CBP Outlines Illegal Transshipping Red Flags and Compliance Best Practices

Trade Update • Sept. 4, 2025

Key Points

• Illegal transshipping is used to avoid U.S. duties, tariffs, and trade rules.
• CBP is increasing enforcement in industries like steel, electronics, textiles, and agriculture.
• Importers and exporters must ensure accuracy in Customs filings and watch for illegal transshipping.
• Red flags include no real product change, wrong origin labels, unusual trade flows, and unclear routing.
• Importers and exporters need strong risk checks, supplier reviews, anomaly alerts, and quick reporting to CBP.

The U.S. Customs and Border Protection (CBP), through its Customs Trade Partnership Against Terrorism (CTPAT) program, issued an important alert addressing the issue of illegal transshipping. While transshipping is a common legal practice in global logistics, CBP warns that it becomes illegal when used deceptively to avoid duties, tariffs, sanctions, or trade restrictions.

Background

CBP defines transshipping as the movement of goods through a third country to disguise or obscure the true country of origin, often to circumvent duties, quotas, or sanctions.

The agency has observed a significant increase in illegal transshipment schemes, particularly in industries heavily impacted by antidumping and countervailing duties (AD/CVD), and tariffs on Chinese-origin goods. Some of the industries and products frequently targeted for illegal transshipment practices include, but are not limited to:

• Steel and aluminum
• Textiles and apparel
• Automobiles and auto parts
• Electronics
• Solar panels
• Agricultural products

CBP’s enforcement efforts have intensified with the introduction of the Anti-Circumvention Rule, which imposes a strict 40% penalty tariff on goods found to be illegally transshipped to avoid U.S. duties and tariffs.

Red Flags to Watch For

CBP warns to be alert for these warning signs of illegal transshipping:

• Lack of substantial transformation in the transshipment country: Goods must undergo a real change in form, function, or use to count as originating from the transshipment country.
• Country-of-origin labeling inconsistent with manufacturing capabilities: If a product claims to be made in a country that cannot produce it, this may indicate a false declaration of origin.
• Reporting discrepancies between exports and imports in Customs declarations: When the amount, value, or description of goods differs between export and import reports, it could hide illegal transshipping or undervaluing of goods.
• Routing through low-cost or Free Trade Agreement (FTA) countries without a valid commercial rationale: Shipping goods through countries with favorable trade terms for no legitimate supply chain reason is often used to bypass higher tariffs or trade restrictions.
• Significant deviations from a business partner’s historical trade activity: Sudden changes in trade volumes, partners, or pricing patterns can be red flags for illegal transshipping.
• Uncommon or overly complex transaction structures lacking a legitimate commercial purpose: Complex deals without clear business reasoning may be designed to disguise the true nature of transactions and evade enforcement.

Compliance Best Practices

CBP recommends adopting these best practices to reduce illegal transshipping risks:

• Verify country-of-origin markings in compliance with the Tariff Act of 1930.
• Conduct rigorous vetting and ongoing monitoring of foreign suppliers in line with CTPAT security standards.
• Establish clear procedures to identify and report anomalies quickly. Detect problems early and notify CBP or your Supply Chain Security Specialist without delay.
• Submit suspicious activity reports through CBP’s e-Allegations system immediately.
• Follow Bureau of Industry and Security (BIS) guidelines, including using trusted freight forwarders and limiting routed exports to reliable partners.
• Use technology and data tools to improve supply chain visibility and manage risks. Modern systems can detect unusual patterns and alert you sooner.

For detailed information, check out the BIR tansshipment best practices page.

How GHY Can Help?

GHY specializes in helping businesses navigate and reduce the impacts of tariffs through strategic solutions tailored to their needs. Our experts can audit your supply chain to identify inefficiencies, uncover cost-saving opportunities, and ensure compliance with evolving trade regulations. We also employ tariff engineering techniques to optimize product classification and sourcing strategies, minimizing duty exposure and maximizing profitability.

By partnering with GHY, your business gains access to the tools and expertise needed to streamline operations and stay competitive in a challenging trade environment.

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