U.S. focus intensifies on illegal transshipment

The White House has issued a new report highlighting increased U.S. attention on illegal transshipment - the practice of routing goods through third countries and misrepresenting origin to avoid applicable tariffs or trade remedies. The illegal practice accelerated after 2018 when tariff differentials created incentives for exporters to reroute goods through lower-tariff jurisdictions rather than ship directly.

The report, called "The Great Transshipment Scam," emphasizes that legitimate manufacturing, sourcing diversification, and substantial transformation remain distinct from prohibited activities such as relabeling, repackaging, re-invoicing, or minor processing intended to secure an incorrect country-of-origin claim. The report describes stronger customs-enforcement measures and an AI-enabled "Detective Border" framework intended to improve targeting of high-risk shipments.

The report identifies more than 40 countries and jurisdictions associated with elevated illegal transshipment risk:

Tier 1 - Diversified scale leaders

: Canada, Mexico, the EU, Japan, South Korea, India, Israel, and Taiwan move the largest volumes while maintaining legitimate industrial bases, making transshipment risk harder to isolate.

Tier 2 - Regional integration hubs

: Vietnam, Thailand, Malaysia, Indonesia, Brazil, and Turkey combine significant volumes with deeper integration into supply networks producing electronics, machinery, plastics, and components.

Tier 3 - Opportunistic platforms

: Smaller economies like Panama, Costa Rica, Jordan, Cambodia, and the UAE (among others) offer specialized advantages - free zones, port access, bonded warehousing, or preferential market access - that attract rerouting activity.

The report identifies specific corridors: Vietnam's Ho Chi Minh City area handles electrical equipment; India's Pune-Gujarat-Chennai belt moves pumps and compressors; Malaysia's Penang cluster processes plastics. The report links these corridors to selected U.S. manufacturing regions that it identifies as potentially exposed to competitive pressure.

Companies importing into the United States should ensure that their customs declarations, origin determinations, supplier documentation, and production records accurately reflect the goods' actual manufacturing process and economic origin. Particular care may be warranted where goods move through free-trade zones, bonded facilities, or multi-country production and distribution networks.

For more information on how ONESOURCE Global Trade solutions can assist you, please contact your Account Manager or Customer Success Manager.