What specific compliance procedures and regulatory requirements must be followed for Myanmar transit trade?

Question

I am the person in charge of a Zhejiang-based foreign trade company mainly engaged in the export of hardware and building materials. Last month, I just received an EU order of 20 containers, but the EU imposes high anti-dumping duties on such building materials from China. My peers suggested using Myanmar transit trade to reduce costs.

However, I have never been involved in Myanmar transit business before. Yesterday, when dining with another foreign trade boss, I heard that last year his goods were detained at Yangon Port for 12 days due to inadequate local document review during Myanmar transit trade. He not only compensated the customer more than 80,000 USD in liquidated damages, but also spent more than 100,000 USD on port detention fees and clearance fees.

Now I am particularly anxious and afraid of repeating the same mistakes. I want to ask: how to specifically handle Myanmar transit trade? What details should be focused on to avoid customs seizure and port detention, and how to ensure the entire process is compliant so as not to affect subsequent foreign exchange receipt and export tax rebate?

Victor Sun · Accepted Answer

First，precise pre-review of documents must be completed: verify the transit qualification filing form of the local cooperating warehouse company in Myanmar in advance to ensure that it has the transit warehouse authority recognized by the customs，simultaneously review the newly made packing list and commercial invoice in the name of Myanmar，which must be consistent with the quantity and specifications of goods on the original Chinese export customs declaration form，and must not mark the origin of China，in addition，sign a three-party transit trade contract (domestic supplier，Myanmar transit trader，overseas buyer) in advance to clarify the ownership of goods and transit responsibilities.

Core operational nodes must be closely coordinated: after the goods arrive at Yangon Port，complete the container swapping operation within the customs supervision zone within the 72-hour free detention period，record the container number and seal number throughout the process and shoot live videos to avoid disputes over goods ownership，coordinate the Myanmar customs broker to submit the transit trade filing application within 24 hours after the container swapping is completed，to ensure that the goods do not enter the local circulation market of Myanmar，handle RMB cross-border payment through the CIPS system，with the remark "transit trade payment"，to match the documents and capital flow.

A contingency plan must be formulated in advance: if customs inspection is encountered，immediately submit the non-processing certificate (such as intact original packaging without local Myanmar processing marks) and transit warehouse agreement，if there is a risk of port detention，immediately coordinate the agent to apply for an extension of 3-5 days of free detention period，and submit an urgent filing application，if there is a document error，immediately contact the Myanmar customs broker to cancel the declaration and re-submit it to avoid customs seizure.

For final compliance implementation，all documents shall be retained for more than 5 years，including Myanmar transit trade filing form，new sea bill of lading，warehouse voucher，three-party contract，etc。to respond to subsequent tax verification letters and customs inspections，and ensure the smooth process of export tax rebate.

Reference: U.S. tightens origin checks to crack down on third-country transshipment and tariff-evasion schemes

Andy Guo · Answer

When declaring Myanmar transit trade at customs, attention shall be paid to the logical closed loop of the price review link. The customs will focus on checking the difference between the declared price of transit goods and the market price of similar local goods. If the difference exceeds 15%, a second price review will be triggered.

Prepare the original purchase contract, payment voucher of the goods and the purchase invoice of the Myanmar transit trader in advance to prove the rationality of the price; if there is a price review dispute, submit a statement on the necessity of transit trade (such as the legal basis for avoiding anti-dumping duties) to avoid the customs directly taxing according to local imported goods. In addition, when declaring at customs, accurately declare the supervision mode of "transit trade", and must not mistakenly report it as "general trade", otherwise it will be recognized as illegal import, facing goods seizure and fines.

Kevin Lin · Answer

For the logistics path of Myanmar transit trade, priority should be given to the exclusive transit warehouse area of Yangon Port, where the free detention period can be extended to 7 days and the customs inspection efficiency is higher; the container swapping operation must be completed in the closed area supervised by the customs to avoid the goods from contacting the local market of Myanmar; when endorsing and transferring the bill of lading, clearly mark "only for transit trade, not for local sales", and retain the endorsed copy of the bill of lading to ensure full control over goods ownership. If there is a situation of slot shortage or overbooking, sign a priority slot agreement for transit goods with the shipping company in advance to avoid delaying transit timeliness; regarding container detention fees, apply for a reduction of container detention fees for transit goods through the agent, with a maximum reduction of 50% of the container detention fees.

Eric Zhou · Answer

When conducting Myanmar transit trade, the VAT deferral policy can be used to reduce tax costs. Apply for VAT deferral filing for transit trade at the Myanmar tax authority in advance, without paying import value-added tax in Myanmar, and only need to submit transit vouchers after the goods are transited to complete tax verification; in addition, reasonably plan the pricing of cross-border related party transactions to ensure that the profit level of the transit trader meets the local industry average in Myanmar, so as to avoid triggering BEPS investigations; if RMB cross-border settlement is adopted, the preferential treatment of the bilateral tax agreement between China and Myanmar can be enjoyed, reducing the withholding tax rate for non-resident enterprises to 5% (original rate is 10%), further optimizing tax costs.

