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How to Effectively Mitigate Risks Related to Anti-Dumping Duties Through Compliance Operations in Transit Trade?
or complex compliance issues.
clearance and fund security.
I am a foreign trade practitioner engaged in hardware tool export. Last year, two batches of carbon steel wrenches I shipped to US customers were imposed a 120% anti-dumping duty, leading to a direct loss of nearly 800,000 RMB, which wiped out all profits I made in the previous six months. Now my regular customer insists on renewing the order and requires transit trade, meaning the goods will be transshipped via a Southeast Asian port before being sent to the US.
However, I just heard last week that a batch of transshipped goods belonging to a peer was detained at the Port of Los Angeles due to inconsistent certificate of origin traceability, and the enterprise is also facing anti-circumvention investigation from the US Department of Commerce. I am extremely anxious right now: I am afraid of repeating the same mistake and suffering even heavier losses, and also worried that improper transit route selection and unqualified document preparation will draw attention from customs. What is more, I have no idea about the compliance details and risk prevention and control of transit trade. I would like to ask how to operate to truly avoid dumping risks and ensure smooth customs clearance of goods?
Evelyn LiYears of service：3Customer Rating：5.0
Cross-border Compliance SupervisorStart a Chat
First of all，common industry misunderstandings need to be clarified: many practitioners choose to buy fake certificates of origin for convenience，or only repack goods at the transit port without keeping any substantive transit records，which is the core trigger for anti-circumvention investigations.
Stepping into this misunderstanding will trigger a chain of negative consequences: US Customs will verify the authenticity of certificates of origin through the global traceability system. Once false information is found，goods will be directly detained，and anti-circumvention investigation from the US Department of Commerce will be triggered at the same time. Enterprises will not only face a fine equivalent to 2 to 5 times the value of the goods，but also be added to the key monitoring blacklist of customs. All goods exported to the US in the next 3 to 5 years will be subject to 100% inspection，and enterprises may even permanently lose US market access qualification.
Three measures for physical risk isolation shall be implemented: first，select ports with transit trade compliance qualifications，such as Port Klang in Malaysia and the Port of Singapore，which have sound transit traceability supervision systems，second，require transit service providers to provide complete transit operation records，including container replacement photos，local storage vouchers and logistics transit bills of lading，third，authentic certificates of origin shall be issued by formal local chambers of commerce in the transit country，to ensure the document traceability chain is complete and verifiable.
Exclusive loss reduction tips: you can purchase transit trade compliance liability insurance. If cargo detention or fine is caused by non-compliance of transit operations，the insurance company can compensate up to 90% of the losses，at the same time，sign a compliance joint liability agreement with the transit service provider，clarifying that the provider shall bear corresponding compensation liability if risks are caused by its operational errors.
Cindy ChenYears of service：3Customer Rating：5.0
Key Account ManagerStart a Chat
Two core documents shall be focused on in the transit trade customs declaration process: first, the certificate of origin issued by the transit country. It is necessary to ensure that the goods description and HS code on the certificate of origin are completely consistent with the customs declaration form of the final importing country, and the issuing authority of the certificate of origin is on the whitelist recognized by the customs of the importing country; second, the transit bill of lading.
The shipper on the bill of lading shall be a local enterprise in the transit country, and the consignee shall be the final importer. Any information of enterprises in the original exporting country is strictly prohibited. In addition, if the customs of the importing country requires a transit processing certificate, supporting materials such as container replacement records and storage invoices at the transit port shall be prepared in advance, to avoid valuation disputes or anti-circumvention investigations caused by inconsistent document logic. If the customs questions the authenticity of the certificate of origin, local goods inspection reports of the transit country shall be provided immediately to prove that the goods have undergone substantive transit operations at the transit port rather than direct transit.
Victor SunYears of service：5Customer Rating：5.0
Trade Risk Control ManagerStart a Chat
For logistics route selection for transit trade, priority shall be given to ports with complete transit supporting facilities, and niche ports or bonded zones without formal transit qualifications shall be avoided, as the traceability systems in such areas are imperfect and easy to arouse customs doubts. Attention shall be paid to core node connection: after goods arrive at the transit port, container replacement operations shall be arranged immediately, and the whole process of container replacement shall be filmed to record changes of container numbers and seal numbers. At the same time, photos of goods before and after container replacement shall be retained as proof of transit operations.
For cargo right control, "order bill of lading" shall be adopted, with the transit service provider as the intermediate endorser, to prevent the original exporter from directly holding the bill of lading and avoid loss of control over cargo rights. For abnormal contingency plans, if cargo congestion occurs at the transit port, immediately contact the local logistics service provider to apply for extending the free storage period, and notify the final importer to adjust the customs declaration time simultaneously, to avoid risks caused by inconsistency between the arrival time of goods and the time indicated on documents.
