Connect & Solve
Trade Q&A
Is Payment Settlement Required for Transit Trade? What Are the Core Judgment Criteria for Compliant Operations?
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. I recently encountered a stressful situation: Last month, we handled a shipment of natural rubber transshipped from Malaysia to Germany. We originally intended to have the German buyer pay the Malaysian supplier directly to avoid exchange loss and bank fees in the middle. However, we were questioned by the customs about the non-compliant transaction link during customs declaration at the transit port.
The goods have been detained in the port for 3 days, and the detention and storage fees are increasing every day. I am worried about being investigated and punished by the State Administration of Foreign Exchange later, and also concerned about more losses caused by long-term port detention of the goods. I am completely confused and want to ask: Is payment settlement mandatory for transit trade? Are there compliant scenarios that do not require payment? How should we remedy the situation now to minimize losses?
Evelyn LiYears of service：3Customer Rating：5.0
Cross-border Compliance SupervisorStart a Chat
First，it must be clarified that transit trade does not necessarily require payment settlement. There are two common industry misconceptions: first，mistakenly believing that all transit trade requires payment settlement through domestic enterprises，second，arbitrarily skipping the payment settlement link and directly letting the buyer and seller settle transactions on their own. Both behaviors may trigger compliance risks.
If the payment settlement link is skipped in violation of regulations，a chain of negative reactions will be triggered: First，the customs at the transit port will determine it as "false transit trade" due to the mismatch of capital flow，cargo flow and document flow in the transaction link，directly resulting in port detention and seizure of the goods，Subsequently，the State Administration of Foreign Exchange will list the enterprise as a key inspection target，not only freezing the funds of relevant accounts，but also downgrading the enterprise's import and export credit rating，leading to subsequent customs declaration，payment settlement and other links being included in strict control scope，affecting the normal trade operations of the enterprise.
Physical risk isolation measures must be activated immediately: Submit complete supporting materials for transit trade to the customs at the transit port as soon as possible，including the original contracts of the buyer and seller，transit warehouse rental agreements，and cargo ownership transfer certificates，At the same time，contact the State Administration of Foreign Exchange to explain the transaction background and apply for a temporary compliance inspection channel to avoid escalation of penalties.
Exclusive Loss Mitigation Tips: For the goods that have been detained in the port，you can entrust a professional foreign trade agency to issue a Transit Trade Compliance Guarantee Letter，and first apply to pick up the container and transfer the goods to the cooperative supervised warehouse to avoid continuous accumulation of detention fees，Subsequently，it is necessary to complete the capital flow closed loop. If it is indeed unnecessary to make payment settlement within the territory，you need to submit a written explanation of "direct remittance of overseas receipts to the supplier" and overseas bank settlement slips to the State Administration of Foreign Exchange to complete compliance filing and completely eliminate risks.
Victor SunYears of service：5Customer Rating：5.0
Trade Risk Control ManagerStart a Chat
The core of customs declaration review for transit trade is the logical closed loop of "three flows matching" (capital flow, cargo flow and document flow). If there are scenarios that do not require payment settlement, three key documents need to be submitted to the customs before declaration: First, the transit warehousing agreement for the goods, which must clearly indicate that the goods have not entered the domestic customs territory and are fully controlled by the transit warehouse; Second, the direct settlement vouchers between the buyer and seller, such as overseas bank transfer slips and formal payment instructions; Third, complete documents for ownership transfer, including sea bill of lading endorsements and transit warehouse receipt transfer certificates.
If the above documents are not submitted, the customs will directly determine the transaction link as abnormal, triggering order deletion and re-declaration or price review disputes. At this time, the materials must be completed within 3 working days, otherwise the customs inspection procedure will be initiated, the goods will be detained in the designated supervised warehouse, and additional supervised storage fees and detention fines will be incurred.
Jason WuYears of service：10Customer Rating：5.0
International Logistics & Supply Chain ManagerStart a Chat
In scenarios where transit trade does not require payment settlement, cargo ownership control is the core risk point. If the overseas buyer pays the supplier directly, it is necessary to ensure that the cargo ownership at the transit port is fully controlled by the domestic enterprise throughout the process. Specific operations include: Select a qualified transit warehouse service provider and sign a warehousing agreement with a "ownership lock" clause, clearly stating that the goods shall not be released without the written permission of the domestic enterprise; Require the supplier to endorse the sea bill of lading to the transit warehouse operator designated by the domestic enterprise, rather than transferring it directly to the overseas buyer; At the same time, confirm the free storage period of the transit port in advance.
