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What core qualifications and compliance requirements are needed to carry out formal cross-border entrepot trade?
or complex compliance issues.
clearance and fund security.
I am the owner of a small and medium-sized foreign trade enterprise engaged in hardware product export in Shanghai. Last week, I just received an order of 1,200 sets of heavy-duty industrial hinges from a Middle East customer, with a total value of nearly 800,000 yuan. However, the EU imposes high anti-dumping duties on similar products from our production area, and the customer insists that we can only cooperate if we ship the goods through a third country in Southeast Asia for transit.
I have never been exposed to entrepot trade before. Now I am worried that I cannot find a compliant transit warehouse leading to loss of cargo title control, afraid of document connection errors causing customs detention and port demurrage, and also concerned about the compliance of cross-border foreign exchange receipt and payment.
I even have no idea what qualifications, core documents I need to prepare in advance and how to control the extra costs of entrepot trade. I have been too anxious to eat these days, and I would like to ask what aspects I need to prepare for carrying out entrepot trade?
Victor SunYears of service：5Customer Rating：5.0
Trade Risk Control ManagerStart a Chat
First of all，pre-compliance qualification and document review shall be completed to confirm that the enterprise has the right to operate import and export and the authority to receive and pay foreign exchange through offshore accounts. Meanwhile，the access requirements of the transit country shall be verified. For Southeast Asian countries such as Malaysia，the category and value of entrepot goods shall be filed 1-2 days in advance，make sure that the warehouse in the transit country has exclusive bonded qualification for entrepot trade，so as to avoid cargo detention due to unqualified qualification. In addition，three types of core documents，namely original factory invoice，final consignee order and transit warehousing agreement，shall be prepared in advance to ensure that the name，quantity and value of goods on all documents are completely matched，and "document mismatch" shall be eliminated.
Three-party connection shall be well done at core nodes: First，for the document end，the certificate of origin of the transit country shall be issued by local compliant institutions，and the bill of lading shall be changed by using order bill of lading and endorsed to the transit warehouse agent. Second，for the logistics end，a freight forwarder with entrepot operation experience shall be selected，require it to issue an irrevocable cargo title control guarantee，and clarify the node and responsibility of cargo title transfer. Third，for the receipt and payment end，cross-border RMB receipt and payment shall be completed through CIPS system，report the full background materials of entrepot trade to the bank 1 working day in advance，so as to avoid funds being listed as suspicious transactions.
Abnormal contingency plans shall be formulated: If customs inspection occurs in the transit country，the transit warehouse agent shall be coordinated to provide background supporting documents within 24 hours，if there is an error in documents，a 3-5 day buffer period for document amendment shall be reserved. Finally，all documents (including transit country documents，foreign exchange receipt and payment vouchers，logistics tracks) shall be archived for at least 5 years，so as to meet the post-inspection requirements of Shanghai Customs and the State Administration of Foreign Exchange，and complete compliant implementation.
Michael ZhangYears of service：6Customer Rating：5.0
Customs Declaration & Compliance ExpertStart a Chat
For entrepot trade customs declaration, the attributes of "inbound transit" and "domestic entrepot" shall be strictly distinguished. The customs declaration form must accurately mark the supervision method code of "entrepot trade", and the transit country warehousing agreement and final consignee order shall be submitted as background supporting materials.
In case of inbound transit at Shanghai Port, pre-declaration shall be completed 24 hours before the arrival of goods, and the deviation between the declared value and the market price of similar goods in the transit country shall not exceed 10%, otherwise it will trigger customs value review disputes. Once there is a value review query, vouchers such as original factory invoice and goods procurement contract shall be provided within 3 working days.
If they cannot be provided in time, the customs will collect a deposit according to the maximum price limit of similar goods, which will affect the transit time limit of goods. If the customs declaration form is filled incorrectly, an application for deleting and re-declaring shall be submitted 48 hours before the goods are unloaded, so as to avoid being listed in the customs credit early warning list due to illegal declaration.
Cindy ChenYears of service：3Customer Rating：5.0
Key Account ManagerStart a Chat
For entrepot trade logistics, overseas warehouses with bonded transit qualification shall be preferred, such as exclusive entrepot bonded warehouses in Port Klang, Malaysia and Port of Singapore. Such warehouses can provide a 14-21 day free storage period to avoid high port demurrage charges caused by delayed document connection.
When goods are shipped, order bill of lading shall be used, the title of the bill of lading shall be marked as the transit warehouse agent company, and the freight forwarder shall be required to issue a cargo title transfer confirmation letter to ensure that the cargo title is controllable during the bill of lading exchange link. In case of container rolling at the transit port, a spare space shall be agreed with the freight forwarder in advance, and the reservation time limit of the spare space shall not exceed 24 hours to avoid cargo detention at the port.
In addition, the reduction and exemption clause for container detention charges shall be specified in the logistics contract. For entrepot trade goods, the freight forwarder can be required to apply to the shipping company for a 50% reduction of container detention charges for more than 7 days, so as to reduce logistics costs.
Evelyn LiYears of service：3Customer Rating：5.0
Cross-border Compliance SupervisorStart a Chat
For entrepot trade tax planning, transit countries shall be preferred. For example, Southeast Asian countries such as Malaysia and Singapore exempt import value-added tax and consumption tax on entrepot goods, and only charge about 0.5%-1% of the cargo value as warehousing service tax, which can greatly reduce tax costs. If it involves EU transit, the VAT number of the transit country shall be registered in advance and VAT deferment shall be applied, so as to avoid paying import VAT in advance and occupying cash flow.
