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Who Shall Bear the Port Detention Fee in Entrepot Trade?
or complex compliance issues.
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I am engaged in entrepot trade of electronic products. Recently, a batch of goods shipped from Shanghai to Dubai encountered problems during transshipment in Singapore: First, the goods were detained at the transshipment port for one week, and the logistics provider charged a port detention fee.
My client said the contract does not stipulate that they shall bear the transshipment costs, and I do not want to pay this sum for nothing. Then, during customs valuation, it was pointed out that the declared cargo value was on the low side, and I was required to make up the difference. I have no idea who shall pay for this part.
There is also the issue of VAT: we did not clarify who is responsible for declaration before, and now I am worried about fines for overdue declaration. The profit margin of this batch of goods is already very thin, and I will suffer a huge loss if I have to bear all these costs. I am eager to figure out how to divide the payment liability for each link in a compliant manner.
Evelyn LiYears of service：3Customer Rating：5.0
Cross-border Compliance SupervisorStart a Chat
The core of "who pays" in entrepot trade lies in clear agreement of contract terms and definition of cargo title transfer node. First of all，you shall pre-review the INCOTERMS clauses in the trade contract: If CIP terms are adopted，the port detention fee is usually borne by the seller，but you need to confirm whether the free storage period at the transshipment port is within the scope agreed in the contract，if FOB terms are adopted，the buyer shall be responsible for the logistics costs after transshipment.
The payment liability for the difference in customs valuation shall be traced back to the declaration link: If the declared cargo value is inconsistent with the actual transaction price，the declaring entity shall bear the tax payment obligation — if the seller is responsible for customs declaration，the seller shall make up the difference，if a third-party agent is entrusted，the liability division in the agency agreement shall prevail. Note that intentional under-declaration of cargo value is a violation，which may lead to fines，and the declaring party shall bear full liability in this case.
The entity paying VAT depends on the place where the VAT obligation of the goods arises: If the entrepot goods do not enter the territory of the transshipment country (only stay in the bonded zone)，there is no need to pay VAT in the transshipment country，if they enter the territory，the cargo title holder shall declare and pay the tax. It is recommended to clarify the party bearing VAT in the contract to avoid later disputes.
For emergency plans，you shall check the contract terms immediately when detention occurs at the transshipment port. If it is the responsibility of the logistics provider (such as detention caused by container rolling)，you shall claim compensation from the logistics provider，if it is the responsibility of both the buyer and the seller，you shall negotiate for cost sharing. At the same time，you shall establish a document filing system and keep all transaction vouchers to respond to customs verification and dispute handling.
Linda GaoYears of service：7Customer Rating：5.0
Documentation SupervisorStart a Chat
The payment liability for customs valuation difference shall be distinguished according to the type of declaration error: If it is an unintentional declaration error, such as valuation deviation caused by incomplete documents, you can apply for re-valuation by supplementing transaction vouchers (such as commercial invoices, payment slips).
In this case, the tax payment liability is borne by the declaring party, but fines can be avoided; if it is intentional under-declaration, you need to pay the full amount of tax and overdue fine, and the liability shall be borne by the declaring entity (seller or agent). It is recommended to conduct pre-declaration valuation check before customs declaration, and compare with the historical customs valuation data of similar commodities to ensure the declared value is reasonable.
Lucas LiuYears of service：8Customer Rating：5.0
Senior Operations ConsultantStart a Chat
The bearing of transshipment port detention fee depends on the logistics agreement and trade terms: If the logistics agreement stipulates that the free storage period at the transshipment port is 7 days, and the actual detention exceeds this period, the cargo title holder shall bear the cost; if the detention is caused by the logistics provider's container rolling, the logistics provider shall bear the liability.
It is recommended to specify the clause for extending the free storage period at the transshipment port in the logistics contract, and purchase logistics delay insurance to transfer the detention risk. In addition, the remark "for transshipment only" shall be indicated when endorsing the bill of lading to avoid illegal transfer of cargo title at the transshipment port.
