I kept seeing the phrase “The Great Transshipment Scam” and, it sounded like the name of another internet fraud story.
It isn’t, in this case, transshipment is a real international trade practice. The controversy is about whether companies are using legitimate supply-chain routes to disguise where goods actually came from and avoid tariffs.
This matters, because the phrase makes it sound as though every shipment passing through another country is automatically fraudulent. That’s not true.
The current controversy comes from the Trump administration’s trade officials, who are accusing countries including Mexico, Vietnam, Malaysia, Canada, Japan and others of becoming routes through which Chinese goods can enter the U.S. market while avoiding or reducing tariffs. The administration’s report has dubbed the alleged practice “The Great Transshipment Scam.”
So what exactly is going on? And is the Great Transshipment Scam actually a scam?
What Is Transshipment?
Transshipment itself isn’t illegal, it simply means goods are moved from one transportation route or location to another before reaching their final destination.
A shipment might leave a factory in one country, travel through a port in another country, and eventually arrive in the United States. That is normal international logistics, the problem begins when somebody deliberately uses another country as a cover for the true country of origin.
For example, imagine a product manufactured in China, instead of being shipped directly to the United States, it could be routed through another country.
If that second country is merely being used as a stopover while the paperwork makes the product appear to have originated there, that can become tariff evasion or customs fraud, that’s the behavior U.S. officials are targeting.
Why Is Everyone Talking About the Great Transshipment Scam Now?
Tariffs are the reason this has suddenly become such a big story, when the United States places higher tariffs on goods from a particular country, those tariffs can create a financial incentive to find another route into the American market.
And here, transshipment enters the picture, the administration argues that China can manufacture a product, send it through a lower-tariff country and ultimately get it into the United States while avoiding some of the tariffs that would have applied if the product had come directly from China.
Peter Navarro has argued that countries including Mexico, Vietnam and Malaysia have become important transshipment platforms and has called for stronger enforcement of country-of-origin rules.
The administration’s current allegations are substantial. A Financial Times report says the White House has accused more than 40 countries of helping Chinese exporters circumvent U.S. tariffs and estimates the practice could involve tens of billions of dollars in trade.
But Is Every Product Coming Through Vietnam or Mexico Part of a Scam?
No.
And I think people need to be careful with the language, a product can legitimately be manufactured in one country, assembled in another, packaged somewhere else and then exported to the United States.
Global supply chains are complicated, just because a package says it was shipped from Vietnam doesn’t mean someone secretly moved a Chinese product there yesterday to avoid customs duties.
There has to be a question of what actually happened to the goods, was the product genuinely manufactured or substantially transformed in the second country? Or was it simply moved through the country so that the paperwork could make it look like something it wasn’t? Those are two very different situations.
So What Would Make Transshipment Illegal?
The basic problem is deception, if someone deliberately misrepresents the country of origin of imported goods to avoid applicable customs duties, the conduct can become illegal.
The U.S. Department of Justice has prosecuted cases involving Chinese goods being routed through another country with fraudulent documents to avoid customs duties. One federal case, for example, involved paper products shipped from China through Taiwan using false invoices and bills of lading.
So this isn’t some completely invented concept, tariff evasion through false country-of-origin information has happened before, the argument happening now is about how widespread the problem is and how aggressively the government should respond.
Why China Is at the Center of This
China is the world’s manufacturing powerhouse, so it naturally sits at the center of this discussion. If U.S. tariffs make Chinese products substantially more expensive to import directly, companies have an obvious reason to reconsider their supply chains.
The administration argues that some Chinese manufacturers and trading networks are responding by using countries with lower tariff rates as alternative routes into the United States.
The concern isn’t simply about shipping containers changing ships, it’s about country-of-origin games.
If a product remains essentially a Chinese product but is presented to U.S. customs as though it originated somewhere else, the government loses tariff revenue and the purpose of the tariff policy is undermined.
Mexico, Vietnam and Malaysia Are Getting Particular Attention
The countries aren’t being accused for exactly the same reasons, but the administration has highlighted Mexico, Vietnam and Malaysia because of their growing trade relationships and large goods surpluses with the United States.
Navarro has specifically argued that these countries can function as “staging grounds” for goods from higher-tariff countries.
That doesn’t mean everything they export is suspicious, it means U.S. officials believe certain trade flows deserve closer examination.
