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Does Fully Waiving Payment and Collection in Transit Trade Operations Comply with Domestic Regulatory Compliance Requirements?
or complex compliance issues.
clearance and fund security.
I am a practitioner engaged in hardware and building materials cross-border trade. Recently, I have a transit trade business. The buyer in Hong Kong is a related party that my company has cooperated with for 5 years. They proposed to settle the payment directly with the domestic supplier, skipping our company's payment and collection link, which can save nearly 20,000 in handling fees and exchange loss. But I have been worried. I heard before that transit trade requires matching capital flow and cargo flow.
If we completely skip payment and collection, will we be included in the key verification list by the State Administration of Foreign Exchange (SAFE)? I am also afraid that the customs will detain the goods due to abnormal capital link. I have been anxious and unable to sleep for two consecutive days. I want to clarify whether it is possible to waive payment and collection, and what the specific requirements for compliant operations are.
Eric ZhouYears of service：6Customer Rating：5.0
Senior Manager of Foreign Exchange & Tax RebatesStart a Chat
Many cross-border trade practitioners have cognitive misunderstandings: they believe that when upstream and downstream parties are related parties，the payment and collection link can be directly omitted in transit trade，but in fact，this operation crosses the regulatory red line.
If the payment and collection link is omitted，it will first trigger a mismatch between capital flow and cargo flow warning from the SAFE，and enter the on-site verification procedure. If valid supporting materials cannot be provided，the enterprise will be listed as a foreign exchange violation entity，suspended from subsequent cross-border payment and collection quotas，and its customs credit rating will also be affected，leading to a surge in inspection rates，goods detention and port detention，etc. The resulting demurrage and port detention fees may far exceed the saved handling fees.
To isolate physical risks，you first need to sort out the complete supporting documents for related-party transactions，including long-term cooperation agreements between upstream and downstream parties，bills of lading，warehouse receipts，commercial invoices and other core documents for transit trade.
The exclusive risk-mitigation tip is to apply for virtual payment and collection filing with the SAFE，submit a statement of related-party transaction settlement，ask the upstream and downstream parties to provide bank water slips as supporting evidence，and also note "related-party direct settlement" when declaring to the customs to complete the compliance closed loop. This meets the settlement needs while avoiding regulatory risks.
Daniel XuYears of service：10Customer Rating：5.0
Director of Import & Export OperationsStart a Chat
In the case of no payment and collection in transit trade, the customs valuation link will focus on verifying the matching between cargo right transfer certificates and capital links. If payment and collection vouchers cannot be provided, you need to submit pricing agreements for upstream and downstream related-party transactions, cargo value assessment reports from third-party institutions, and full logistics trail proof for transit trade (including manifests and bill of lading exchange records at transit ports).
At the same time, you need to clearly mark "related-party direct settlement" in the "remarks column" of the customs declaration form to avoid valuation disputes caused by missing logical links. If the declaration has been rejected, you need to supplement the complete supporting materials within 3 working days to apply for canceling the original declaration and re-submitting it, otherwise you will be included in the customs key monitoring list.
Michael ZhangYears of service：6Customer Rating：5.0
Customs Declaration & Compliance ExpertStart a Chat
When the payment and collection link is omitted in transit trade, cargo right control is the core risk point. You need to use "order bills of lading" and clarify endorsement requirements to ensure that when exchanging bills of lading at the transit port, the cargo right can be directly transferred from the domestic supplier to the overseas buyer.
At the same time, you need to ask the logistics service provider to provide a manifest confirmation letter from the transit port to confirm that the goods have not entered the domestic bonded area or inland ports. If there are abnormal situations such as container rehandling or port change, you need to timely send the upstream and downstream settlement vouchers to the logistics service provider to avoid demurrage caused by cargo right disputes, and apply for an extended free detention period at the transit port in advance to minimize logistics cost losses.
Cindy ChenYears of service：3Customer Rating：5.0
Key Account ManagerStart a Chat
When there is no payment and collection in transit trade, you need to focus on the pricing rationality of cross-border related-party transactions to avoid Base Erosion and Profit Shifting (BEPS) investigations triggered by pricing deviating from the market fair value. If the upstream and downstream parties are related parties, you need to submit an application for advance pricing arrangement to the tax authority in advance to clarify the profit distribution ratio of transit trade, and retain all documents for transit trade (including logistics documents, contracts, invoices) as tax filing materials.
