Transshipment occurs when a party transports goods first to one destination and then on to another by air, sea, road or a combination of the three. It can take place from one international deep-sea container ship to another, or it can involve a transfer from a seaborne to an inland waterway ship. This latter process is sometimes called water-to-water transshipment. On the other hand, a transfer could be accomplished from a truck to a plane, a ship to a truck or plane, a plane to a tractor trailer, etc. In some cases, transshipment can occur unintentionally. However, it is often done legally and on purpose. Although it is a widely accepted practice when rules and regulations are followed to the letter, transshipment can frequently have negative consequences for the parties involved nevertheless.
HOW THE TRANSSHIPMENT PROCESS WORKS
To understand how transshipment is accomplished, let’s follow the journey of a container from its port or place of origin. When it is placed aboard its initial ship, truck or airplane, a bill of lading is issued. On that document, the vessel or vehicle of origin is listed. If the container in question is on a ship, the container will be routed along what is known in the industry as a trade lane during the course of its journey. These “water highways” facilitate the movement of goods and are subject to shipping industry rules that require that they are broken up into what is known as transshipment hubs. You can think of these hubs as docking stations which connect various international ports to each other. Once the container is on its way or as it nears its final destination, the notified party at the end of the container’s trip will receive documentation stating that it will be arriving. This will include the ocean bill of lading and, in most cases, the commercial invoice. The arrival documentation from the shipper will have details about the vessel coming into port with the transshipped goods. After arrival, the notified party can file the import customs information with the appropriate officials. The documentation will also indicate the precise terminal or freight station where the cargo will be located after being off-loaded from the vessel.
WHY COMPANIES OPT TO TRANSSHIP THEIR PRODUCTS
There are a number of reasons why transshipping is chosen. They include the following:
- If the distance from origin to destination is too long for one method of transportation.
- If a company wishes to change the mode of transportation while the shipment is en route. An example is if the merchant initially moves the container from its place of origin to a midpoint by ship and elects to have the goods transported to their final destination by truck. This process is known as transloading.
- If the company wants to consolidate two or more small shipments into a larger one before sending it on its way to the final destination.
- If the shipper is engaging in illegal activities and/or is attempting to avoid additional duty charges or other fees.
Transshipping can sometimes be a legitimate and effective technique to facilitate the movement of items. However, each situation must be carefully analyzed to ensure that no illegal activity is being perpetrated.
WHERE TRANSSHIPMENT TAKES PLACE
Transshipment occurs in all parts of the globe, it can happen between any number of vehicle types, including planes, trains, trucks, tractor trailers and ships in a variety of logistical combinations. Although it is often legal and sanctioned by all of the governments and customs officials involved along the chain, there are times when transshipping is anything but above board.
HOW TRANSSHIPMENT MAY BE AFFECTED BY THE CURRENT TRADE CLIMATE
In January of 2018, the Trump administration imposed the so-called “America First” duties that placed tariffs on large imported items such as solar panels from China and washing machines from South Korea. Talk later in the year also flirted with the idea of adding large tariffs to steel imported into the U.S. from China. On top of the duties that already exist, this measure adds a 20 percent tariff to the first 1.2 million consumer-grade washing machines brought into the country. After that, the tariff skyrockets to 50 percent. Furthermore, washing machine parts are also burdened with a 50 percent tax to keep importers from bringing in cheap parts and finishing the assembly stateside.
When the news of these tariffs hit, the ensuing firestorm from exporting countries was hot and immediate. China termed them “an abuse” while Mexico pledge to bring all of the legal power at its disposal to bear.
Transshipping plays a pivotal role in the impact these tariffs could have both on Asian countries and U.S. consumers. The sanctions are so broad that many Asian nations, not just China and South Korea, will be unable to change the point of origin on the goods they wish to ship to the US. As a result, imports of consumer goods might decrease across the board, raising prices and diminishing the diversity of the market.
Today, there are many policymakers who are quick to paint the entire phenomenon of transshipping in a negative light. While it is certainly true that the practice has long been a favorite of smugglers and terrorists, it is also performed legally innumerable times every day across the world. Only time will tell if politicians can separate their isolationist tendencies from the positive attributes that transshipping brings to legitimate businesses in this country and around the globe.