Transshipment and Diversion Risk

Moving cargo through hubs is normal trade, so the route alone proves nothing. The risk arises when a transit country is used to hide the real destination. Goods may be unloaded, repackaged or relabelled, and sent on with new papers. A front company in the hub may buy and resell. Free trade zones add risk because customs checks there can be lighter. Payments follow the same pattern, passing through accounts in the transit country before reaching the real buyer. Items that are restricted for certain countries, such as dual-use electronics, are the usual target. Firms look for signs such as buyers with no history in the product, unusual quantities for the stated market, vague end-user details, and routes that make no commercial sense. Some regimes expect exporters to seek end-user statements and to check re-export. Diversion defeats controls that only look at the first buyer.

A manufacturer of precision machine parts receives a large order from a new distributor in a transit hub with no machinery industry. The distributor will not name its end customer and asks for delivery to a free zone warehouse. The exporter’s compliance team treats this as a diversion risk, asks for an end-user statement, and holds the order until it receives one.