How Transshipment Can Help Importers Avoid Tariffs from China to US

 The ongoing trade war between the US and China has imposed hefty tariffs on thousands of products imported from China, ranging from agricultural goods to consumer electronics. These tariffs have increased the cost of doing business for many US importers, who rely on Chinese suppliers for their products. However, there is a way to avoid or reduce these tariffs by using a technique called transshipment.

What is transshipment?

Transshipment is the practice of moving cargo from one country to another by way of a third country, without entering the customs territory of the third country. For example, Chinese goods meant for the US can be shipped to a country like Malaysia, where they are repackaged and relabeled as Malaysian products, and then shipped to the US. This way, the goods can avoid the tariffs imposed on Chinese products, as they appear to come from a non-tariffed country.

Benefits of using transshipment to navigate import challenges

Using transshipment can offer several benefits for US importers who source their products from China, such as:

• Saving money on tariffs: By avoiding the tariffs on Chinese products, importers can reduce their costs and increase their profit margins. Depending on the product category and the tariff rate, this can amount to significant savings. For example, if a product is subject to a 25% tariff, transshipping it through a third country can save $25 for every $100 of the product value.
• Maintaining supply chain stability: By using transshipment, importers can continue to work with their existing Chinese suppliers, without having to look for alternative sources in other countries. This can help them maintain their quality standards, delivery times, and business relationships.
• Gaining a competitive edge: By using transshipment, importers can offer lower prices or higher quality products than their competitors who pay the tariffs or source from other countries. This can help them attract more customers and increase their market share.

Transshipment statistics and case studies

Transshipment is not a new phenomenon, and has been used for decades as a way to reduce costs and streamline shipments of goods. However, in recent years, transshipment has become more prevalent and sophisticated, as the trade war between the US and China has escalated. According to a report by the US Government Accountability Office (GAO), transshipment of Chinese products through third countries increased by 137% from 2016 to 2019, while direct imports from China decreased by 17% in the same period.

Some of the countries that are commonly used as transshipment hubs for Chinese products include Vietnam, Malaysia, Taiwan, Thailand, Singapore, and Hong Kong. These countries have favorable trade agreements with the US, low labor costs, and efficient logistics infrastructure. Some examples of products that are transshipped through these countries include steel, aluminum, solar panels, furniture, seafood, and clothing.

One case study of transshipment involves a Vietnam-based timber products manufacturer, who was found by the US Customs and Border Protection (CBP) to be importing products from China and relabeling them for export to the US, to avoid the Section 301 tariffs on Chinese products. The CBP seized the products and imposed a penalty of $575,000 on the manufacturer. Another case study involves a US-based importer of seafood, who was found by the CBP to be importing shrimp from China and transshipping it through Malaysia, to avoid the anti-dumping duties on Chinese shrimp. The CBP seized the shrimp and imposed a penalty of $1.5 million on the importer.

How to implement transshipment in your import strategy

If you are a US importer who wants to use transshipment to avoid tariffs on Chinese products, you need to follow some steps to ensure a smooth and legal process. These steps include:

• Finding a reliable transshipment partner: You need to find a trustworthy and experienced third-country supplier or agent, who can handle the transshipment of your products from China to the US. You need to verify their credentials, reputation, and track record, and establish a clear and transparent contract with them.
• Choosing a suitable transshipment country: You need to choose a third country that has a favorable trade agreement with the US, low or no tariffs on your products, and efficient logistics infrastructure. You also need to consider the geographic proximity, political stability, and legal environment of the country.
• Complying with the rules of origin: You need to ensure that your products meet the rules of origin requirements of the US and the third country, to qualify for the preferential tariff treatment. This means that your products must undergo a substantial transformation or value addition in the third country, and not just a simple repackaging or relabeling. You also need to obtain the necessary certificates of origin and other documents to prove the origin of your products.
• Declaring the correct value and classification of your products: You need to declare the accurate value and classification of your products to the customs authorities of the US and the third country, to avoid any under- or over-valuation or misclassification of your products. You also need to pay any applicable taxes, fees, or duties in the third country, and keep the receipts and invoices for your records.

Best practices for using transshipment effectively

Using transshipment can be a beneficial strategy for US importers who source their products from China, but it also comes with some challenges and risks. To use transshipment effectively, you need to follow some best practices, such as:

• Conducting a cost-benefit analysis: You need to weigh the pros and cons of using transshipment, and compare it with other options, such as paying the tariffs, sourcing from other countries, or relocating your production. You need to consider the factors such as the tariff rate, the product value, the transshipment cost, the lead time, the quality, and the customer demand.
• Monitoring the trade policy changes: You need to keep track of the changes in the trade policy between the US and China, and the US and the third country, as they may affect your transshipment strategy. For example, if the US and China reach a trade deal, or if the US imposes tariffs on the third country, you may need to adjust your transshipment plan accordingly.
• Communicating with your stakeholders: You need to communicate with your stakeholders, such as your suppliers, customers, and employees, about your transshipment strategy, and explain the reasons, benefits, and risks of using it. You also need to solicit their feedback and suggestions, and address any concerns or issues they may have.

