Pavan Joshi

In the most basic sense, transshipping is like commercial air travel, says Pavan Joshi, chief strategy officer at the supply chain platform E2Open.

If we have a direct flight, we'll take that.

But if we don't have a direct flight...

Or if we want to save some money, we connect through an airport.

This practice of transshipping, goods stopping for a layover before they come to the U.S., is almost as old as global trade itself.

But Ibahi Ioha, a professor of business administration at Harvard, says there's been an uptick in transshipping with tariffs.

That creates an incentive to pretend that goods made in China were really made somewhere else.

Pretending is very much illegal, but companies get away with it because customs fraud cases are complex to prove.

Ioha says there's also a legal way to use transshipping to avoid tariffs.

I might import a finished good from a different country, bundle it with something else that I'm producing, and then sell them together.

A manufacturer might ship components from China and assemble them in Vietnam before importing the product to the U.S.

Julie Niederhoff, a professor of supply chain management at Syracuse University, says in that case, the company could claim Vietnam as its country of origin and avoid Chinese tariffs if the product has undergone a, quote, substantial transformation.

Problem is... There's no clear definition on how we define and...

Trade law would have to define what that means for every product, from bikes to furniture to construction equipment.

And experts say as long as the rules are murky, and as long as we have different import taxes for different countries, transshipping is a part of the supply chain.

I'm Kristen Schwab for Marketplace.