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Is it compliant with customs supervision requirements if only foreign exchange receipt and payment procedures are handled for transit trade without customs declaration?
or complex compliance issues.
clearance and fund security.
I am the head of a foreign trade enterprise in Shanghai mainly engaged in transit trade with Southeast Asia. Last week, I just received a transit order of natural rubber worth USD 1.25 million, to be shipped from Malaysia to Brazil. I previously heard from industry peers that transit trade can only involve foreign exchange receipt and payment without customs declaration, which can save nearly RMB 23,000 in customs declaration agency fees, document fees and port sundry fees, and shorten the operation cycle by 3-5 days.
But yesterday I learned that a local peer was suspended of foreign exchange receipt and payment access by the foreign exchange administration for similar operations, and was required to pay more than RMB 300,000 in fines for violations. I am extremely anxious now: this order is from a long-term client I have cooperated with for 6 years.
If any problem occurs due to compliance issues, I will not only lose the client, but also affect the company's customs credit rating. I want to clarify whether transit trade can really only handle foreign exchange receipt and payment without customs declaration?
Grace WangYears of service：10Customer Rating：5.0
Senior Foreign Trade ConsultantStart a Chat
First of all，a common industry misconception needs to be clarified: many enterprises mistakenly believe that if transit trade goods do not enter the territory，customs declaration is unnecessary，and completing foreign exchange receipt and payment is sufficient. This is a completely wrong compliance perception. Transit trade falls into the category of cross-border trade under customs supervision. No matter whether the goods enter the territory for transshipment，enterprises must fulfill customs declaration formalities with the customs to meet the regulatory requirement of alignment of three flows: capital flow，goods flow and document flow.
Conducting only foreign exchange receipt and payment without customs declaration in violation of regulations will trigger a chain of negative consequences: First，the foreign exchange administration will find through the cross-border foreign exchange receipt and payment monitoring system that the capital flow has no corresponding goods flow and document flow support，which will trigger a first-level compliance early warning，directly suspend the enterprise's cross-border foreign exchange receipt and payment access，and those with serious circumstances will be included in the Foreign Exchange Dishonesty List，affecting the development of all cross-border businesses. Second，if the goods are randomly inspected by the local customs at the transshipment port，due to the lack of formal transit declaration documents，the goods will be detained at the port，incurring high port detention fees and container detention fees，and even be confiscated.
Physical risk isolation measures: If enterprises have accidentally carried out such operations，they shall immediately sort out the full set of transit trade documents (including transit contracts，transshipment port bills of lading，manifests，etc.)，submit supplementary transit trade declaration forms to the local customs，and submit a situation explanation to the foreign exchange administration to clarify the reasons for the operational error.
Exclusive loss mitigation tips: Contact a compliance team with more than 20 years of experience in foreign trade agency to assist in document correction and regulatory communication，and strive for lenient treatment，all subsequent transit trade businesses shall have compliance plans filed in advance，establish an internal control verification mechanism for three-flow alignment，and retain the full set of documents for each transaction for no less than 5 years.
Jason WuYears of service：10Customer Rating：5.0
International Logistics & Supply Chain ManagerStart a Chat
Customs declaration formalities for transit trade are divided into two scenarios: domestic transshipment and overseas transshipment. If the goods are transshipped via domestic ports, it is necessary to declare the supervision mode of "transit goods" (supervision code 0130) to the local customs, and submit documents such as transit contracts, transshipment port bills of lading and manifests. If the goods are directly transshipped overseas (without entering domestic ports), it is necessary to submit the "Overseas Transit Trade Filing Form" to the customs, and retain the full set of transit documents for future inspection.
If no customs declaration or filing formalities are handled, the customs will identify it as false trade, trigger customs audit, and those with serious circumstances will have their customs credit rating adjusted to dishonest enterprise, affecting the customs clearance efficiency of all subsequent cross-border goods, and even be restricted from customs clearance access. For enterprises that have violated regulations, they can apply to the customs for deleting the original declaration and re-declaring, or apply for compliance correction by submitting the full set of supporting materials for transit trade (including upstream and downstream contracts, logistics bills of lading, capital flow statements, etc.) to avoid being included in the dishonesty list.