Lucas LiuYears of service：8Customer Rating：5.0
Senior Operations ConsultantStart a Chat
When avoiding dumping risks in transit trade, a compliant tax structure shall be built at the same time to avoid anti-dumping investigations caused by tax-related connections. First, the transit service provider shall have no direct equity connection with the original exporter. If they are related enterprises, the US Department of Commerce may determine that the transit is a means to evade anti-dumping duties, and launch an anti-circumvention investigation accordingly.
Second, the pricing of transit trade shall comply with the arm's length principle, and the markup ratio of the transit service provider shall be within the reasonable range of the same industry in the transit country, generally 5% to 10% of the cargo value, to avoid transfer pricing investigations caused by excessively high or low pricing. In addition, if the transit country and the final importing country have a tax agreement, you can apply for tax agreement treatment to reduce tax costs in the transit link, and retain complete pricing basis, such as local industry price reports and cost accounting sheets of the transit country, as proof of tax compliance.
Jason WuYears of service：10Customer Rating：5.0
International Logistics & Supply Chain ManagerStart a Chat
The foreign exchange collection and payment for transit trade shall strictly follow the principle of "three flows consistency", that is, capital flow, document flow and cargo flow are completely matched. In terms of capital flow, the final importer shall pay the payment for goods to the local service provider in the transit country, and then the transit service provider shall pay the remaining payment after deducting reasonable fees to the original exporter.
It is strictly prohibited for the final importer to directly pay the payment to the original exporter, otherwise it will be recognized as direct trade and trigger anti-dumping duty collection. Attention shall be paid to SWIFT message filling: the transaction code corresponding to "transit trade" shall be selected, and information such as the transit port and transit bill of lading number shall be indicated in the message remark column, to avoid verification by the foreign exchange administration due to inconsistent transaction codes.
In addition, all foreign exchange collection and payment vouchers, including bank slips and payment notices, shall be retained as proof of compliant foreign exchange collection and payment. In case of verification by the foreign exchange administration, a complete voucher chain can be provided immediately.
Kevin LinYears of service：4Customer Rating：5.0
Trade Solutions ManagerStart a Chat
Three core legal documents shall be signed for transit trade: first, the Transit Trade Compliance Agreement signed with the transit service provider, which clarifies that the transit service provider shall be responsible for the authenticity of documents and compliant operations. If anti-dumping investigation or cargo detention is caused by the provider's operational errors, it shall bear full compensation liability; second, the Transit Trade Exemption Agreement signed with the final importer, which clarifies that the importer is aware of and agrees to adopt the transit trade method.
If anti-dumping duty collection or investigation is caused by transit operations, the importer shall bear corresponding responsibility; third, the Cargo Transit Certificate issued by a formal local logistics enterprise in the transit country, to prove that the goods have undergone substantive transit operations at the transit port rather than direct transit. In addition, all legal documents shall be notarized to ensure they have legal effect in the importing country. In case of legal disputes, they can be submitted to courts or arbitration institutions as valid evidence.
Andy GuoYears of service：3Customer Rating：5.0
Supply Chain Management ExpertStart a Chat
When transit trade goods are inspected at the transit port, three preparations shall be made in advance: first, prepare complete transit documents, including the original bill of lading, transit bill of lading, certificate of origin and storage vouchers, to ensure the contents of the documents are consistent; second, the packaging of goods shall meet the requirements of the transit country. Any mark of the original exporting country is strictly prohibited, including the production address and enterprise logo on the packaging.
If there is any residue, it shall be completely removed; third, inform the inspection service provider at the transit port of detailed information of the goods in advance, including HS code, goods specifications and quantity, to avoid unpacking inspection caused by inconsistent information. If the customs at the transit port conducts unpacking inspection, require the inspection service provider to accompany the whole process, take videos and photos of the inspection process, and retain inspection records as proof that the goods have undergone substantive transit at the transit port. If marks of the original exporting country are found on the goods during inspection, arrange repackaging immediately to avoid affecting the subsequent issuance of the certificate of origin.
Eric ZhouYears of service：6Customer Rating：5.0
Senior Manager of Foreign Exchange & Tax RebatesStart a Chat
When transit trade involves export tax refund in the original exporting country, it shall strictly comply with tax refund compliance requirements to avoid affecting the tax refund qualification due to transit operations. First, the original exporter shall export goods to the transit port rather than directly to the final importing country, to ensure the export destination indicated on the customs declaration form is the transit port rather than the final importing country; second, complete export documents, including the customs declaration form, original bill of lading and export invoice, shall be retained to ensure the contents of the documents are consistent with the transit trade operations; third, capital flow shall be collected and paid through formal channels.
It is strictly prohibited to collect and pay foreign exchange through personal accounts, to avoid tax correspondence investigation caused by abnormal capital flow. In case of tax refund correspondence investigation by the tax authority, provide the full set of transit trade documents, including the transit bill of lading, qualification certificate of the transit service provider and certificate of origin, to prove the authenticity of the transit trade, to avoid the tax refund application being rejected or even being identified as tax fraud due to failure to provide supporting materials.