Meanwhile, the related party transaction pricing of entrepot trade shall comply with the arm's length principle, and the profit ratio shall be controlled between 3% and 5% of the cargo value, so as to avoid BEPS investigation triggered by pricing deviating from the market price. In addition, all tax vouchers (such as transit country tax receipts, VAT deferment application receipts) shall be retained for at least 7 years for inspection by tax authorities.
Kevin LinYears of service：4Customer Rating：5.0
Trade Solutions ManagerStart a Chat
Foreign exchange receipt and payment for entrepot trade shall be completed through CIPS RMB cross-border payment system, and the background materials of entrepot trade, including transit country warehousing agreement, final consignee order, copy of bill of lading and so on, shall be reported to the account opening bank 1-2 working days in advance, so as to ensure that the capital flow is consistent with the cargo flow and document flow. If an offshore account is used to receive and pay foreign exchange, it is necessary to avoid capital flows unrelated to entrepot trade in the account, otherwise it will be listed as a suspicious transaction account by the bank and trigger account freezing.
When settling foreign exchange, complete foreign exchange receipt and payment vouchers, including bank receipts and transit warehouse fee invoices, shall be provided to ensure that the foreign exchange settlement process meets the compliance requirements of the State Administration of Foreign Exchange. In addition, the details of foreign exchange receipt and payment for entrepot trade shall be submitted to the State Administration of Foreign Exchange every quarter, so as to avoid being listed as a key foreign exchange supervision object due to failure to submit on time.
Jason WuYears of service：10Customer Rating：5.0
International Logistics & Supply Chain ManagerStart a Chat
For entrepot trade, special attention shall be paid to avoiding soft clauses of letters of credit. For example, the clause "payment can be made only after the transit country customs issues the entrepot certificate" shall be avoided, and it can be modified to "payment can be made only after the transit warehouse agent issues the entrepot goods confirmation letter", so as to reduce the collection risk.
A written agreement shall be signed for cargo title transfer, clarifying that after the transit warehouse completes the bill of lading exchange, the cargo title is transferred from the exporter to the final consignee. Meanwhile, the transit warehouse agent shall be required to issue an irrevocable cargo title storage guarantee to avoid loss of cargo title control.
In addition, a force majeure fallback clause shall be added to the trade contract, clarifying that in case of force majeure events such as epidemic situation and political unrest in the transit country, delivery can be delayed without bearing liability for breach of contract. If the goods involve intellectual property rights, the intellectual property protection filing shall be completed at the customs of the transit country in advance, so as to avoid the goods being detained due to infringement allegations.
Daniel XuYears of service：10Customer Rating：5.0
Director of Import & Export OperationsStart a Chat
When entrepot goods are transited inbound, the tamper-proof seal exclusive to the transit warehouse shall be used, and the seal number shall be accurately marked in documents such as the bill of lading and transit warehousing agreement, so that the customs can verify the authenticity of the seal. In case of unpacking inspection by the customs of the transit country, the transit warehouse agent shall be coordinated to be present for cooperation in advance, and supporting documents such as the original factory certificate of goods and transit trade background materials shall be provided, so as to avoid the goods being detained due to failure to provide valid certificates.
When passing the machine inspection, the freight forwarder shall be coordinated in advance to adjust the placement of goods, with heavy goods placed at the bottom of the container and light goods at the top, so as to ensure clear machine inspection images and avoid secondary inspection triggered by blurred images. When interpreting the inspection notice, focus on the "inspection type" field. If it is marked as "sampling inspection", only 3%-5% of samples need to be sent for inspection, and the whole container does not need to be unpacked, which can greatly shorten the inspection time limit.
Grace WangYears of service：10Customer Rating：5.0
Senior Foreign Trade ConsultantStart a Chat
The packaging of entrepot goods shall meet the environmental protection and transportation requirements of the transit country. If wooden packaging is used, fumigation treatment shall be completed in advance and a fumigation certificate shall be issued.
Some transit countries in Southeast Asia (such as Malaysia) take direct return measures for wooden packaging without fumigation. For heavy hardware products, a moisture-proof and reinforced packaging scheme shall be adopted: the surface of the goods shall be tightly wrapped with PE stretch film, and a customized wooden frame shall be installed inside the container to fix the goods, so as to avoid deformation and damage of the goods caused by bumps during transit.
If the goods involve dangerous categories (such as hinges containing lubricating oil), dangerous goods packaging conforming to UN standards shall be made, and an MSDS report issued by a third-party institution shall be provided at the same time. The dangerous goods information shall be reported to the customs of the transit country 7 days in advance, so as to avoid being listed as illegal goods due to failure to report.
Andy GuoYears of service：3Customer Rating：5.0
Supply Chain Management ExpertStart a Chat
Entrepot trade does not fall into the scope of export tax rebate. Enterprises shall accurately declare it as "entrepot trade income" in the VAT tax return, and shall not falsely declare it as general trade export income, otherwise it will trigger inspection by tax authorities, and even the refunded tax will be recovered. Document filing shall strictly implement the requirement of consistency of four flows. The filing materials include transit country warehousing agreement, copy of bill of lading, bank receipt for foreign exchange receipt and payment, and final consignee order.
The name, quantity and value of goods in all materials shall be completely matched. In case of letter investigation by tax authorities, complete filing materials shall be provided within 10 working days to prove the authenticity of entrepot trade, so as to avoid being suspended from the export tax rebate qualification. In addition, a special internal audit shall be conducted on the income from entrepot trade every year to ensure the compliance of tax declaration.