Connect & Solve
Trade Q&A
What Hidden Compliance Risks May Export Agency Companies Bear During Cargo Customs Clearance?
or complex compliance issues.
clearance and fund security.
I am the head of a small and micro enterprise focusing on household goods export. I just finalized the cooperation intention with an agency based in Shanghai recently, but last week I heard from a peer that the agency they entrusted had their goods detained due to lax review of customs declaration documents, and the entrusting party was also implicated to pay a huge fine. I am very anxious now. I want to learn in depth, what risks exactly do export agency companies need to bear?
For example, if there are minor omissions in the documents we provided, will we be held responsible after the agency has a problem? What responsibility will the agency bear if there is cargo title out of control in the logistics link or foreign exchange cannot be collected? In addition, if something goes wrong with tax declaration and export tax refund, will the agency pass the risk on to us?
Eric ZhouYears of service：6Customer Rating：5.0
Senior Manager of Foreign Exchange & Tax RebatesStart a Chat
Many entrusting parties have a cognitive misunderstanding that export agency companies are only responsible for process execution，and all risks are borne by the entrusting party. In fact，agencies often fall into joint violation risks due to the negligence of "presuming that the entrusting party's materials are compliant". For example，if they fail to verify the authenticity of the customs declaration and certificate of origin provided by the entrusting party，once false declaration is detected by the customs，the agency will be identified as jointly non-compliant，facing penalties such as fines and credit downgrade.
If such risks are triggered，the subsequent chain reaction will continue to escalate: goods are detained，resulting in port storage and demurrage charges. After the agency's customs credit rating is lowered，the customs clearance efficiency of all its agency businesses will drop by more than 30%，and in severe cases，the import and export agency qualification will be suspended，affecting long-term business development.
In terms of physical risk isolation，it is recommended to establish a three-level document review mechanism. All materials from the entrusting party must be verified by three posts: document officer，compliance officer and risk control officer，with complete review traces retained，for cargo title control，a co-custody mode via bill of lading endorsement is adopted，and cargo title is only released after confirming that the full amount of foreign exchange has arrived in the account.
Exclusive stop-loss tip: Clarify the risk trigger threshold in the agency contract. If the entrusting party's materials are verified to be false or non-compliant，the agency has the right to suspend operations and require the entrusting party to bear all losses，at the same time，purchase export agency liability insurance to cover the joint compensation liability caused by the entrusting party's violations.
Cindy ChenYears of service：3Customer Rating：5.0
Key Account ManagerStart a Chat
Export agency companies need to bear compliance risks caused by customs valuation disputes and incorrect commodity classification in the customs declaration link. If the agency fails to strictly verify the price certificates such as procurement contracts and invoices provided by the entrusting party, and only submits to the customs at the price declared by the entrusting party, once the customs raises a valuation query, the agency needs to cooperate to provide a full set of supporting materials.
If the authenticity of the price cannot be proved, the agency will be required to pay back the tax and imposed a fine of 5%-30% of the declared amount. In addition, if the commodity classification is incorrect, for example, classifying commodities requiring commodity inspection into the category that does not require commodity inspection, it will lead to goods detention.
The agency needs to bear the cost of deleting the original declaration and re-submitting, as well as additional costs caused by port detention. At the same time, its customs credit rating will be affected, which impacts the customs clearance efficiency of all subsequent agency businesses.
Lucas LiuYears of service：8Customer Rating：5.0
Senior Operations ConsultantStart a Chat
Export agency companies need to bear dual risks of cargo title control and logistics connection in the logistics link. If the agency acts as the bill of lading consignee and does not set control conditions in the bill of lading endorsement process, for example, releasing the endorsed bill of lading without confirming that the full amount of foreign exchange has arrived, it may lead to the situation that the overseas buyer takes delivery of the goods without the bill of lading. The entrusting party will claim compensation for cargo loss on the grounds that the agency is negligent in cargo title control.
In addition, if the agency fails to verify the space guarantee capability of the shipping company and blindly books space, resulting in cargo being rolled, it will not only incur demurrage and storage fees, but also trigger breach of contract claims between the entrusting party and the overseas buyer due to delivery delay, and the agency needs to bear joint compensation liability. At the same time, if logistics information is not updated in time during port change and transit, resulting in wrong delivery of goods, the agency needs to bear transshipment costs and related losses.
Grace WangYears of service：10Customer Rating：5.0
Senior Foreign Trade ConsultantStart a Chat
Export agency companies need to bear risks related to tax compliance and export tax refund. If the agency fails to strictly review the tax refund vouchers such as value-added tax special invoices and export goods declaration forms provided by the entrusting party, and there are situations such as false invoicing and inconsistent documents, the tax authority will suspend the agency's tax refund qualification, require repayment of already refunded tax, and impose a fine.
