Illegal Transshipment in International Trade

Transshipment is the transfer of goods from one vessel or conveyance to another during movement to their destination, often through an intermediate country or port. It becomes illegal transshipment when customs procedures are violated or routing is used to conceal the goods’ true origin and evade applicable tariffs, quotas, trade-remedy duties, or import restrictions. Mere transit through a third country is not illegal and does not by itself change origin.

When transshipment becomes illegal

Illegal transshipment may involve procedural violations or deliberate tariff circumvention.

• Goods are transferred without the declaration, documentation, or customs permission required under Section 54 of the Customs Act, 1962.
• Goods moving under customs control are diverted into the domestic market, substituted, or handled through tampering with seals or records.
• Goods originating in one country are routed through another and falsely declared as products of that intermediary country to obtain a lower tariff or avoid a country-specific trade measure.
• False certificates of origin, invoices, shipping records, labels, or descriptions are used to support the disguised origin.

Determining the true origin

Customs authorities apply the relevant rules of origin, which may require wholly obtained status, a prescribed change in tariff classification, value addition, or specified processing. Repacking, relabelling, storage, or other minimal operations do not establish a new origin when the applicable rule requires substantive production.

• The country of export may legitimately differ from the country of origin, so routing alone does not prove evasion.
• Authorities examine production records, transport documents, ownership links, processing capacity, and the continuity of the supply chain.
• For preferential imports into India, Section 28DA of the Customs Tariff Act, 1975 and CAROTAR, 2020 permit scrutiny and verification of origin claims.

Customs consequences

Once circumvention or a procedural breach is established, authorities may deny the claimed tariff preference, reassess and recover duty, and apply confiscation, penalties, or prosecution as authorised by customs law. Liability depends on the importing country’s law, the applicable origin rule, and evidence of the actual transaction.