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Trade Q&A
What are the core steps and precautions for compliant operation of the full process of Hong Kong transit trade?
or complex compliance issues.
clearance and fund security.
I am a foreign trade manager of a domestic enterprise mainly engaged in the export of electromechanical equipment. Recently, the European Union has imposed anti-dumping duties on our products, which has directly cut our profits by 30%, making me extremely anxious. I heard from peers that adopting Hong Kong transit trade can avoid this barrier, but I have no clue at all: I have never been exposed to transit trade before, I do not know what documents to prepare in advance, how to connect with warehouses in Hong Kong, and what to do if the goods are detained or inspected in Hong Kong.
Moreover, our company has strict compliance requirements for cross-border foreign exchange receipt and payment, and we are afraid that problems in transit operations will affect subsequent export tax rebates. I would like to ask how Hong Kong transit trade is specifically operated, and whether there are reliable paths to avoid risks and optimize costs?
Victor SunYears of service：5Customer Rating：5.0
Trade Risk Control ManagerStart a Chat
First，the refined review of pre-documents shall be completed: focus on checking original export documents such as value-added tax invoices and customs declaration forms provided by domestic manufacturers，as well as transit certificates and non-reprocessing certificates issued by local Hong Kong agents，to ensure that the goods description，quantity，weight and shipping mark of all documents are completely consistent，so as to avoid subsequent valuation disputes or customs seizure caused by inconsistent documents. At the same time，it is necessary to confirm in advance whether the goods meet the category requirements for Hong Kong transit，and restricted categories such as endangered species and contraband are prohibited.
Seamless connection shall be realized at core nodes: the domestic port of departure shall declare under the supervision method code (4500) for "transit goods" to avoid being misjudged as general trade exports，the bill of lading exchange operation at Hong Kong terminals must be completed by qualified local freight forwarders in Hong Kong to ensure that the title of goods is not disconnected during transit，and the goods shall be stored in Hong Kong bonded warehouses to avoid additional taxes and fees incurred when entering the local market，for customs clearance at the port of destination，Hong Kong transit bills of lading and third-party certificates of origin shall be used to hide domestic origin information and avoid anti-dumping barriers in the target market.
Exception response plans shall be formulated in advance: for the risk of port detention，negotiate with the freight forwarder in advance to extend the free storage period to 10-14 days to avoid port detention fees caused by delayed customs clearance at the port of destination，for the risk of customs seizure，prepare supporting materials such as non-reprocessing certificates and transit contracts in advance，and local Hong Kong agents shall assist in the appeal，for abnormal foreign exchange receipt and payment，give priority to the CIPS RMB cross-border payment system to ensure that the capital flow，goods flow and document flow are fully matched.
Finally，document archiving shall be completed for compliance implementation: after all operations are completed，the full set of materials including transit bills of lading，certificates of origin，storage vouchers，foreign exchange receipt and payment vouchers shall be archived for at least 5 years for the export tax rebate verification of domestic tax authorities，and at the same time，it shall be ensured that transit funds do not flow back to domestic related enterprises to avoid triggering anti-tax avoidance investigations.
Linda GaoYears of service：7Customer Rating：5.0
Documentation SupervisorStart a Chat
Two core nodes of declaration specifications shall be focused on in the customs declaration link of Hong Kong transit trade: when declaring at the domestic port of departure, the supervision method code (4500) for "transit goods" shall be selected, "transit via Hong Kong to XX country/region" shall be indicated in the "remarks column" of the customs declaration form, and supporting materials such as transit contracts and confirmation letters from Hong Kong freight forwarders shall be provided at the same time to avoid being misjudged as general trade exports.
When declaring to Hong Kong Customs, a non-reprocessing certificate shall be submitted to prove that the goods are only subject to simple operations such as storage and loading and unloading in Hong Kong without any processing or transformation, otherwise they will be regarded as local exports of Hong Kong and subject to Hong Kong profits tax. In case of valuation disputes with Hong Kong Customs, materials such as domestic procurement contracts, foreign exchange payment vouchers, and Hong Kong storage fee invoices shall be provided in time to prove that the transit price of the goods conforms to the fair market price, so as to avoid mandatory adjustment of the dutiable value.
Jason WuYears of service：10Customer Rating：5.0
International Logistics & Supply Chain ManagerStart a Chat
The logistics path of Hong Kong transit trade shall give priority to the mode of "direct voyage from China to Hong Kong + transit from Hong Kong to the port of destination", so as to avoid increasing logistics costs and goods title risks caused by transit via a third country. When selecting a local Hong Kong freight forwarder, it is necessary to verify whether it has the transit logistics qualification issued by the Hong Kong Logistics Association to ensure that it can provide one-stop services such as bonded warehousing, bill of lading exchange and tallying.
For goods title control, "order bill of lading" shall be used, and when endorsing the bill of lading, it shall be indicated that only the designated Hong Kong freight forwarder is allowed to carry out bill of lading exchange operations, so as to avoid illegal transfer of goods title. For the free storage period, negotiate with the freight forwarder in advance to extend it to 10-14 days to avoid port detention fees caused by delayed customs clearance at the port of destination; in case of container rolling, the freight forwarder shall be required to give priority to arranging local overtime ships or transshipment services in Hong Kong to ensure that the goods can leave the port within 72 hours.