Legal considerations and compliance issues with transshipment

Using transshipment can be a legal and legitimate way to avoid tariffs on Chinese products, as long as you comply with the rules and regulations of the US and the third country. However, if you use transshipment to evade or circumvent the tariffs, you may face legal consequences and compliance issues, such as:

• Penalties and fines: If the CBP finds that you are using transshipment to evade or circumvent the tariffs, you may be subject to penalties and fines, which can range from 10% to 100% of the product value, or even higher. You may also be liable for criminal charges, such as fraud, smuggling, or money laundering, which can result in imprisonment or forfeiture of your assets.
• Seizure and forfeiture of your products: If the CBP finds that you are using transshipment to evade or circumvent the tariffs, you may also face the seizure and forfeiture of your products, which can cause significant losses and disruptions to your business. You may also lose your eligibility for future preferential tariff treatment or trade benefits.
• Damage to your reputation and credibility: If the CBP finds that you are using transshipment to evade or circumvent the tariffs, you may also damage your reputation and credibility in the market, as you may be seen as unethical, dishonest, or untrustworthy. You may also lose the trust and confidence of your customers, suppliers, and partners, and face negative publicity and backlash.

Risks and potential drawbacks of transshipment

Using transshipment can also entail some risks and potential drawbacks, which you need to be aware of and mitigate, such as:

• Increased complexity and uncertainty: Using transshipment can increase the complexity and uncertainty of your import process, as you have to deal with multiple parties, countries, and regulations. You may also face delays, errors, or disruptions in the transshipment process, due to factors such as weather, customs, or logistics issues.
• Reduced quality and control: Using transshipment can reduce the quality and control of your products, as you have to rely on a third-party supplier or agent to handle the transshipment of your products. You may also face quality issues, such as damage, deterioration, or contamination of your products, due to factors such as handling, storage, or transportation conditions.
• Increased vulnerability and exposure: Using transshipment can increase your vulnerability and exposure to various risks, such as fraud, theft, or sabotage of your products, by unscrupulous or malicious actors. You may also face legal risks, such as lawsuits, claims, or disputes, from your customers, suppliers, or authorities, due to factors such as product liability, contract breach, or trade violation.

Transshipment services and providers

If you are interested in using transshipment as part of your import strategy, you may need to seek the help of professional transshipment services and providers, who can offer you the following benefits:

• Expertise and experience: Transshipment services and providers have the expertise and experience in handling the transshipment of various products, from different countries, and under different trade regimes. They can advise you the best solutions and strategies for your transshipment needs. They can also handle the documentation, certification, and compliance issues for your products.
• Resources and network: Transshipment services and providers have the resources and network to facilitate the transshipment of your products, from China to the US, via a third country. They have access to various modes of transportation, such as air, sea, or land, and various transshipment hubs, such as ports, airports, or warehouses. They can also coordinate with the customs authorities, logistics providers, and other stakeholders involved in the transshipment process.
• Cost and time efficiency: Transshipment services and providers can offer you cost and time efficiency for your transshipment process, by optimizing the routes, modes, and schedules of your shipments. They can also help you reduce the risks and uncertainties associated with transshipment, by providing you with tracking, monitoring, and insurance services for your products.

Some examples of transshipment services and providers that you can consider are:

• [Xianrong Global]: Xianrong Global is a global transshipment service provider that specializes in helping US importers avoid tariffs on Chinese products, by using Malaysia and other countries as a transshipment hub. Xianrong Global offers end-to-end transshipment solutions, from sourcing, shipping, repackaging, relabeling, to delivering your products. Xianrong Global also provides you with a digital platform, where you can manage and monitor your transshipment orders, and access the relevant documents and certificates for your products.
• [TransPort]: TransPort is a leading transshipment service provider that offers a range of transshipment options for US importers who source their products from China, such as Vietnam, Taiwan, Thailand, Singapore, and Hong Kong. TransPort provides you with customized transshipment solutions, based on your product category, value, volume, and destination. TransPort also ensures that your products meet the rules of origin and compliance requirements of the US and the third country, and provides you with the necessary support and guidance for your transshipment process.
• [TransLink]: TransLink is a comprehensive transshipment service provider that caters to US importers who import various products from China, such as steel, aluminum, solar panels, furniture, seafood, and clothing. TransLink uses a network of transshipment hubs in different countries, such as Vietnam, Malaysia, Taiwan, Thailand, Singapore, and Hong Kong, to help you avoid or reduce the tariffs on your products. TransLink also offers you a flexible and transparent pricing model, where you only pay for the services and features that you need for your transshipment process.

BEST TRANSSHIPPING AGENT FROM CHINA TO USA