U.S. Eyes Content Percentage for "Transshipment" Enforcement

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Aug. 14, 2025
By: Ashley J. Bodden

Trade professionals have noticed that more recent Executive Orders regarding trade have contained language imposing a 40 percent tariff, plus penalties and any applicable country-of-origin duties, if US Customs and Border Protection (CBP) determines they have been intentionally “transshipped” to avoid tariffs. It has not been clear under what circumstances these duties are intended to apply.

Transshipping to avoid tariffs or other trade restrictions by shipping goods to a country and falsely claiming that country as the origin of the goods is already a serious violation of the trade law. Existing laws provide for penalties including substantial fines and even imprisonment. This leaves trade professionals wondering how the “transshipment” called out in the Executive Orders differs from existing transshipment rules (if at all).

While nothing definitive has been published, at least some administration officials have indicated that “transshipment” as used in the Executive Order might relate only to the percentage of the value of a good from a third country. Under this view a good that has 30% or more of its value from a third country is treated as a good of that country for reciprocal tariff purposes. Of course this 30% number (or any number below 50.1% has the same problem, namely that a good could be 36% Vietnamese, 32% Chinese, and 32% Malaysian and assembled in Vietnam. Would three sets of duties apply? No duties?

Under current U.S. customs laws, the origin of a good is determined by whether there is a substantial transformation by reason of manufacturing in a country in most cases. This is true for U.S. trade partners like China, Vietnam, Malaysia, Thailand, and the Philippines, among others. Substantial transformation is deeply embedded in both U.S. case law and trade regulations. Several free trade agreements replace this with specific rules that can require local content amounts, although these are subject to specific changes in law to allow for the origin determination under the local content rules.

Whether the United States will try to impose something like a 30% content rule for the new “transshipping” rule is unclear. The interaction of this rule with substantial transformation rules and the plain language of the new tariffs, basing duties on the origin of goods, is also unclear. What is clear is that importers need to start thinking about their supply chains in terms not just substantial transformation but also bill of material value. The time to discuss with suppliers whether this information would even be available is sooner rather than later. Importers who already know what is possible will be better prepared to react to whatever comes of the “transshipment” language.

CBP has not released official guidance on this as of yet but check back for updates. If you have questions about tariffs, trade remedies, or transshipment, do not hesitate to contact an attorney at Barnes, Richardson & Colburn LLP.