Transshipment in International Trade

Transshipment means moving goods to their final destination through an intermediary customs territory, usually by transferring them from one vessel or mode of transport to another. The intermediary territory functions as a transit or logistics point rather than the intended market for the goods.

How transshipment works

Goods are unloaded, stored temporarily if necessary, and dispatched onward while remaining under customs control. When prescribed procedures are followed, they ordinarily do not enter domestic consumption in the intermediary territory and its regular import duty is not levied.

• Transshipment may connect different ships or transport modes and is widely used where direct services are unavailable or uneconomic.
• Under Section 54 of the Customs Act, 1962, goods imported into a customs station may be permitted to be transshipped according to the prescribed customs procedure.

Effect on the origin of goods

Mere routing, unloading, storage or repacking in an intermediary territory does not by itself confer that territory's origin. Origin is determined under the applicable rules of origin, generally by reference to where goods were wholly obtained or underwent the required substantial transformation.

• The country of shipment, where goods were dispatched, can therefore differ from the country of origin.
• Origin determines eligibility for a preferential tariff and may also affect the application of country-specific trade measures.

Legitimate use and possible abuse

Transshipment is a legitimate logistics practice that can consolidate cargo, reduce transport costs and connect ports to global shipping networks. It becomes problematic when used for origin fraud, such as relabelling goods to evade tariffs, quotas or trade remedies.

• Customs authorities may examine origin documents, shipping records and processing undertaken in the intermediary territory.
• Genuine production or processing may change origin only when the applicable origin rule is satisfied.