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Is It Fully Compliant for Domestic Chinese Companies to Conduct Entrepot Trade? What Core Conditions Are Required?
or complex compliance issues.
clearance and fund security.
I am the owner of a foreign trade company focusing on outdoor metal furniture based in Shanghai, China. I just lost two large EU orders last week. My clients told me that our product price increased by 32% due to anti-dumping duties, and they will turn to Southeast Asian suppliers if we can't lower the price further.
I heard from peers that entrepot trade can bypass anti-dumping duties, but I have never engaged in this type of business before and I feel quite uncertain: can an ordinary domestic foreign trade company like ours with import and export operation right qualify to do entrepot trade in terms of qualification? Will it involve violation and lead to goods detained by customs? Will the fund transfer be alerted and the account frozen by the bank?
How to guarantee cargo title, what if the intermediate trader detains the goods during transshipment? I stay up late searching for information every day but still feel uncertain. I just want to figure out whether we can do this business and what key issues we need to pay attention to?
Cindy ChenYears of service：3Customer Rating：5.0
Key Account ManagerStart a Chat
Pre-document Review Details: First of all，it is necessary to confirm whether the domestic company has valid import and export operation right and customs declaration filing qualification. Meanwhile，you need to check the entry rules of the transshipment country in advance，such as the issuance requirements of core documents including third-country certificate of origin and proof of non-processing. It is strictly forbidden to use forged or non-compliant documents，otherwise it will directly trigger traceability investigation by the destination country customs，goods detention and even high fines.
Core Node Connection: Three core nodes must be strictly controlled: First，lock the cargo title for the first-leg transportation，a named bill of lading must be used and endorsement rules must be clearly specified to avoid delivery of goods without original bill of lading，Second，for container swapping operation in the transshipment country，you need to select a third-party warehouse supervised by customs，and keep full-process container swapping videos，seal numbers and cargo photos，Third，match all documents for the second-leg transportation，ensure that the cargo name，quantity and amount on all documents including contract，bill of lading，invoice and certificate of origin are completely consistent with no logical loopholes.
Contingency Plan: Sign an exception handling agreement with the transshipment country agent in advance. If the destination country customs launches traceability investigation，you need to submit transshipment storage records，proof of non-processing and complete trade background materials within 24 hours，if there is a bank capital alert，you need to provide a full set of documents immediately to cooperate with the investigation，and entrust a professional foreign trade agency to issue a compliance certificate when necessary.
Final Compliance Implementation: All operations need to keep a full set of documents for at least 5 years，strictly ensure the consistency of four flows (contract，document，capital，logistics). Meanwhile，it is recommended to entrust a foreign trade agency with more than 20 years of experience to conduct whole-process monitoring，avoid compliance risks caused by non-standard operation，and ensure the safe implementation of the whole process of entrepot trade.
Evelyn LiYears of service：3Customer Rating：5.0
Cross-border Compliance SupervisorStart a Chat
When declaring customs for entrepot trade, it should be noted that if a domestic company declares customs in its own name directly, it must clearly mark the word "Entrepot Trade" on the customs declaration form, and submit the entrepot contract, third-country procurement contract and destination country sales contract at the same time. If the information on the customs declaration does not match the supporting documents, the customs will initiate a price verification procedure, and may even identify it as false trade, resulting in goods detention and fines.
In addition, the customs declaration form of entrepot trade must be fully consistent with the capital flow. If there is abnormal capital return, the customs will list the enterprise as a key supervision object, which will affect all subsequent import and export business.
Linda GaoYears of service：7Customer Rating：5.0
Documentation SupervisorStart a Chat
The logistics route of entrepot trade should avoid sensitive monitored ports of the destination country, and priority should be given to neutral ports with transshipment qualification, such as Singapore, Port Klang Malaysia, etc. A named bill of lading shall be used for the first-leg transportation to avoid delivery of goods without original bill of lading; full-process video monitoring is required during container swapping in transshipment, the seal number must be consistent with that on the bill of lading and customs declaration form, and keep cargo photos and container number records before and after container swapping. In case of container rolling or port congestion, an emergency reallocation agreement shall be signed with the logistics agent in advance to ensure that the goods can be allocated to other shipping schedules within 48 hours to avoid port storage fees.
