What full-process compliance operations and risk prevention and control requirements must be followed for domestic locomotive export agency services?

Question

I am the person in charge of a medium-sized locomotive manufacturer in Zhejiang. Last month, we just won an order for 3 heavy-duty locomotives from a Southeast Asian country.

This is our first export business, and we have no idea how to carry it out. We contacted two small agencies before, either with inflated quotations or unclear specific compliance requirements.

I am worried about falling into pitfalls, such as cargo detention and port congestion caused by document errors and omissions, loss of tax rebates due to improper tax handling, or even impact on subsequent cooperation. We are now eager to find a professional agency, and want to know how to operate from preliminary preparation to final implementation to ensure compliance, save costs and avoid all potential risks?

Grace Wang · Accepted Answer

First， details of pre-document audit : It is necessary to check the Export Goods Declaration Form，Commercial Invoice and Packing List of the locomotives in advance，focus on confirming whether the HS code (86012000) corresponding to heavy-duty locomotives is accurately matched，and provide the locomotive product qualification certificate and commodity inspection clearance form at the same time. Some Southeast Asian countries require additional CE certification. Ensure that the product name，model，weight and declared value on all documents are completely consistent，and eliminate vague statements. For core node connection: It is necessary to coordinate the three parties of the manufacturer，customs broker and cross-border logistics provider，complete the pre-declaration audit 3 days before the locomotive leaves the factory，select a shipping company with large cargo transportation qualification to reserve space in advance，and avoid container dumping caused by overweight and overlength of the locomotive，simultaneously confirm additional documents required for customs clearance with the foreign consignee to realize seamless connection between domestic export and foreign import. Exception plans should be formulated in advance: If encountering customs inspection，prepare the locomotive technical parameter manual and certificate of origin，and arrange special personnel to go to the site for cooperation，if there is document inconsistency，complete modification and resubmit within 24 hours to avoid port storage fees and container detention fees. Final compliant implementation: After completing export declaration，collect all documents in time for export tax rebate declaration，ensure that the four streams of contract，invoice，logistics and capital are consistent，and follow up the foreign exchange settlement progress at the same time to ensure safe entry of funds.

Daniel Xu · Answer

When acting as an agent for domestic locomotive export declaration, focus on the accuracy of HS code classification. If heavy-duty locomotives are attached with special tools, they shall be classified and declared separately to avoid price review disputes caused by mixed declaration; at the same time, apply for the integrated customs clearance mode in advance, and take advantage of the territorial declaration advantage of Shanghai Customs District to reduce time loss in transshipment links; if encountering customs price review queries, provide original factory cost accounting details, procurement contracts and previous export records of the same model of locomotives to avoid the risk of document deletion and re-declaration; in addition, pay attention to the export supervision conditions of locomotives, some countries require the reverse certificate of Automatic Import License to ensure that declaration materials fully meet supervision requirements.

Evelyn Li · Answer

For the logistics link of domestic locomotive export agency, priority shall be given to shipping companies with transportation qualification for large special equipment, and confirm in advance whether the space size of the shipping company matches the length, width and height of the locomotive (heavy-duty locomotives are usually more than 12 meters long) to avoid container dumping due to insufficient space; at the same time, reasonably plan the domestic land transportation route, and select a logistics company with large cargo transportation license to avoid being seized by road administration on the way; in addition, confirm the calculation standard of free storage period and container detention fee with the shipping company, and apply for extending the free storage period in advance (usually 7-14 days can be applied) to avoid additional costs caused by delayed foreign customs clearance; the bill of lading shall be order bill of lading to ensure controllable cargo rights.

Michael Zhang · Answer

For tax planning of domestic locomotive export agency, the VAT deferral mode can be adopted, and deferred payment of value-added tax can be applied for at the time of export declaration to reduce capital occupation of the enterprise; at the same time, make reasonable use of the export tax rebate policy to ensure that the input invoice of the locomotive fully matches the product name and model on the export declaration form, and avoid tax rebate failure due to inconsistent input; in addition, if cross-border related transactions are involved, they shall meet the relevant requirements of BEPS, formulate reasonable transfer pricing, and avoid anti-tax avoidance investigation by tax authorities; for RCEP member states such as those in Southeast Asia, certificates of origin can be applied for to enjoy tariff reduction preferences, reduce tariff costs of the importing country, and improve product competitiveness.