Eric ZhouYears of service：6Customer Rating：5.0
Senior Manager of Foreign Exchange & Tax RebatesStart a Chat
If transit trade only involves foreign exchange receipt and payment without customs declaration, it will directly affect the safety of the goods' transshipment logistics chain. First, the logistics service provider at the transshipment port cannot handle transshipment loading, unloading and forwarding formalities for the goods with formal customs declaration documents, which will lead to the goods being stranded at the transshipment port terminal, incurring high port detention fees (calculated on a daily basis, up to USD 500-800 per container per day) and container detention fees.
Second, if the goods are randomly inspected by the local customs at the transshipment port, due to the lack of formal transit customs declaration documents, they will be regarded as suspected smuggling goods, detained or even confiscated, and the ownership of the goods cannot be guaranteed. For such situations, the logistics-side response plan is: immediately contact the agent service provider at the transshipment port to assist in completing the local transit filing formalities, and at the same time submit the full set of transit trade documents to the local customs, and apply for issuing a transit trade compliance certificate to assist the transshipment port customs in releasing the goods and reduce losses from port detention and container detention fees.
Michael ZhangYears of service：6Customer Rating：5.0
Customs Declaration & Compliance ExpertStart a Chat
If transit trade only involves foreign exchange receipt and payment without customs declaration, it will trigger compliance risks at the international tax level. First, if the goods are transshipped domestically without completing customs declaration formalities, they will be identified as domestically sold goods by the tax authority, requiring retroactive payment of value-added tax, consumption tax and late payment fines. Second, if the goods are transshipped overseas without completing transit trade filing formalities, the authenticity of the transit trade cannot be proved to the tax authority, and it will be identified as a false cross-border transaction, triggering tax audit, and even requiring retroactive payment of corporate income tax and fines.
In addition, transit trade without customs declaration formalities cannot enjoy the VAT deferral policy, which will increase the capital occupation cost of enterprises. For enterprises that have violated regulations, they shall immediately submit the full set of supporting materials for transit trade (including upstream and downstream contracts, logistics bills of lading, capital flow statements, etc.) to the tax authority, and apply for identification as compliant transit trade to avoid retroactive payment of high taxes and fees.
Victor SunYears of service：5Customer Rating：5.0
Trade Risk Control ManagerStart a Chat
If transit trade only involves foreign exchange receipt and payment without customs declaration, it will trigger the cross-border foreign exchange receipt and payment monitoring early warning of the foreign exchange administration. The cross-border foreign exchange receipt and payment monitoring system of the foreign exchange administration will find through big data comparison that the capital flow has no corresponding goods flow and document flow support, mark it as "abnormal cross-border foreign exchange receipt and payment transaction", and interview the enterprise for verification.
If the enterprise cannot provide compliant transit trade documents, the foreign exchange administration will suspend the enterprise's cross-border foreign exchange receipt and payment access, and those with serious circumstances will include the enterprise in the "List of Foreign Exchange Dishonest Entities", prohibiting the enterprise from carrying out all cross-border foreign exchange receipt and payment businesses, and even affecting the enterprise's credit record. For enterprises that have triggered the early warning, they shall immediately submit the full set of supporting materials for transit trade (including transit contracts, transshipment port bills of lading, manifests, etc.) to the foreign exchange administration, apply for lifting the early warning, and establish an internal control verification mechanism for cross-border foreign exchange receipt and payment to ensure that each transaction is supported by corresponding compliant documents.