You can investigate potential tariff evasion without suggesting that an entire country’s legitimate exporters are running scams.
The Numbers Are What Make This Story Interesting
The administration’s allegations aren’t based solely on a few suspicious packages.
The White House has pointed to large trade deficits with countries it considers possible transshipment hubs.
According to reporting on the administration’s latest claims, the estimated value of potentially affected transshipment could reach around $60 billion in lost tariff revenue, with some estimates of the underlying trade flows much higher. Those are enormous numbers, but they’re also estimates.
I wouldn’t treat every dollar mentioned in political statements as money that has definitively been proven to have been lost through illegal transshipment.
What Is the Government Doing About It?
The United States is now looking at technology as part of the answer.
The administration plans to use an AI-powered tool reportedly called “Detective Border” to help identify suspicious trade patterns, the idea is fairly interesting.
Instead of customs officials looking at individual shipments one at a time, an AI system can compare large amounts of international trade data and look for inconsistencies involving routes, product origins, components and declared values.
For example, if a country suddenly begins exporting enormous quantities of a product despite having little domestic production capacity for that product, that could be a reason to look more closely at the supply chain.
Technology can help identify patterns that would be difficult for humans to spot manually, but an algorithm identifying a suspicious pattern isn’t the same thing as proving a company committed fraud, there still needs to be investigation and evidence.
Why Should American Consumers Care?
You might be wondering why any of this matters when you’re just buying something online, it can affect you more than you realize.
Tariffs and customs costs are ultimately part of the economics behind imported products. if companies have to pay higher tariffs, those costs can be absorbed by the importer, passed along to retailers or eventually reflected in the price consumers pay.
On the other hand, if companies are illegally avoiding tariffs, domestic manufacturers can argue that they’re being put at an unfair disadvantage against competitors who aren’t paying the same costs, that’s the bigger issue behind the Great Transshipment Scam.
It’s not really about where a particular package happens to stop on its way to your house, it’s about whether companies are truthfully reporting where their products come from.
Is the Great Transshipment Scam Actually a Scam?
Here’s my take after looking into it, Transshipment itself is not a scam, it’s a normal part of global commerce.
But illegal transshipment used to evade tariffs or deliberately misrepresent country of origin is a real problem, and there are documented cases of companies being prosecuted for this kind of conduct.
The current political debate is about how widespread it is today and how much trade is actually being routed this way, hence I wouldn’t take dramatic headlines at face value.
Calling the entire international transshipment industry a scam would be completely misleading, calling deliberate tariff evasion through false country-of-origin declarations legitimate business would be equally wrong.
The Part I Think Consumers Should Watch
There is a useful lesson here beyond the politics.
Don’t assume the country you’re buying from is necessarily the country where the product was made.
A website can look American, the company can advertise in English, the product can be shipped from a U.S. warehouse, and the actual manufacturing chain can still involve several countries.
That’s why “Ships from the USA” and “Made in the USA” aren’t interchangeable statements. The same applies to products that appear to be manufactured in Vietnam, Mexico, Malaysia or another country that has become part of a complicated international supply chain.
The country on the shipping label is not necessarily the whole story.
What I Think About The Whole Great Transshipment Scam
The phrase “The Great Transshipment Scam” sounds like we’re talking about one giant fraud operation.
The reality is much more complicated, there is legitimate transshipment, there is legitimate international manufacturing, and there is also genuine tariff evasion when companies deliberately disguise the origin of goods to avoid customs duties.
The U.S. government is now putting much more attention on that third category, particularly where Chinese goods may be entering through countries such as Mexico, Vietnam and Malaysia. Whether every allegation being made by the administration will ultimately hold up is another question.
For me, the most sensible conclusion is this:
The Great Transshipment Scam isn’t a scam involving transshipment itself. It’s a name being used for alleged tariff-evasion practices hidden inside legitimate global trade.
Because if you’re reading this and thinking, “So every product coming through another country is fake?”, no.
But if a company deliberately lies about where its goods were made so it can avoid tariffs, that’s a completely different story, and the part customs officials are trying to uncover.
And with the U.S. now turning to data analysis and AI to identify suspicious trade patterns, I expect we’re going to hear a lot more about transshipment, tariff evasion, country-of-origin fraud and Chinese goods being rerouted through third countries in the months ahead.