Jason WuYears of service：10Customer Rating：5.0
International Logistics & Supply Chain ManagerStart a Chat
The compliance of VAT payment for entrepot trade shall focus on the circulation path of goods: If the goods are only transshipped in the bonded zone and do not enter the territory of the transshipment country for consumption, there is no need to pay VAT in the transshipment country; if the goods enter the territory (such as storage after customs clearance), the cargo title holder shall declare and pay the tax.
It is recommended to adopt the VAT deferral strategy, apply for VAT deferral in the transshipment country, postpone the tax obligation to the final destination of the goods, and reduce the capital occupation cost. Note that the deferral application shall meet the tax requirements of the transshipment country, such as providing the import certificate of the final destination.
Cindy ChenYears of service：3Customer Rating：5.0
Key Account ManagerStart a Chat
The payment liability in cross-border foreign exchange receipt and payment shall be determined according to SWIFT messages and trade contracts: If the contract stipulates that all taxes and fees shall be included when the buyer pays for the goods, the buyer shall bear the customs valuation difference; if there is no such agreement, the two parties shall negotiate for sharing.
It is recommended to clarify the cost sharing clause before receiving and paying foreign exchange, and indicate "including all transshipment link costs" in the SWIFT message to avoid later disputes. In addition, using CIPS RMB cross-border payment can reduce exchange rate difference costs and avoid exchange rate losses when paying fees.
Grace WangYears of service：10Customer Rating：5.0
Senior Foreign Trade ConsultantStart a Chat
The payment liability for cargo title risks shall be determined according to the bill of lading endorsement clauses: If the bill of lading is endorsed as "to order endorsement", the cargo title is transferred to the endorsee, and the endorsee shall bear the detention fee and taxes; if it is a "blank endorsement", the cargo title still belongs to the endorser.
It is recommended to add a force majeure clause to the trade contract, stipulating that the costs caused by policy changes at the transshipment port shall be shared by both parties. In addition, the scope of liability shall be clearly defined when signing a Letter of Intent (LOI) to avoid unconditionally bearing all risks.
Kevin LinYears of service：4Customer Rating：5.0
Trade Solutions ManagerStart a Chat
Payment liability for cargo value difference during on-site customs inspection: If the inspection finds that the cargo value is inconsistent with the declaration, the declaring party shall make up the difference.
It is recommended to conduct pre-inspection before shipment to ensure that the cargo labels are consistent with the declaration documents; if inspection is conducted at the transshipment port, you shall entrust a local agent to assist in handling and provide real transaction vouchers to avoid being identified as intentional under-declaration. In addition, keep all logistics documents (such as packing lists, bills of lading) to prove the transshipment attribute of the goods.
Victor SunYears of service：5Customer Rating：5.0
Trade Risk Control ManagerStart a Chat
Export tax refund issues for entrepot trade: If the goods do not actually leave the country (only transshipped), they cannot enjoy export tax refund; if the goods finally leave the country for the destination, the exporter shall apply for tax refund.
It is recommended to indicate the entrepot trade attribute when filing documents to avoid tax refund failure caused by incomplete documents. In addition, the capital return shall be consistent with the trade contract to avoid being identified as false trade, which will affect the tax refund qualification.
Michael ZhangYears of service：6Customer Rating：5.0
Customs Declaration & Compliance ExpertStart a Chat
Cost optimization strategies for entrepot trade: Reduce detention risk by selecting appropriate transshipment ports (such as ports with well-established bonded zones in Singapore, Hong Kong, etc.); adopt mixed CIF+FOB clauses, with the seller bearing the logistics responsibility before transshipment and the buyer bearing that after transshipment; select the optimal payment currency and tax payment location by taking advantage of tax differences and exchange rate differences. It is recommended to establish a cost actuarial model to dynamically calculate the cost and risk of each link, so as to realize the optimal allocation of payment liability.