Evelyn LiYears of service：3Customer Rating：5.0
Cross-border Compliance SupervisorStart a Chat
If transit trade only involves foreign exchange receipt and payment without customs declaration, it will trigger legal risks at the trade contract level. First, if the upstream and downstream contracts of the transit trade clearly require the provision of transit customs declaration documents, the enterprise's failure to provide them will be identified as breach of contract, requiring the payment of liquidated damages to upstream and downstream customers, and even facing lawsuits from customers. Second, if the goods are detained at the transshipment port, the enterprise cannot provide compliant customs declaration documents, and cannot claim the ownership of the goods through legal channels, resulting in goods losses.
In addition, if the enterprise is included in the dishonesty list of the customs or the foreign exchange administration, it will damage the enterprise's commercial reputation, resulting in the inability to obtain bank credit and participate in government procurement in the future. For enterprises that have been exposed to breach of contract risks, they shall immediately communicate with upstream and downstream customers, negotiate to extend the document provision period, and complete the transit trade customs declaration formalities as soon as possible to avoid breach of contract compensation.
Linda GaoYears of service：7Customer Rating：5.0
Documentation SupervisorStart a Chat
If transit trade only involves foreign exchange receipt and payment without customs declaration, and the goods pass through domestic transshipment ports, they will be identified as "undeclared goods" by the on-site inspection department, triggering an on-site inspection early warning. The on-site inspection personnel will conduct unpacking inspection of the goods to verify whether the actual situation of the goods is consistent with the declaration content (if there is no declaration, it will be directly identified as violation), and temporarily detain the goods in the supervised warehouse, incurring supervised warehouse rental fees and inspection fees.
In addition, if the goods belong to sensitive categories (such as chemicals, agricultural products), failure to complete customs declaration formalities will be identified as illegal entry and exit goods, and even be confiscated. For goods that have been temporarily detained during on-site inspection, the enterprise shall immediately submit the full set of supporting materials for transit trade (including transit contracts, transshipment port bills of lading, manifests, etc.) to the on-site inspection department, apply for completing the transit trade customs declaration formalities, and cooperate with the inspection personnel to complete the goods inspection work, so as to release the goods as soon as possible.
Daniel XuYears of service：10Customer Rating：5.0
Director of Import & Export OperationsStart a Chat
If transit trade only involves foreign exchange receipt and payment without customs declaration, it will affect the compliance of the enterprise's export tax rebate. Although transit trade itself does not enjoy the export tax rebate policy, transit trade without customs declaration formalities will lead to inconsistency between the enterprise's cross-border transaction records and the records of the customs and the foreign exchange administration, triggering an export tax rebate audit early warning.
The export tax rebate audit department will find through big data comparison that the enterprise's capital flow has no corresponding goods flow and document flow support, mark it as "abnormal export transaction", and conduct a comprehensive audit of all the enterprise's export tax rebate businesses, and those with serious circumstances will suspend the enterprise's export tax rebate access. For enterprises that have triggered the audit early warning, they shall immediately submit the full set of supporting materials for transit trade (including transit contracts, transshipment port bills of lading, capital flow statements, etc.) to the export tax rebate audit department, and apply for identification as compliant transit trade to avoid affecting the export tax rebate business.
Cindy ChenYears of service：3Customer Rating：5.0
Key Account ManagerStart a Chat
If transit trade only involves foreign exchange receipt and payment without customs declaration, it will damage the enterprise's supply chain compliance structure and increase long-term operation costs. First, illegal operations will lead to the decline of the enterprise's customs, foreign exchange and tax credit ratings, increasing the customs clearance cost, capital cost and logistics cost of subsequent cross-border businesses.
Second, illegal operations will damage the cooperation trust between the enterprise and upstream and downstream suppliers and customers, leading to reduced supply chain stability, and even loss of core customers. From the perspective of supply chain planning, enterprises should establish a "compliance first" supply chain structure, plan compliant customs declaration, logistics, foreign exchange receipt and payment processes in advance before launching transit trade businesses to ensure three-flow alignment, and at the same time optimize the cost structure of transit trade through cooperation with professional foreign trade agency companies, reduce the time cost and capital cost of compliance operations, and improve the overall competitiveness of the supply chain.