If VAT deferral is involved, you need to ensure that the situation of no payment and collection meets the preconditions for deferral application, that is, the cargo right has not entered the territory, and the upstream and downstream settlement vouchers have completed tax filing, so as to avoid tax investigations.
Linda GaoYears of service：7Customer Rating：5.0
Documentation SupervisorStart a Chat
To conduct transit trade without payment and collection, you need to meet the special filing requirements of the SAFE. First, you need to submit the document information of the transit trade on the "Cross-border Financial Blockchain Service Platform", including bills of lading, contracts, upstream and downstream settlement agreements, to apply for "special settlement filing".
After the filing is approved, you need to note the special situation of this transaction in the monthly foreign exchange receipts and payments declaration, and retain the bank water slips of the upstream and downstream parties (even if they do not pass through the company's account) as capital flow supporting evidence. If the SAFE issues a warning, you need to submit the complete filing materials within 5 working days to avoid being listed as a violation entity and affecting subsequent cross-border payment rights.
Jason WuYears of service：10Customer Rating：5.0
International Logistics & Supply Chain ManagerStart a Chat
When there is no payment and collection in transit trade, you need to clearly specify the clause of "related-party direct settlement" in the transit trade contract, and require the upstream and downstream parties to sign the Cargo Right Transfer Confirmation Letter to clarify that the cargo right is directly transferred from the domestic supplier to the overseas buyer, and that the company only acts as the operator of the transit trade and does not undertake the capital settlement obligation. In addition, you need to retain all communication records (including emails, WeChat chat records) as supporting evidence for dispute resolution. If a cargo right dispute occurs, you can use the Cargo Right Transfer Confirmation Letter and contract clauses to avoid legal risks, and can also apply for a bank-issued letter of guarantee as a supplementary guarantee for cargo right transfer.
Victor SunYears of service：5Customer Rating：5.0
Trade Risk Control ManagerStart a Chat
When there is no payment and collection in transit trade, the customs on-site inspection will focus on verifying the consistency of the goods' name, quantity and documents, and will also require capital flow supporting evidence. If payment and collection vouchers cannot be provided, you need to prepare supporting documents for related-party transactions, bill of lading exchange records at the transit port of the transit trade, and cargo value certificates from third-party institutions in advance.
During the X-ray inspection, you need to cooperate with the customs to provide materials such as Material Safety Data Sheets (MSDS, if the goods are dangerous goods) and packing lists. If a container inspection is required, you need to ensure that the shipping marks on the goods packaging are consistent with the bill of lading to avoid customs detention caused by inconsistent documents and goods. If the goods have been detained, you need to supplement the compliance materials within 3 working days to apply for release.
Grace WangYears of service：10Customer Rating：5.0
Senior Foreign Trade ConsultantStart a Chat
When there is no payment and collection in transit trade, you need to conduct "special transaction filing" in the export tax refund declaration system, submit the complete documents of the transit trade (including bills of lading, contracts, upstream and downstream settlement vouchers), and clarify that this transaction does not involve export tax refund and is only a transit operation.
At the same time, you need to retain the documents for no less than 5 years for tax authority investigation and verification. If there is a mismatch between capital flow and cargo flow, you need to submit the "Special Settlement Statement for Transit Trade" to the tax authority in advance to avoid being listed as an abnormal tax refund enterprise and affecting the tax refund declaration of other subsequent export businesses.
Evelyn LiYears of service：3Customer Rating：5.0
Cross-border Compliance SupervisorStart a Chat
Omitting the payment and collection link in transit trade needs to match the corresponding supply chain structure. If the upstream and downstream parties are related parties, you can adopt the "centralized settlement" supply chain model, position the company as a cargo right transit party rather than a capital settlement party, and clarify the independent closed loop of cargo flow and document flow in the supply chain planning to avoid confusion with other normal transit trade businesses of the company that involve payment and collection.
In addition, you need to establish a cost actuarial model to compare the saved handling fees and exchange losses from omitting payment and collection with the costs generated by compliance filing, to ensure that the benefits of this operation are greater than the risk costs, and regularly evaluate changes in regulatory policies to adjust the supply chain model to maintain compliance.