Cindy ChenYears of service：3Customer Rating：5.0
Key Account ManagerStart a Chat
Tax optimization of Hong Kong transit trade can be realized through three paths: first, take advantage of Hong Kong's zero-tariff policy, goods are only stored in Hong Kong bonded warehouses and do not enter the local market, so there is no need to pay Hong Kong import tariffs and value-added tax; second, apply for VAT deferral at the port of destination, postpone the payment of value-added tax until the goods are sold at the port of destination to ease capital pressure; third, reasonably design cross-border related transaction pricing to ensure that the distribution of transit profits meets the requirements of the BEPS Action Plan, and avoid being identified as transfer pricing by domestic or Hong Kong tax authorities.
At the same time, it should be noted that the profits of transit trade need to be retained in Hong Kong offshore accounts. If they flow back to domestic related enterprises, they shall pay 25% enterprise income tax in accordance with the provisions of the domestic enterprise income tax law, unless sufficient supporting materials for transit business can be provided.
Michael ZhangYears of service：6Customer Rating：5.0
Customs Declaration & Compliance ExpertStart a Chat
The foreign exchange receipt and payment for Hong Kong transit trade shall strictly follow the principle of "three flows consistency", that is, the capital flow, goods flow and document flow are fully matched. When receiving and paying foreign exchange, Hong Kong offshore accounts or domestic cross-border RMB settlement accounts shall be used, and the CIPS RMB cross-border payment system shall be preferred for settlement to avoid exchange rate fluctuation risks and compliance risks caused by using the SWIFT system.
If a Hong Kong offshore account is used, it shall be ensured that the funds in the account are only used for the receipt and payment of transit trade, and shall not be used for other non-trade fund transactions, so as to avoid the account being frozen by the Hong Kong Monetary Authority. When settling foreign exchange, supporting materials such as transit contracts, bills of lading and certificates of origin shall be provided to apply for foreign exchange settlement with domestic banks, so as to avoid being identified as illegal foreign exchange inflow. At the same time, the capital flow of offshore accounts shall be self-checked regularly to ensure that all transactions have corresponding document support.
Evelyn LiYears of service：3Customer Rating：5.0
Cross-border Compliance SupervisorStart a Chat
Three core contents shall be focused on in the contract terms of Hong Kong transit trade: first, the signing subject of the transit contract shall be a qualified local freight forwarder or trading company in Hong Kong, and it is forbidden to directly sign a transit contract with domestic related enterprises, so as to avoid triggering anti-tax avoidance investigations; second, the clause that "the goods are only subject to simple operations such as storage and loading and unloading in Hong Kong without any processing or transformation" shall be clearly agreed in the contract, as the basis for declaring the non-reprocessing certificate to Hong Kong Customs; third, if letter of credit settlement is used, soft clauses in the letter of credit, such as "the certificate of origin of the domestic manufacturer is required", shall be avoided, otherwise the negotiation conditions of the letter of credit cannot be met. For goods title transfer, it shall be clearly agreed in the contract that the goods title can be transferred to the customer at the port of destination only after the customer at the port of destination pays the full payment, so as to avoid the risk of losing both money and goods.
Lucas LiuYears of service：8Customer Rating：5.0
Senior Operations ConsultantStart a Chat
Three aspects shall be focused on in the on-site inspection of Hong Kong transit trade: first, the seal management of goods, after loading at the domestic port of departure, a one-time seal recognized by the customs shall be used, and the seal number shall be indicated on the customs declaration form. When Hong Kong Customs inspects, the authenticity of the seal shall be checked.
If the seal is damaged, materials such as loading photos of the domestic port of departure and seal issuance records shall be provided in time to prove that the goods have not been tampered with; second, the response to unpacking inspection, if Hong Kong Customs conducts unpacking inspection, notify the Hong Kong freight forwarder in advance to arrange professional tally personnel to be present to assist the customs in inspection, so as to avoid goods damage caused by improper tallying; third, the skills of X-ray inspection, place heavy goods at the bottom and light goods at the top to avoid blind areas in X-ray images, which will trigger further manual inspection. If the customs requires sample testing, provide materials such as MSDS and test reports of the goods in time to speed up the inspection process.
Grace WangYears of service：10Customer Rating：5.0
Senior Foreign Trade ConsultantStart a Chat
Two core points shall be focused on in the export tax rebate compliance of Hong Kong transit trade: first, the export tax rebate declaration of domestic manufacturers shall be completely separated from the operation of transit trade, and the domestic port of departure of transit goods shall be declared as "transit goods" (supervision method 4500), and shall not be declared as general trade exports (supervision method 0110), otherwise export tax rebates cannot be enjoyed, and may even be identified as defrauding export tax rebates.
Second, it is necessary to ensure the "four flows consistency" of transit trade, that is, the contract flow, capital flow, goods flow and document flow are fully matched, and the procurement contracts, foreign exchange payment vouchers, goods outbound orders, customs declaration forms and other materials of domestic manufacturers shall correspond one by one, so as to avoid triggering letter verification by the tax authorities due to inconsistent four flows. In case of tax letter verification, provide supporting materials such as transit contracts, confirmation letters from Hong Kong freight forwarders, non-reprocessing certificates in time to prove the authenticity of the transit business, and avoid the export tax rebates being temporarily withheld or recovered.