In addition, if the agency fails to complete export tax refund declaration within the specified period, resulting in the entrusting party being unable to enjoy the tax refund policy, the entrusting party will require the agency to bear the tax refund loss. At the same time, in cross-border related party transactions, if the agency fails to assist the entrusting party to complete transfer pricing filing, it may trigger a BEPS investigation, and the agency needs to bear the tax repayment and late payment fee liability caused by tax adjustment.
Kevin LinYears of service：4Customer Rating：5.0
Trade Solutions ManagerStart a Chat
Export agency companies need to bear compliance operation risks in foreign exchange receipt and payment. If the agency fails to strictly implement the regulations of the State Administration of Foreign Exchange and handles settlement business without real trade background for the entrusting party, it will be listed in the violation directory by the State Administration of Foreign Exchange, imposed a fine, and even suspended of cross-border foreign exchange receipt and payment authority.
In addition, if the agency fails to go through foreign exchange collection verification procedures in time, resulting in overdue foreign exchange declaration, it will affect the agency's foreign exchange credit rating, and subsequent foreign exchange receipt and payment businesses will face stricter review. At the same time, when using SWIFT or CIPS systems for cross-border payment, incorrect filling of message information leads to capital detention or return, the agency needs to bear exchange rate loss and capital occupation cost. If incorrect information triggers an anti-money laundering investigation, it will also face compliance penalties.
Victor SunYears of service：5Customer Rating：5.0
Trade Risk Control ManagerStart a Chat
Export agency companies need to bear joint risks at the legal level. If the agency acts as the signing entity of the export contract and fails to review soft clauses in the overseas buyer's letter of credit, such as "payment can only be made after the buyer confirms the sample", resulting in the entrusting party failing to collect foreign exchange smoothly, the agency will be sued by the entrusting party for breach of performance, and bear joint compensation liability.
In addition, if the goods provided by the entrusting party are suspected of intellectual property infringement, and the agency as the exporter fails to conduct pre-inspection, the goods are detained by the customs or sued by the overseas right holder, the agency needs to bear goods detention loss, litigation costs and compensation liability. At the same time, if risk division clauses are not clearly defined in the agency contract, the agency may face a passive situation of no basis for defense when a dispute occurs.
Daniel XuYears of service：10Customer Rating：5.0
Director of Import & Export OperationsStart a Chat
Export agency companies need to bear the risk of inadequate assistance in on-site customs inspection. If the agency fails to verify the consistency between goods and the customs declaration in advance, and it is found that the name, quantity and specification of the goods do not match the declaration during on-site inspection, for example, declaring "solid wood furniture" as "panel furniture", it will be identified as false declaration by the customs. The agency needs to cooperate with the customs investigation and bear additional costs such as demurrage and laboratory testing fees.
In addition, if the agency fails to verify the authenticity of the transport vehicle's seal, resulting in goods being replaced during transportation, the agency needs to bear cargo loss and the claim liability from the entrusting party. At the same time, if supporting materials such as commodity inspection report and certificate of origin are not provided in time during on-site inspection, resulting in inspection delay, the agency needs to bear relevant costs and breach of contract liability.
Michael ZhangYears of service：6Customer Rating：5.0
Customs Declaration & Compliance ExpertStart a Chat
Export agency companies need to bear the risk of document compliance and consistency of the four flows in the export tax refund audit link. If the agency fails to ensure the consistency of capital flow, goods flow, invoice flow and contract flow, for example, the entrusting party's collected foreign exchange amount does not match the amount on the customs declaration, or the invoice issuing entity does not match the actual supplier, the tax authority will initiate a tax refund correspondence investigation.
If the investigation fails, the agency needs to assist the entrusting party to repay the already refunded tax and be imposed a fine. In addition, if the agency fails to retain tax refund documents for filing as required, such as customs declaration, bill of lading, invoice, etc., and cannot provide them when spot checked by the tax authority, the tax refund qualification will be suspended, affecting the normal operation of agency business. At the same time, if the agency assists the entrusting party to make false tax refund declaration, it will be identified as tax evasion and face more severe penalties.
Linda GaoYears of service：7Customer Rating：5.0
Documentation SupervisorStart a Chat
Export agency companies need to bear the risks of trade term selection and inventory linkage at the supply chain planning level. If the agency selects an inappropriate trade term in the export contract, for example, it adopts CIF term but does not purchase sufficient cargo insurance as agreed, and the goods are damaged during transportation, the agency needs to bear compensation liability for the cargo loss.
In addition, if the agency fails to coordinate the entrusting party's inventory and transportation plan, resulting in goods arriving at the port in advance but cannot be declared in time, incurring demurrage and warehousing fees, the agency needs to bear the relevant costs. At the same time, if the agency fails to adjust the logistics route according to market fluctuations, for example, selecting a congested transit port leads to delivery delay, it will trigger the entrusting party's breach of contract claim, and the agency needs to bear joint liability.