacturing and substantial transformation; beware of “light processing” claims.
- Document reasonable care procedures; ensure leadership oversight of origin, valuation, and classification controls.
- Train staff on AD/CVD, Section 301/232, FTA rules of origin, and substantial transformation.
- Conduct risk-based supplier vetting (ownership, facilities, production capacity, origin of inputs).
- Monitor trade lanes for unusual routing and transshipment hubs without clear commercial rationale.
- Cross-check commercial invoices, packing lists, bills of lading, certificates of origin, and entry data for consistency.
- Reconcile declared quantities, values, and tariff classifications; investigate anomalies.
- Verify COO marking compliance under Section 304 before importation.
- Implement automated denied party, end-use, and end-user screening.
- Use data analytics to detect origin shifts, volume spikes, and pattern deviations.
- Maintain audit trails for due diligence steps and decisions.
- Establish clear anomaly detection and escalation procedures.
- Report suspicions to your CTPAT Supply Chain Security Specialist and via CBP’s e-Allegations portal (if you are a CTPAT member).
- Proactively disclose violations discovered where appropriate, in consultation with counsel.
- Periodically audit supply chains, including site visits where risk warrants.
- Update risk assessments for high-risk sectors (steel, textiles, electronics, solar, autos, agriculture).
- Review partners’ compliance programs and require corrective actions when gaps are found.
Consequences and legal exposure
CBP is responding to increases in illegal transshipment by intensifying targeting operations, increasing supply chain audits, and leveraging its Enforce and Protect Act (EAPA) authority to investigate evasion schemes. Illegal transshipment is a violation of CBP regulations and may subject businesses to:
- Civil and criminal penalties
- Seizure of goods and business disruption
- Loss of import privileges
- Potential criminal charges under 19 U.S.C. § 1586 (Unlawful unlading or transshipment)
- Reputational damage, loss of customer trust, and shrinking market share
Conclusion
Transshipping as a logistics practice is lawful. It becomes illegal when used to obscure true origin or evade U.S. trade measures. CBP is actively targeting these schemes, and the penalties—legal, financial, and reputational—are severe. Companies should strengthen due diligence, monitoring, and reporting to prevent, detect, and address illegal transshipment and diversion risks.
For more information on how ONESOURCE Global Trade solutions can assist you in managing supply chain risk and regulatory compliance, contact your Account Manager or Client Success Manager.
Additional resources:
CTPAT Program: cbp.gov/ctpat
Report trade violations: CBP e-Allegations
BIS Red Flag Indicators and Best Practices: U.S. Department of Commerce, BIS website
Statute: 19 U.S.C. § 1586 (Unlawful unlading or transshipment)