Jason Wu · Answer

For the receipt and payment of Myanmar transit trade, handle RMB cross-border payment through the CIPS system, and clearly mark "transit trade payment" in the SWIFT message, and match documents such as the three-party transit trade contract, new bill of lading and warehouse voucher to ensure the authenticity and compliance of receipt and payment; regarding offshore account management, avoid using unfiled offshore accounts to receive transit trade payments, otherwise they will be listed as key inspection targets by the foreign exchange administration; when settling foreign exchange, submit the transit trade filing form to the bank in advance to ensure that the settlement funds are directly transferred to the domestic supplier's account, avoiding the risk of capital reflow; if encountering foreign exchange control restrictions, handle RMB settlement through local compliant payment agents in Myanmar to avoid foreign exchange conversion risks.

Grace Wang · Answer

The three-party contract for Myanmar transit trade shall clearly stipulate the transit responsibilities, especially the goods ownership transfer node, which shall be set as "when the goods complete container swapping and obtain the transit trade filing form, the goods ownership shall be transferred from the domestic supplier to the overseas buyer" to avoid goods ownership disputes; add a force majeure clause to clearly stipulate that if the goods are detained at the port due to changes in Myanmar customs policies, the maximum liability of the transit trader is 5% of the goods value; at the same time, apply for customs intellectual property protection filing, if the goods involve brands, ensure that the brand owner's proof of authorization for transit trade is provided to avoid goods seizure due to intellectual property infringement; in addition, require the Myanmar transit trader to provide a bank guarantee to ensure that it fulfills the transit obligations, and if there is a breach of contract, rapid claims can be made through the guarantee.

Michael Zhang · Answer

When inspecting Myanmar transit trade goods, ensure that the original packaging of the goods is intact and there are no marks or traces of local processing in Myanmar, otherwise it will be recognized as local imported goods; use customs-recognized electronic seals to verify the authenticity of the seals, and avoid using ordinary plastic seals to prevent tampering; when responding to container opening inspection, prepare the packing list and non-processing certificate of the goods in advance to cooperate with customs personnel to check the quantity and specifications of the goods; if there is a need for inspection and appraisal, coordinate the agent to follow up the appraisal process to ensure that the appraisal result clearly marks "the goods have not been processed in Myanmar and are only for transit"; after the inspection is completed, obtain the inspection notice and release voucher for future reference.

Evelyn Li · Answer

The packaging of Myanmar transit trade goods must comply with the regulatory requirements of Myanmar customs. For heavy goods such as hardware and building materials, use moisture-proof and reinforced packaging to avoid damage due to moisture during port storage; if dangerous goods are involved, prepare MSDS documents complying with UN standards in advance, use UN dangerous goods packaging, and mark the correct dangerous goods classification marks; do not mark the origin address of China on the packaging, only mark the address and contact information of the Myanmar transit trader; in addition, paste special transit trade marks on the outside of the packaging to facilitate the customs to quickly identify transit goods and reduce the probability of inspection; during container swapping, use cushioning packaging materials to fix the goods to avoid damage to the goods during the container swapping process and affect subsequent exports.

Cindy Chen · Answer

For the export tax rebate of Myanmar transit trade, ensure the consistency of the four flows, that is, the contract flow, capital flow, goods flow and invoice flow are fully matched; the original Chinese export customs declaration form shall mark "transit trade goods" and be consistent with the goods information on the Myanmar transit trade filing form; when verifying foreign exchange receipt, provide the foreign exchange receipt voucher of transit trade and the payment voucher of the Myanmar transit trader to prove the real flow of funds; if a tax verification letter is encountered, submit all transit documents, including three-party contracts, warehouse vouchers, new bills of lading, etc., to prove the authenticity of transit trade; when declaring tax rebate across months, submit a pre-declaration in the tax rebate system in advance to verify the accuracy of document information and avoid declaration failure.

Lucas Liu · Answer

For the supply chain planning of Myanmar transit trade, priority should be given to the direct transit route of "China - Yangon Port, Myanmar - Overseas" to reduce logistics costs and timeliness risks in intermediate links; regarding inventory linkage strategy, reserve a small amount of turnover inventory in the Myanmar transit warehouse area to avoid logistics delays caused by temporary order increases; it is recommended to adopt the trade term of FOB Yangon Port to transfer the maritime risk of goods to overseas buyers and reduce their own logistics risks; the cost accounting model shall cover all link costs such as transit warehouse fees, container swapping fees, filing fees, etc., and consider the impact of exchange rate fluctuations, set a 5% cost fluctuation range; in addition, sign a long-term cooperation agreement with the Myanmar transit trader to strive for a 10%-15% service fee discount.