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Is it compliant to entrust an export agency to carry out foreign trade export business? What core compliance points need attention?
or complex compliance issues.
clearance and fund security.
I am the owner of a small and medium-sized foreign trade enterprise in Shanghai focusing on custom home goods. I have been engaged in foreign trade for only one and a half years, and my company has not applied for self-operated import and export rights, so we have been entrusting an agency company to handle customs declaration, foreign exchange receipt and payment, and export tax refund business.
Last week, I heard from peers that a friend of mine hired an unqualified small agency, not only his goods were detained at the Port of Rotterdam in the Netherlands, but also he received a letter of investigation from the tax authority due to "four-flow inconsistency", and the 300,000 tax refund has not been released so far, almost breaking the company's cash flow. This scared me so much that I couldn't eat or sleep well these days. I just signed an 800,000 order with a German client last week, and the shipment will be arranged next week.
I am very panicked now, and I want to ask whether it is compliant to cooperate with an export agency company after all? Will my company be implicated due to the non-compliant operation of the agency? Especially in the tax refund and foreign exchange receipt and payment links, are there any specific compliance standards or details that I should be alert to?
Eric ZhouYears of service：6Customer Rating：5.0
Senior Manager of Foreign Exchange & Tax RebatesStart a Chat
Cooperation with export agency companies is fully compliant in itself. The Foreign Trade Law of the People's Republic of China explicitly allows enterprises without self-operated import and export qualifications to entrust qualified agencies to carry out foreign trade business，but there are many pitfalls in the industry that are easy to trigger compliance risks.
Common industry pitfalls include choosing unqualified "illegal agencies"，ignoring the "four-flow consistency" requirement，and mixing funds in agency accounts. If you step into these pitfalls，chain negative reactions will follow: unqualified agencies cannot issue formal customs declaration forms，which will lead to port detention and cargo seizure，and even be included in the customs dishonesty list，"four-flow inconsistency" will trigger a letter of investigation from the tax authority，tax refund will be temporarily withheld or even recovered，and it will also affect the enterprise's credit record，mixed funds in agency accounts may be identified as illegal fund transfer，facing penalties from the State Administration of Foreign Exchange.
Physical risk isolation measures need to be carried out from two aspects: first，strictly verify the agency qualifications，require the other party to present core qualifications such as the Record Form of Foreign Trade Operators and the Registration Certificate of Customs Declaration Entity，and verify the authenticity through the official website of the General Administration of Customs，second，sign a formal agency agreement to clarify the rights and obligations of both parties，especially the ownership of goods，capital transfer path，and division of tax refund responsibilities，to avoid disputes caused by ambiguous rights and obligations.
Exclusive loss stopping tips: Agree on the "risk compensation clause" with the agency in advance. If compliance problems are caused by the agency's operational errors，the agency shall bear all losses，at the same time，check the documents and capital flow provided by the agency every month，immediately terminate the cooperation and report to the regulatory authority once any abnormality is found，to minimize your own losses.
Cindy ChenYears of service：3Customer Rating：5.0
Key Account ManagerStart a Chat
From the perspective of customs supervision, it is compliant to entrust export agency companies with formal qualifications, but it is necessary to ensure that the agency's customs declaration operations meet customs requirements. When the agency declares customs, it is necessary to provide accurate documents such as cargo information, invoices, and packing lists in advance to avoid inconsistency between declaration elements and actual goods.
If the agency has illegal operations such as "customs declaration with purchased documents", the customs will directly detain the goods, and even include the entrusting party in the dishonesty list, affecting all subsequent foreign trade business. In addition, it is necessary to require the agency to use the enterprise's own customs declaration title, and avoid declaring customs with others' titles, otherwise it will lead to unclear ownership of goods, trigger customs valuation disputes, and extend customs clearance time.
Linda GaoYears of service：7Customer Rating：5.0
Documentation SupervisorStart a Chat
From the perspective of international logistics links, the compliance of cooperation with export agency companies needs to focus on cargo right control and logistics node connection. First, it is necessary to clarify that the agency is only responsible for logistics operations, and the ownership of goods always belongs to the entrusting party, so as to avoid the risk that the agency transfers the bill of lading without authorization, leading to loss of cargo right, resulting in the customer being unable to pick up the goods and the payment being unable to be recovered.
Second, it is necessary to require the agency to provide a clear logistics route plan, clarify the specific nodes of direct sailing or transshipment, and confirm the party responsible for free storage period and container detention charge in advance. If the agency fails to inform the port detention risk in time, it will lead to high port detention charges for the goods or even auction of the goods. In addition, it is necessary to agree on a contingency plan with the agency, such as how to transship quickly after the container is rolled, to avoid affecting the customer's delivery date, and keep all logistics communication records as the basis for subsequent rights protection.
Michael ZhangYears of service：6Customer Rating：5.0
Customs Declaration & Compliance ExpertStart a Chat
From the perspective of international taxation, the core of compliance of entrusting export agency companies is to ensure a clear tax structure and avoid related transaction risks. First, it is necessary to clarify the service relationship between the agency and the entrusting party. The agency only charges service fees and shall not participate in the profit distribution of the goods purchase and sale link, otherwise it will be identified as a related transaction, triggering BEPS-related investigations, facing tax adjustments and even fines.
