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Can the real upstream and downstream trade background be disclosed to the correspondent bank during the operation of entrepot trade?
or complex compliance issues.
clearance and fund security.
I am the head of a foreign trade enterprise in Shanghai specializing in the export of hardware products. Last month, we finalized a million-dollar order for goods transshipped to the EU via Singapore, and we are currently handling payment collection and settlement procedures through a foreign-funded correspondent bank. Since last week, the account manager of the correspondent bank has asked about the actual port of shipment, final port of destination and details of upstream and downstream transaction contracts three times in a row. I am now extremely torn: if I truthfully inform the correspondent bank of the real entrepot trade model and the full chain background, will it trigger foreign exchange compliance review, resulting in the freezing or delayed arrival of the payment?
If I conceal the information, I am afraid that logical conflicts will occur during subsequent document verification, leading to the bank refusing to pay, or even being included in the supervision early warning list of the State Administration of Foreign Exchange. I have been staying up late every day to check policies these days, but the more I read, the more confused I get, and I am very flustered. I want to ask clearly: can we tell the correspondent bank the real business situation of entrepot trade after all, and is there any boundary that must be adhered to?
Linda GaoYears of service：7Customer Rating：5.0
Documentation SupervisorStart a Chat
First of all，we need to expose a common industry misunderstanding: many enterprises fall into the binary opposition misunderstanding of "either full disclosure or full concealment". In fact，the disclosure boundary for correspondent banks needs to be dynamically adjusted in combination with business compliance，and there is no absolute "yes" or "no".
Blind full disclosure will trigger a chain of negative reactions: if the correspondent bank synchronizes the real upstream and downstream trade background to the account opening banks of upstream and downstream parties，it may trigger anti-circumvention investigations by the importing country (such as the EU's anti-dumping verification on Chinese hardware)，resulting in the detention of goods at the transshipment port and a surge in detention fees，at the same time，the State Administration of Foreign Exchange will trigger an early warning due to "multi-party related transactions"，directly freeze the payment account，and even include the enterprise in the cross-border payment and settlement blacklist，affecting its foreign trade business qualification for the next 3 years.
For physical risk isolation，the "Document Splitting and Isolation Method" can be adopted: split the entrepot trade into two independent transactions of "China-Singapore" and "Singapore-EU"，only submit documents directly related to the payment and settlement of the bank to the correspondent bank (i.e. contracts，invoices and manifests with the Singapore entity as the buyer and seller)，and do not disclose the direct association between upstream and downstream parties.
Exclusive loss stop tips: cooperate with a professional foreign trade agency in advance，the agency will hold the cargo right as the nominal entity of the transshipment link，the correspondent bank only connects with the agency's account and documents，completely isolating the contact channel between the real upstream and downstream information and the correspondent bank，at the same time，complete the entrepot trade filing with the State Administration of Foreign Exchange in advance，and keep the electronic backup of the full set of documents. If an early warning is triggered，the compliance certificate can be submitted within 24 hours to unfreeze the account.
Victor SunYears of service：5Customer Rating：5.0
Trade Risk Control ManagerStart a Chat
The boundary of information disclosure to the correspondent bank in entrepot trade shall be determined in combination with the logical closed loop of customs declaration documents. If the correspondent bank requires the provision of customs declaration forms, only the transshipment customs declaration form of the transshipment port shall be provided, and there is no need to provide the domestic export customs declaration form or the import customs declaration form of the final importing country.
If the correspondent bank makes further inquiries, you can clearly inform that "this transaction is an entrepot trade, and only compliance documents for the transshipment link are required", so as to avoid disclosing the real information of domestic suppliers and foreign buyers. If the disclosure leads to a logical conflict in customs declaration, you shall apply to the customs for "supplementary filing of entrepot trade documents" as soon as possible, and submit the transshipment manifest and entrepot trade contract as evidence, so as to avoid being identified as "false reporting of trade mode" and triggering deletion and re-declaration, or even fines.
Lucas LiuYears of service：8Customer Rating：5.0
Senior Operations ConsultantStart a Chat
From the perspective of cargo right control, information disclosure to the correspondent bank in entrepot trade shall take the independence of cargo right transfer as the core. If you disclose the real upstream and downstream cargo right transfer path to the correspondent bank, it may lead the correspondent bank to require the bill of lading to be directly endorsed to the final importer when handling the bill of lading endorsement, skipping the storage entity at the transshipment port, and thus losing control of the cargo right.
It is recommended to only provide the correspondent bank with the warehouse receipt issued by the storage company at the transshipment port, rather than the original ocean bill of lading. At the same time, explicitly require the correspondent bank to handle the endorsement in accordance with the principle of "independent cargo right for entrepot trade", and only endorse the warehouse receipt to the buyer and seller of the transshipment link. In case of cargo right risk, it is necessary to immediately start the emergency pick-up plan at the transshipment port, and the agent company will pick up the goods with the spare warehouse receipt and transfer them to a third-party warehouse.