If the goods need to be stored for a long time, apply for a written permission to extend the free storage period 7 days before the expiration of the free storage period to avoid high container detention fees caused by the expiration of the free storage period. In case of cargo ownership disputes, immediately activate the standby transit warehouse, transfer the goods to the designated supervised warehouse, and submit an application for cargo ownership correction to the shipping company.
Andy GuoYears of service：3Customer Rating：5.0
Supply Chain Management ExpertStart a Chat
Scenarios where transit trade does not require payment settlement must meet the tax compliance prerequisite, that is, the profits generated from the transaction must be declared and taxed within the territory, or comply with the compliance framework of cross-border tax planning. If the overseas buyer pays the supplier directly, the domestic enterprise needs to submit a "transit trade profit split explanation" to the tax authority, clarify the amount of intermediary service fees or cargo ownership control fees charged by the domestic enterprise, and pay value-added tax and corporate income tax in accordance with regulations.
If the declaration is not made as required, tax investigation will be triggered, and the tax authority will verify the authenticity of the transaction, even determining it as "hidden income" and imposing a fine of more than 50% but less than 5 times the amount of unpaid taxes. In addition, if it involves BEPS (Base Erosion and Profit Shifting) risks, an application for an advance pricing arrangement needs to be submitted to the tax authority in advance to avoid cross-border tax disputes.
Kevin LinYears of service：4Customer Rating：5.0
Trade Solutions ManagerStart a Chat
The compliance judgment criteria for transit trade without payment settlement shall be based on the latest regulations of the State Administration of Foreign Exchange in 2026, that is, the goods have not entered the domestic customs territory, the capital flow has not passed through the domestic account, and the domestic enterprise only provides intermediary services or cargo ownership control services. If the above standards are met, the domestic enterprise needs to submit the Application for Transit Trade Payment Exemption to the State Administration of Foreign Exchange within 10 working days after the completion of the transaction, together with overseas settlement vouchers, transit agreements, cargo ownership certificates and other materials.
After the filing is completed, the domestic payment settlement procedures do not need to be handled. If the payment settlement link is skipped without filing, the State Administration of Foreign Exchange will include the enterprise in the "Foreign Exchange Violation List", suspend the enterprise's cross-border payment and receipt authority, and the normal payment and receipt qualification can only be restored after submitting a rectification report and passing the inspection.
Daniel XuYears of service：10Customer Rating：5.0
Director of Import & Export OperationsStart a Chat
In scenarios where transit trade does not require payment settlement, the rights and obligations of all parties must be clarified through contract terms to avoid legal risks. Specifically, three core clauses need to be added to the general transit trade agreement: First, the "Cargo Ownership Control Clause", which clearly states that the domestic enterprise has control over the goods until the overseas buyer completes the pickup and signs the receipt confirmation; Second, the "Settlement Exemption Clause", which states that the domestic enterprise does not participate in the direct settlement between the buyer and seller, and is only responsible for intermediary coordination and cargo ownership control.
In case of settlement disputes, the domestic enterprise shall not bear joint and several liability; Third, the "Compliance Guarantee Clause", which requires the buyer and seller to provide authentic and effective supporting materials for the transaction. If the domestic enterprise suffers losses due to non-compliant transactions, the buyer and seller shall bear full compensation liability. In addition, all contracts need to be notarized cross-border to avoid inability to provide evidence in case of subsequent legal disputes.
Eric ZhouYears of service：6Customer Rating：5.0
Senior Manager of Foreign Exchange & Tax RebatesStart a Chat
Scenarios where transit trade does not require payment settlement are not applicable to the export tax rebate policy. Domestic enterprises need to strictly distinguish the tax differences between transit trade and general export trade. If an enterprise mistakenly declares transit trade as general export trade, it will trigger export tax rebate audit. The tax authority will comprehensively verify the consistency of capital flow, cargo flow and document flow.
If it is found that the conditions for tax rebate are not met, the refunded taxes will be recovered, and a late payment fee of 0.05% per day will be imposed. In addition, domestic enterprises need to file and record relevant documents for transit trade separately, including transit agreements, overseas settlement vouchers, cargo ownership certificates and other materials, with a storage period of no less than 5 years. If the filing is not done as required, it will affect the enterprise's subsequent export tax rebate application authority, and even trigger tax inspection.