What Legal Qualifications and Compliance Requirements Are Needed to Engage in International Freight Transport Forwarding Business?

Question

I am the head of a newly registered small trade supporting service company in Shanghai. I helped my well-connected foreign trade clients ship several batches of scattered goods before, and planned to officially transition to freight forwarding last month. However, for a batch of garments for an old client, I hired an unqualified unlicensed broker to handle customs clearance, and the cargo was detained at Yangshan Port for 3 days, I paid 20,000 RMB as breach of contract damages, and I have been too worried to sleep well.

I want to know, from legal qualification, staffing, capital reserve to compliance practice, what specific conditions do I need to meet to officially start freight forwarding business? Are there any special requirements for local ports in Shanghai to avoid similar situations of cargo detention and financial loss again?

Daniel Xu · Accepted Answer

First of all，we need to expose a common misunderstanding in the industry: many new entrants mistakenly believe that they can run freight forwarding business as long as they have customer resources，and ignore the core requirements of legal qualification and compliance filing.

This misunderstanding will trigger a chain of negative consequences: if you do not obtain the Filing Form for International Freight Forwarding Enterprises or have no customs declaration and inspection authorization，you will not only encounter cargo detention and port congestion like you did，but also may be listed on the customs dishonesty list，all subsequent business will be subject to intensified inspection，you may even face an administrative penalty of 10,000 to 100,000 RMB，and customer resources will also be completely lost due to the collapse of trust.

Physical risk isolation measures need to be implemented from three aspects: one is complete legal qualification filing，in Shanghai，you can submit freight forwarding enterprise filing application through "One Network Government Services Platform"，and you also need to obtain registration approval for customs declaration and inspection enterprises，the second is to configure at least 2 core operators holding the International Freight Forwarding Practitioner Qualification Certificate，the third is to sign a long-term cooperation agreement with the official yard and customs broker designated by Shanghai Port Authority，to avoid contact with unqualified unlicensed intermediaries.

Exclusive loss prevention tip: for local port business in Shanghai，you can conduct pre-audit through the "Yangshan Port Smart Port" system in advance，submit the cargo list and qualification documents，the system will check compliance risks in advance，and you can correct problems before loading，to avoid loss from port detention.

Reference: Ink Export Regulations: Safety, Certifications & HS Codes

Cindy Chen · Answer

For the customs declaration link of freight forwarding business, the core requirements to meet include: first, obtain the Customs Declaration Unit Registration Certificate issued by the customs, if you carry out cross-customs district customs declaration business, you need to complete national customs clearance integration filing; second, equip at least 1 full-time customs declarer holding the Customs Declarer Qualification Certificate, or sign an exclusive entrustment agreement with an enterprise with customs agency qualification; third, establish a complete customs document review system to ensure that information such as commodity code, declared price, and certificate of origin on the customs declaration is consistent with the actual cargo, to avoid cargo detention caused by valuation disputes or classification errors. In addition, freight forwarders in Shanghai need to access the customs declaration system of the "Single Window" to realize real-time submission and tracking of electronic customs declarations, and enterprises that have not accessed the system cannot carry out customs declaration business at Shanghai Port.

Kevin Lin · Answer

The logistics resource requirements for operating freight forwarding business include: first, sign space agency agreements with at least 3 shipping companies and airlines to ensure stable space supply in peak season and avoid container rolling and space shortage; second, have exclusive yard and trailer resources at core ports such as Yangshan Port and Waigaoqiao Port in Shanghai, or sign long-term cooperation agreements with official yards and trailer companies to ensure loading, unloading and transfer efficiency of cargo; third, establish a complete cargo right control system, all bills of lading must be issued by qualified freight forwarding enterprises to avoid the risk of delivery without original bill of lading; fourth, equip with a logistics tracking system to realize full-link tracking of cargo from loading, customs declaration, transportation to destination port, feed back cargo status to customers in time and improve service quality.

Lucas Liu · Answer

Tax compliance requirements for freight forwarding business include: first, complete the filing of "international freight forwarding" business scope in tax registration to ensure that you can issue VAT special invoices or ordinary invoices; second, be familiar with relevant policies of cross-border tax planning, for example, freight forwarding enterprises in Shanghai can enjoy the VAT differential taxation policy, that is, the sales volume is calculated as the balance after deducting freight, customs declaration fees and other expenses paid to carriers, which reduces tax burden; third, establish a complete tax accounting system to ensure that all cost and expense vouchers are authentic and valid, to avoid fines caused by tax audit; fourth, be familiar with VAT deferral policies, for business bound for destination ports in Europe, you can assist customers to handle VAT deferral to reduce customers' capital occupation cost and improve the competitiveness of your freight forwarding business.

