A Global Loophole: How Transshipment Became a Tool for Tariff Evasion

Transshipment fraud—where goods are rerouted through third countries to evade tariffs—has been a persistent issue in global trade. Back in 2018, The New York Times highlighted how Chinese exporters were using countries like Thailand to circumvent U.S. tariffs by mislabeling the origin of their products. Fast forward to 2025, and the problem has only intensified. 

Thailand's Crackdown on Transshipment Fraud

In response to mounting pressure from the U.S., Thailand has pledged to intensify its crackdown on transshipment fraud. The Thai government plans to expand its watchlist of goods susceptible to origin misrepresentation and has centralized the authority to issue certificates of origin to the Department of Foreign Trade. This move aims to prevent foreign companies from exploiting Thailand as a conduit for tariff evasion.  

Implications for U.S. Companies

For U.S. importers, engaging in or turning a blind eye to transshipment fraud carries significant risks. The U.S. Customs and Border Protection (CBP) has ramped up enforcement efforts, utilizing data analytics to detect anomalies in trade patterns. Companies found complicit in such schemes may face severe penalties, including hefty fines and criminal charges.  

Strategic Manufacturing Investments

Given the heightened scrutiny, U.S. companies should consider investing directly in manufacturing within compliant countries like Thailand. Thailand offers a robust manufacturing infrastructure and is actively seeking to strengthen trade relations with the U.S. By establishing operations in Thailand, companies can ensure compliance with trade regulations and mitigate the risks associated with transshipment fraud. 

Looking Ahead: Compliance as a Competitive Advantage

Transshipment fraud undermines fair trade practices and exposes companies to legal and reputational risks. With Thailand taking decisive steps to curb this issue, it's imperative for U.S. businesses to align their supply chain strategies accordingly. Investing in legitimate manufacturing operations within Thailand not only ensures compliance but also positions companies favorably in the evolving landscape of international trade.