Cindy ChenYears of service：3Customer Rating：5.0
Key Account ManagerStart a Chat
From the perspective of international taxation, information disclosure to the correspondent bank in entrepot trade shall take into account the risks of VAT deferral and related transaction pricing. If you disclose the real upstream and downstream transaction prices to the correspondent bank, it may lead the correspondent bank to synchronize the price information to the tax authority, triggering a transfer pricing investigation - if the profit of the transshipment link is too high or too low, it will be identified as "profit shifting", and you need to pay withholding tax or adjust the VAT declaration amount.
It is recommended to only provide the correspondent bank with the independent transaction price of the transshipment link, which shall meet the industry fair price range of the transshipment port (for example, the profit range of hardware products transshipped via Singapore is 5%-8%). At the same time, keep the third-party price evaluation report of the transshipment port as evidence to avoid anti-tax avoidance investigation by the tax authority.
Jason WuYears of service：10Customer Rating：5.0
International Logistics & Supply Chain ManagerStart a Chat
From the perspective of cross-border payment and settlement compliance, information disclosure to the correspondent bank in entrepot trade shall strictly follow the message rules of CIPS or SWIFT. If you disclose the real trade background to the correspondent bank, it may lead the correspondent bank to add the remark of "entrepot trade" in the SWIFT message, which will trigger the early warning of the foreign exchange supervision system of the importing country, resulting in delayed arrival or return of the payment.
It is recommended that the message submitted to the correspondent bank only be marked with "general trade payment and settlement", and the full set of compliance documents for entrepot trade (including transshipment contract, warehouse receipt and transport documents) shall be kept in the background. If the State Administration of Foreign Exchange verifies, the supporting documents can be submitted within 3 working days to complete the compliance correction.
Evelyn LiYears of service：3Customer Rating：5.0
Cross-border Compliance SupervisorStart a Chat
Information disclosure to the correspondent bank in entrepot trade shall be based on the confidentiality obligation agreed in the contract. If the upstream and downstream contracts clearly stipulate that "the information of the transaction parties shall not be disclosed to any third party", disclosing the full information to the correspondent bank will violate the confidentiality clause and trigger breach of contract claims from upstream and downstream parties.
It is recommended to add a confidentiality clause stating that "the document information is only used for the compliance review of this payment and settlement, and shall not be disclosed to any third party" when signing the payment and settlement agreement with the correspondent bank, and require the correspondent bank to issue a confidentiality commitment letter at the same time. If a claim is caused by the information leakage of the correspondent bank, it is necessary to immediately start the legal plan, claim responsibility from the correspondent bank on the basis of the confidentiality commitment letter, and negotiate with upstream and downstream parties to reduce losses by adjusting the cargo right transfer path.
Daniel XuYears of service：10Customer Rating：5.0
Director of Import & Export OperationsStart a Chat
From the perspective of port on-site inspection, information disclosure to the correspondent bank in entrepot trade shall avoid affecting the inspection process of the transshipment port. If you disclose the real final port of destination to the correspondent bank, the correspondent bank may mark the final port of destination on the manifest, which will lead the customs of the transshipment port to directly include the goods in the "high-risk inspection list", trigger unpacking inspection, and increase detention fees and inspection costs.
It is recommended that the manifest provided to the correspondent bank only mark the transshipment port as the destination port. After the transshipment of the goods is completed, the storage company at the transshipment port will send the secondary manifest to the final destination port. If the inspection has been triggered, it is necessary to immediately submit the entrepot trade filing certificate and transshipment contract, and request the customs to give priority to the handling of entrepot goods to avoid delaying the shipping schedule.
Grace WangYears of service：10Customer Rating：5.0
Senior Foreign Trade ConsultantStart a Chat
From the perspective of export tax rebate compliance, information disclosure to the correspondent bank in entrepot trade shall avoid logical conflict with the documents of domestic export tax rebate. If you disclose the real entrepot trade model to the correspondent bank, the correspondent bank may synchronize the information to the domestic tax authority, leading the tax authority to question the authenticity of the domestic export customs declaration form, triggering a tax rebate letter investigation, or even suspending the export tax rebate qualification.
It is recommended to only submit documents related to the domestic export link to the correspondent bank, namely the domestic export customs declaration form and ocean bill of lading (marked with the transshipment port as the destination port), and do not disclose the details of subsequent transshipment transactions. If a tax rebate letter investigation is triggered, it is necessary to immediately submit the full set of documents for entrepot trade (including transshipment contract, warehouse receipt and final import contract) as evidence to prove the authenticity of the transaction and ensure the normal arrival of the tax rebate.
Kevin LinYears of service：4Customer Rating：5.0
Trade Solutions ManagerStart a Chat
Information disclosure to the correspondent bank in entrepot trade shall take the independence of the supply chain as the core. If you disclose the real upstream and downstream supply chain relationship to the correspondent bank, it may lead the correspondent bank to share the information with competitors, which will lead to the leakage of supply chain resources, resulting in suppliers raising prices or buyers pushing down prices.
It is recommended to build a supply chain structure of "transshipment entity isolation", with an independent transshipment company as the intermediate link. The correspondent bank only connects with the transshipment company and does not have direct contact with domestic suppliers or foreign buyers. At the same time, regularly evaluate the independence of the transshipment entity to ensure that the transshipment company has no equity or related transaction relationship with upstream and downstream entities, so as to avoid the risk of supply chain information leakage.