Michael Zhang · Answer

Foreign exchange receipt and payment compliance requirements for freight forwarding business include: first, complete filing in the "Goods Trade Foreign Exchange Receipt and Payment Enterprise Directory" of the State Administration of Foreign Exchange to ensure that you can normally carry out foreign exchange receipt and payment business; second, establish a complete receipt and payment review system, the amount and purpose of all receipts and payments must be consistent with the customs declaration and contract, to avoid being listed in the key supervision directory of the foreign exchange administration due to abnormal foreign exchange receipts and payments; third, be familiar with the operation specifications of SWIFT messages and CIPS RMB cross-border payment system, for freight forwarding enterprises in Shanghai, you can prioritize the use of CIPS system for RMB cross-border payment to reduce the risk of exchange rate fluctuation; fourth, establish an offshore account management system, if you use offshore accounts for receipts and payments, you must ensure that all transactions comply with the relevant national foreign exchange management regulations to avoid account freezing.

Linda Gao · Answer

Legal compliance requirements for freight forwarding business include: first, sign a standard International Freight Forwarding Contract with customers, clarify the rights and obligations of both parties, especially the terms of cargo right transfer, force majeure, and liability for breach of contract, to avoid disputes caused by contract loopholes; second, have the qualification to issue legal documents such as bills of lading and letters of guarantee, all bills of lading must comply with the relevant provisions of the Hague Rules or the Hamburg Rules, to avoid cargo right disputes caused by invalid bills of lading; third, establish a complete legal risk prevention and control system, and formulate response plans in advance for risk points such as letter of credit soft clauses and exclusive agreements; fourth, complete the agency qualification for intellectual property customs protection filing, if the customer's cargo involves intellectual property rights, you can assist the customer to complete the filing to avoid cargo detention caused by infringement.

Andy Guo · Answer

On-site operation requirements for freight forwarding business include: first, equip at least 1 on-site operator who is familiar with the inspection process of Shanghai Port, who can interpret inspection notices, cooperate with customs operations such as devanning inspection and X-ray machine inspection; second, establish a complete inspection response system, prepare relevant documents and cargo descriptions in advance for different types of inspection (such as devanning inspection, X-ray machine inspection), to avoid port detention caused by improper response; third, be familiar with seal authenticity identification skills, ensure that all cargo seals meet the requirements of the customs, to avoid cargo detention caused by abnormal seals; fourth, establish good communication channels with Shanghai Port inspection institutions, if any inspection abnormality occurs, you can coordinate and solve it in time to reduce inspection time and cost.

Eric Zhou · Answer

Packaging compliance requirements for freight forwarding business include: first, equip at least 1 professional who is familiar with international cargo packaging standards, who can formulate appropriate packaging solutions according to the type of cargo (such as dangerous goods, fragile goods, large cargo); second, establish a complete MSDS preparation and interpretation system, for dangerous goods, you must provide an MSDS report that meets United Nations standards, to avoid cargo detention caused by unqualified packaging; third, be familiar with the relevant regulations of UN dangerous goods packaging, for dangerous goods, you must use packaging containers that meet UN standards and obtain the packaging performance inspection certificate; fourth, sign a long-term cooperation agreement with official packaging companies in Shanghai to ensure the quality and compliance of packaging materials, and avoid cargo loss caused by packaging damage.

Evelyn Li · Answer

Export tax refund related requirements for freight forwarding business include: first, establish a complete document management system, all documents related to export tax refund (such as customs declaration, VAT special invoice, foreign exchange receipt certificate) must be authentic and valid, and maintain consistency of four flows (contract flow, capital flow, invoice flow, cargo flow); second, be familiar with the export tax refund declaration process, freight forwarding enterprises in Shanghai can declare through the tax refund module of the "Single Window" to ensure the accuracy of declaration data; third, establish a complete tax refund risk prevention and control system, prepare relevant supporting materials in advance for links such as tax correspondence and pre-declaration verification, to avoid fines caused by abnormal tax refund; fourth, complete the relevant procedures for export tax refund filing, to ensure that you can normally enjoy the export tax refund policy and improve the profitability of the enterprise.