Transshipment is the act of shipping goods to an intermediate destination prior to reaching their ultimate end-use. Transshipment is a common practice with logistic benefits, but can be used to illegitimately to disguise country of origin or intent of the goods.

Transshipment is commonly used by smugglers and terrorists seeking to disguise the point of origin of their goods from Customs officials. Certain countries like Libya, North Korea, and Syria are considered higher risk for security threats while countries like China and Taiwan are likely sources for counterfeit goods. Importers can transship goods both intentionally and accidentally. Intentional transshipments are done to avoid higher duty rates levied on certain countries, avoid import restrictions like visa and quota restrictions, or make use of a special trade program to drastically lower duty rates.

Accidental transshipments are usually caused by miscommunication between foreign vendors or US buyers. Too often, US importers do not recognize the need for properly declaring country of origin and see reduced duty rates as smart business. Foreign vendors typically do not have the in-depth knowledge of US Customs regulations to advise against the practice.

Penalties

In addition to the loss of import privileges and seizure of imported merchandise, importers practicing transshipment may also be subject to an array of civil penalties under 19 U.S.C. 1592.

Maximum penalties for transshipment are:

• Fraud: An amount not exceeding the domestic value of the merchandise.
• Gross Negligence: The lesser of
  • the domestic value of the merchandise, or
  • four times the lawful duties, taxes, and fees, or
  • if the violation did not affect the assessment of duties, 40 percent of the dutiable value of the merchandise.
• Negligence: The lesser of
  • the domestic value of the merchandise, or
  • two times the lawful duties, taxes, and fees, or
  • if the violation did not affect the assessment of duties, 20 percent of the dutiable value of the merchandise.