Jason WuYears of service：10Customer Rating：5.0
International Logistics & Supply Chain ManagerStart a Chat
The tax treatment of entrepot trade for domestic companies needs to be divided into two situations: First, if the goods do not enter the Chinese customs territory, there is no need to pay import tariffs and value-added tax, you only need to pay value-added tax for domestic taxable services (tax rate 6%); Second, if the goods briefly enter the domestic bonded area for transshipment, you can apply for VAT deferral and do not need to pay VAT in advance.
In addition, it should be noted that the profits of entrepot trade must be declared truthfully. If there are related party transactions, you need to ensure that the transaction price complies with the arm's length principle, so as to avoid being identified as profit transfer by the tax authority and triggering an anti-avoidance investigation.
Grace WangYears of service：10Customer Rating：5.0
Senior Foreign Trade ConsultantStart a Chat
Foreign exchange collection and payment for entrepot trade must be processed through formal banking channels, and it is strictly forbidden to use offshore accounts for fund transfer without trade background. When collecting foreign exchange, you need to provide a full set of trade documents (contract, bill of lading, invoice, transshipment country documents) to the bank. If you settle in RMB, you can complete the transaction through the CIPS system to ensure that the capital path is traceable.
In addition, you need to avoid large amount of foreign exchange collection and payment in a short period of time, otherwise the bank will trigger an anti-money laundering alert, freeze the account capital and affect normal business operation. If there is any abnormality in foreign exchange collection and payment, you need to provide supplementary supporting materials immediately to cooperate with the bank's verification.
Michael ZhangYears of service：6Customer Rating：5.0
Customs Declaration & Compliance ExpertStart a Chat
Three core contracts are required for entrepot trade: procurement contract between the domestic company and the transshipment country supplier, sales contract between the domestic company and the destination country client, and transshipment service contract between the domestic company and the transshipment country agent. The cargo title transfer node, exception compensation clause and force majeure fallback clause shall be clearly specified in the contract, especially the exclusive clause of "prohibiting transshipment country agent from detaining cargo" shall be added.
Meanwhile, the agent is required to provide a Letter of Indemnity (LOI). If there is a cargo title dispute, you can claim compensation from the bank against the LOI. In addition, you need to check the intellectual property regulations of the destination country to avoid cargo detention due to infringement.
Daniel XuYears of service：10Customer Rating：5.0
Director of Import & Export OperationsStart a Chat
If entrepot trade goods are inspected by customs at the transshipment port, you need to prepare documents such as proof of non-processing, cargo composition test report and transshipment storage agreement in advance. During the inspection, you need to cooperate with the customs to complete the devanning inspection to ensure that the goods have not been processed or refitted in any way.
If the customs questions the entrepot attribute of the goods, you need to immediately provide proof materials such as first-leg and second-leg transportation plans, destination country sales orders, etc. In addition, you need to pay attention to the authenticity of the seal. Customs-approved seal must be used when swapping containers in transshipment, and ordinary seal is strictly prohibited. Otherwise, it will be identified as tampering with cargo and trigger the risk of goods detention.
Lucas LiuYears of service：8Customer Rating：5.0
Senior Operations ConsultantStart a Chat
Since the goods of entrepot trade conducted by domestic companies do not actually enter the Chinese customs territory, enterprises cannot enjoy the export tax rebate policy, and "Entrepot Trade" must be clearly marked in tax declaration to avoid tax correspondence investigation caused by false declaration of export tax rebate. If the goods enter the domestic bonded area for transshipment, you need to keep documents such as bonded area warehouse in-out records and transshipment proof for the tax authority's inspection.
In addition, you need to ensure that the capital flow of entrepot trade is completely consistent with the document flow. If there is capital returning to a domestic related account, it will be identified as false trade, trigger tax inspection, and even face fines.
Victor SunYears of service：5Customer Rating：5.0
Trade Risk Control ManagerStart a Chat
Supply chain planning for entrepot trade needs to be completed 30 days in advance, including transportation plan matching for first leg, transshipment and second leg, linked inventory control, and cost calculation model establishment. Priority is given to cooperating with long-term cooperative transshipment country agents to reduce communication costs and risks; all costs including tariffs, transshipment fees, storage fees and logistics fees shall be included in cost calculation, and exchange rate fluctuation risk shall be considered at the same time, you can lock the exchange rate through forward foreign exchange settlement and sale.
In addition, you need to establish a backup supply chain route. If there is political turmoil or port congestion in the main transshipment country, you can switch to the backup transshipment country immediately to ensure normal business operation.