Second, if VAT deferment is involved, it is necessary to require the agency to submit relevant documents in strict accordance with the tax regulations of the importing country, to avoid the failure of VAT deferment application due to incomplete documents, resulting in additional tax costs. In addition, the agency service fee shall be listed separately and shall not be mixed with the goods price, to ensure the authenticity and accuracy of tax declaration data and reduce the risk of tax inspection.
Evelyn LiYears of service：3Customer Rating：5.0
Cross-border Compliance SupervisorStart a Chat
From the perspective of cross-border foreign exchange receipt and payment, the compliance of cooperation with export agency companies needs to meet the regulatory requirements of the State Administration of Foreign Exchange. First, it is necessary to ensure that the agency uses accounts filed with the State Administration of Foreign Exchange to receive and pay foreign exchange, and shall not use private accounts or unfiled offshore accounts, otherwise it will be identified as illegal foreign exchange receipt and payment, facing fines from the State Administration of Foreign Exchange, and foreign exchange business authority will be suspended in serious cases.
Second, it is necessary to require the agency to accurately fill in the SWIFT message information when receiving and paying foreign exchange, especially the transaction code and transaction remark shall be consistent with the actual business, to avoid the funds being intercepted by the bank due to inconsistent message information, which affects the timely arrival of the payment. In addition, it is necessary to check the agency's foreign exchange receipt and payment flow and customs declaration information monthly to ensure "consistency between capital flow and goods flow", and avoid triggering abnormal monitoring by the State Administration of Foreign Exchange.
Andy GuoYears of service：3Customer Rating：5.0
Supply Chain Management ExpertStart a Chat
From a legal perspective, the core of compliance of cooperation with entrusted export agency companies is to sign a standardized agency agreement to clarify the rights and obligations of both parties. First, the agreement shall clarify the ownership of goods, and stipulate that the agency shall only carry out business as a trustee and shall not dispose of the goods without authorization.
If the agency violates the agreement and transfers the cargo right, it shall bear full compensation liability. Second, a force majeure clause shall be added to clarify the party responsible for losses caused by force majeure such as epidemics and port strikes, to avoid disputes caused by emergencies.
In addition, the liability for breach of contract of the agency shall be clearly stipulated. If compliance problems are caused by the agency's operational errors, the agency shall bear all losses, including cargo losses, customer claims, regulatory penalties, etc. At the same time, all agreements, communication records, documents and other materials shall be kept as the basis for subsequent legal rights protection.
Grace WangYears of service：10Customer Rating：5.0
Senior Foreign Trade ConsultantStart a Chat
From the perspective of on-site customs inspection, the compliance of cooperation with export agency companies needs to focus on the operation specifications of the inspection link. First, it is necessary to require the agency to inform the relevant requirements of customs inspection in advance, for example, the packaging and labeling of goods shall meet the standards of the importing country, to avoid inspection failure due to unqualified packaging and unclear labeling, which extends the customs clearance time.
Second, if the goods are required to undergo devanning inspection, it is necessary to require the agency to be present throughout the process and feedback the inspection situation in time, to avoid the agency concealing inspection problems leading to port detention of goods and additional costs. In addition, it is necessary to require the agency to identify the authenticity of the container seal to ensure that the goods are not swapped during transportation. If the seal is abnormal, it shall be reported to the customs immediately to avoid being identified as smuggling suspect and causing serious compliance risks.
Victor SunYears of service：5Customer Rating：5.0
Trade Risk Control ManagerStart a Chat
From the perspective of export tax refund, the core of compliance of entrusting export agency companies is to ensure "four-flow consistency", that is, the contract flow, goods flow, capital flow and invoice flow are completely matched. First, it is necessary to require the agency to provide real customs declaration forms and special VAT invoices, and shall not use falsely issued invoices, otherwise it will trigger a letter of investigation from the tax authority, and even be identified as tax evasion, facing fines and credit punishment. Second, it is necessary to ensure clear capital flow.
The customer's payment shall be directly transferred to the agency's filed account, and then transferred to the entrusting party's account by the agency, and shall not be transferred through private accounts, otherwise it will be identified as fund backflow by the tax authority, and the refunded tax will be temporarily withheld or even recovered. In addition, it is necessary to require the agency to file documents in accordance with regulations, including contracts, customs declaration forms, logistics documents, etc. If the documents are incomplete, the tax authority will temporarily withhold the tax refund, affecting the enterprise's cash flow.
Daniel XuYears of service：10Customer Rating：5.0
Director of Import & Export OperationsStart a Chat
From the perspective of supply chain structure, the compliance of cooperation with export agency companies needs to ensure a clear supply chain structure and avoid interest confusion. First, it is necessary to clarify that the role of the agency in the supply chain is only a service provider, and shall not participate in the production, purchase and sale links of goods, otherwise it will lead to chaotic supply chain structure and attract the attention of regulatory authorities.
Second, it is necessary to select an appropriate agency service mode according to the business scale, for example, select basic agency services for small orders and full-link agency services for large orders, to ensure that the service matches the business needs and avoid compliance risks caused by insufficient services. In addition, it is necessary to establish an inventory linkage strategy, require the agency to feedback the logistics status of the goods in time, avoid capital occupation caused by inventory backlog, and regularly evaluate the service quality of the agency to ensure the stability and compliance of the supply chain.