While it lowers shipping costs, transshipment may affect delivery times and introduce risks.
Transshipment is a common shipping practice used by many carriers in international shipping, where goods are transferred from one vessel to another before reaching their destination.
Although it may seem like an extra step, it is a common part of the global logistics system.
In this article, we cover what transshipment is, why it's used, its pros and cons, and the key questions to ask before shipping your goods.
Transshipment is the process of moving a shipping container or cargo from one vessel to another at an intermediate port (a transshipment hub) before it reaches its final destination.
For example, a container heading to North America from a smaller port in Asia might first be loaded onto what is called a feeder vessel.
This vessel first travels to a larger hub port, such as Shanghai or Singapore.
At the hub, the container is unloaded, held at the terminal, and then loaded onto a larger mother vessel for the main journey across the Pacific.
Transshipment differs from direct shipping, where goods travel on the same vessel from start to finish.
While it might seem logical for a shipment to travel directly from origin to destination, global shipping networks are built for maximum efficiency.
Transshipment is the key operational strategy that makes this efficiency possible. It is driven by several factors, such as:
Large ocean vessels can carry over 20,000 containers. It is not profitable or practical for them to stop at every single port.
Instead, carriers use a hub-and-spoke model, where large vessels travel only between major global hubs, while smaller feeder vessels move cargo between those hubs and smaller ports.
There may be no direct vessel service available between your origin and destination ports, especially if you are shipping from a smaller or less common location.
In this case, transshipment may be the only way to connect the two.
For Less-than-Container-Load (LCL) shipments, transshipment is common.
Small shipments may be unloaded at a hub to be consolidated into a new container with other goods going to the same destination.
Some ports cannot handle very large container ships due to their infrastructure or space constraints.
Transshipment allows cargo to move via smaller vessels that can access those ports.
While transshipment offers flexibility and cost savings, it also introduces risks that businesses must understand and manage.
Customs non-compliance is the greatest risk linked to transshipment.
While the act of transferring goods from one vessel to another is not itself a violation, it becomes an issue only when routing is used to disguise a product’s true origin or to avoid duties.
In Canada, transshipped goods may risk losing their “originating status” under free trade agreements. If the rules of transshipment are misunderstood, businesses could lose preferential tariff rates or even face penalties for tariff evasion.
In the U.S., transshipment is considered a primary red flag for potential tariff evasion, and goods may be reviewed to determine whether they were moved for logistical reasons or if the routing was used to disguise origin.
In cases of proven evasion of reciprocal tariffs through illegal or disguised transshipment, the U.S. Customs and Border Protection (CBP) may impose an additional 40% ad valorem duty.
To manage your supply chain efficiently, you need clarity.
And to get the clarity you need, here are the key questions to ask and points to consider before you ship your goods:
Understanding upfront whether your cargo will be transferred through a hub port allows you to plan for potential delays. A slightly cheaper quote may not be worth it if it significantly increases your delivery time.
Knowing the hub location can help you assess risks such as congestion, weather disruptions, or political instability in that region.
Consider how much additional time may be added to the journey and whether there are faster alternatives.
Determine whether transshipment adds extra fees for handling or documentation.
Confirm your carrier’s or freight forwarder’s procedures for minimizing damage, theft, or loss while cargo is being moved between vessels.
Depending on the hub port, transshipped goods may be subject to customs rules or temporary entry procedures. Always check how your shipment will be treated.
Ask your freight forwarder how they monitor connections and what their process is for alerting you if your container misses its next vessel.
Getting clear answers to these questions is the key to managing your supply chain. At Cole International, we believe in providing that clarity right from the start.
Through our freight forwarding solutions, we can help your business navigate the entire shipping journey and make the right routing decisions.
Here’s how we can help:
Our goal is to help you ship your goods smarter and faster.
If you need help managing the shipments of your goods, reach out to one of our trade professionals to determine the routing option that best suits your business needs.