Cindy Chen · Answer

For the foreign exchange receipt and payment compliance operation of domestic locomotive export agency, the CIPS RMB cross-border payment system shall be adopted to avoid exchange rate fluctuation risk of the SWIFT system; at the same time, carry out export foreign exchange receipt filing on the foreign exchange monitoring platform in advance to ensure that the deviation between the received foreign exchange amount and the declared amount is controlled within 5%; if an offshore account is used for foreign exchange receipt, ensure that the capital flow of the offshore account meets the supervision requirements of the State Administration of Foreign Exchange, and avoid being listed as a concerned account; in addition, keep all foreign exchange receipt and payment vouchers (including SWIFT messages and CIPS transfer records) for post-event verification by the State Administration of Foreign Exchange, and ensure the compliance of the whole process of foreign exchange receipt and payment.

Lucas Liu · Answer

When acting as an agent for domestic locomotive export, a standardized agency export agreement shall be signed to clarify the rights and obligations of both parties, especially the division of cargo ownership, customs declaration responsibility and tax rebate risk; at the same time, handle intellectual property customs protection filing for the locomotive to avoid infringement allegations during export; if letter of credit settlement is adopted, strictly review the terms of the letter of credit to avoid soft clauses (such as requiring inspection certificates issued by foreign consignees); in addition, add a force majeure clause to the agreement to clarify the way of bearing losses caused by force majeure events such as epidemics and port strikes, and avoid legal disputes.

Andy Guo · Answer

When encountering customs inspection when acting as an agent for domestic locomotive export, prepare the locomotive technical parameter manual, product qualification certificate and commodity inspection clearance form in advance to ensure that inspection personnel can quickly verify the model and specification of the locomotive; if abnormality is found in machine inspection, cooperate with inspection personnel to carry out unpacking inspection, and avoid cargo detention caused by resisting inspection; in addition, check the authenticity of the seal to ensure that the locomotive has not been tampered with during transportation; if inspection and appraisal are required, submit the appraisal application within 3 working days, and follow up the appraisal progress at the same time to avoid port detention fees caused by delayed appraisal; after passing the inspection, obtain the inspection release notice in time to ensure that the goods are loaded on schedule.

Linda Gao · Answer

The packaging of locomotives for export agency shall meet the requirements of international sea transportation. Heavy-duty locomotives shall adopt frame packaging to avoid damage to locomotives caused by bumps during transportation; at the same time, mark clear transportation labels on the package (including consignee information, destination, weight, size) to avoid wrong delivery; if the locomotive is attached with batteries (such as starting batteries), they shall be packaged separately in accordance with the dangerous goods packaging requirements of UN3480, and provide MSDS reports; in addition, add a moisture-proof film inside the package to avoid rusting of locomotive parts caused by the humid marine environment; after the packaging is completed, a drop test shall be carried out to ensure the firmness of the packaging.

Kevin Lin · Answer

For the tax rebate review of domestic locomotive export agency, ensure that the four streams (contract, invoice, logistics, capital) are completely consistent, and focus on checking whether the issuing time, product name and model of the input invoice match the export declaration form; if cross-month declaration is involved, complete the pre-declaration verification within the declaration period to avoid delayed tax rebate caused by data errors; in addition, keep all tax rebate documents (including declaration forms, invoices, logistics bills, foreign exchange receipt vouchers) for at least 5 years for correspondence and investigation by tax authorities; if encountering tax correspondence and investigation, submit relevant supporting materials within 10 working days to ensure smooth passage of the correspondence and investigation, and avoid temporary withholding of tax rebates.

Jason Wu · Answer

For the supply chain planning of domestic locomotive export agency, adopt CIF trade terms to transfer logistics and insurance responsibilities to the agency company and reduce the risks of the enterprise; at the same time, optimize the inventory linkage strategy, complete the customs declaration audit 3 days before the locomotive leaves the factory to avoid inventory backlog; in addition, establish a cost actuarial model to calculate agency fees, logistics fees, tax costs, etc., to maximize export profits; if there are follow-up orders, sign a long-term cooperation agreement with the agency company to lock in the service price and reduce long-term costs; at the same time, pay attention to the tariff reduction policies of free trade agreements such as RCEP, adjust the export market layout, and improve the market competitiveness of products.