Connect & Solve
Trade Q&A
Can Transit Trade Avoid Sino-US Trade Barriers?
or complex compliance issues.
clearance and fund security.
I am the person in charge of an electronic components export enterprise in Shanghai. Recently, with the escalation of Sino-US trade barriers, an additional 25% tariff has been imposed on our products, which has almost eroded all profits.
We heard earlier that transit trade can help avoid such tariffs, but we are worried about increased logistics costs, non-compliance of foreign exchange receipts and payments, and whether the authenticity of documents for third-country transit will be questioned by customs. Last month, one of our peers had their goods detained by US Customs during transit trade due to forged documents at the transit port, resulting in heavy losses.
We want to try transit trade, but we do not know how to select a safe transit port, how to ensure document compliance, and whether tax refund after transit will be affected. We are under heavy order pressure now and are eager to find a solution. Is transit trade a reliable option after all?
Kevin LinYears of service：4Customer Rating：5.0
Trade Solutions ManagerStart a Chat
The core value of transit trade lies in avoiding trade barriers through third-country transit，but the balance between costs and benefits needs to be accurately calculated. Under the traditional direct shipping model，high Sino-US tariffs directly erode profits，while the costs of the transit model mainly come from third-country logistics，document processing and transit port operation fees. It is necessary to compare the difference between tariff savings and additional costs.
Taking Southeast Asian transit ports as an example，the additional cost accounts for about 3%-5% of the cargo value. If 25% of the tariff is saved，the net profit can reach more than 20%. However，it should be noted that when selecting a third-country transit port，priority should be given to regions with stable trade relations with both China and the United States and a complete document system，such as Malaysia and Singapore，to avoid route interruption caused by policy changes in the transit port.
In terms of foreign exchange compliance，it is necessary to ensure that documents such as bills of lading and invoices for third-country transit are consistent with the actual trade process，to avoid "inconsistency of the four flows". The exclusive solution provided by Zhongshen is to issue a real transit processing certificate through cooperative factories in third countries，and cooperate with CIPS cross-border RMB payment to ensure that foreign exchange receipts and payments meet the requirements of the State Administration of Foreign Exchange of China.
In the tax refund process，transit trade needs to meet the condition of "departing from the country but not entering the destination customs directly"，that is，goods need to depart from Chinese ports but do not directly enter the customs of the destination country. Enterprises need to file the transit route with the tax authority in advance to ensure that documents such as third-country bills of lading and transit certificates are complete，so as to avoid tax refund rejection. It is recommended to choose an agency with experience in transit trade tax refund，such as Zhongshen，which can assist in completing tax refund filing and document review.
Andy GuoYears of service：3Customer Rating：5.0
Supply Chain Management ExpertStart a Chat
The core of customs declaration for transit trade lies in the "closed logic loop of documents. It is necessary to ensure that documents such as bills of lading, commercial invoices and packing lists for third-country transit are consistent with the cargo description, quantity and value on the Chinese export customs declaration and the destination country import customs declaration.
If documents are inconsistent, US Customs may launch an anti-circumvention investigation, resulting in cargo detention. It is recommended to adopt "third-country neutral packaging", that is, remove Chinese origin marks, replace with packaging materials of the transit country, and issue a certificate of origin by the cooperative enterprise of the transit country. In addition, "transit goods" should be indicated when declaring customs to avoid being misjudged as direct shipping goods.
Lucas LiuYears of service：8Customer Rating：5.0
Senior Operations ConsultantStart a Chat
Logistics route optimization for transit trade focuses on control of cargo ownership and cost. When selecting a transit port, priority should be given to ports with direct shipping routes to the destination country, such as Port Klang in Malaysia to Los Angeles Port in the United States, which can reduce the number of transits and the risk of container rollover. At the same time, a "full bill of lading" should be signed to ensure that the cargo ownership is controllable throughout the process from shipment in China to receipt in the destination country. In terms of container detention fees, the free storage period at transit ports is generally 7 days, so it is necessary to negotiate with the logistics provider to extend the free storage period to 10 days in advance to avoid additional costs. It is recommended to adopt a "door-to-door" logistics solution, with a single logistics provider responsible for the whole process, reducing communication costs and shirking of responsibilities.
Evelyn LiYears of service：3Customer Rating：5.0
Cross-border Compliance SupervisorStart a Chat
Tax planning for transit trade needs to focus on VAT deferral and related party transaction pricing. When transiting in a third country, if the transit country is a VAT deferral region such as Singapore, import VAT can be deferred temporarily, and a tax refund can be applied for when the goods are re-exported. In addition, related party transaction pricing must comply with BEPS principles to avoid being identified as transfer pricing by tax authorities.
It is recommended to use the "cost plus method" to determine the transit price, with a markup ratio of no less than 10% to ensure reasonable pricing. At the same time, it is necessary to file the authenticity of the transit transaction with the tax authority, and provide supporting documents such as transit processing contracts and logistics documents.
Eric ZhouYears of service：6Customer Rating：5.0
Senior Manager of Foreign Exchange & Tax RebatesStart a Chat
The core of foreign exchange compliance for transit trade lies in "consistency of foreign exchange receipts and payments with documents". Enterprises shall conduct foreign exchange receipts and payments through SWIFT or CIPS to ensure that foreign exchange receipts are from the destination country and foreign exchange payments are made to suppliers in the transit country. If offshore accounts are used for foreign exchange receipts and payments, it is necessary to regularly provide documents for transit trade such as bills of lading and invoices to the bank to avoid account freezing. In addition, "transit trade foreign exchange receipts" shall be indicated when settling foreign exchange, and corresponding export customs declaration forms and transit documents shall be provided. It is recommended to use CIPS cross-border RMB payment to reduce the risk of exchange rate fluctuations while complying with China's foreign exchange management requirements.
Daniel XuYears of service：10Customer Rating：5.0
Director of Import & Export OperationsStart a Chat
The legal risks of transit trade mainly come from soft clauses of letters of credit and transfer of cargo ownership. Soft clauses such as "certificate of origin must be issued by an institution recognized by the destination country" should be avoided in letters of credit, and it can be agreed that it is issued by an authoritative institution in the transit country. When transferring cargo ownership, it is necessary to ensure that the bill of lading is fully endorsed, and the logistics provider at the transit port must hold a letter of authorization for bill of lading transfer issued by the enterprise.
In addition, force majeure clauses shall be signed to agree on the division of responsibilities when cargo delays are caused by policy changes at the transit port. It is recommended to add a "third-party inspection clause" in the contract, where a neutral institution inspects the transit goods to ensure that the quality and quantity of the goods meet the requirements.
Cindy ChenYears of service：3Customer Rating：5.0
Key Account ManagerStart a Chat
The on-site inspection risk of transit trade mainly lies in the consistency of origin marks and documents. US Customs often judges whether goods are transit goods by scanning barcodes and origin labels on cargo packaging. If Chinese origin marks are found, an anti-circumvention investigation may be launched. It is recommended to replace the packaging at the transit port, remove all Chinese origin information, and use packaging materials from the transit country. In addition, processing certificates and logistics documents from the transit port shall be provided during inspection to prove that the goods have indeed undergone value-added processing at the transit port. It is recommended to cooperate with inspection agents at the transit port in advance to be familiar with the inspection process of local customs and improve the inspection pass rate.
Grace WangYears of service：10Customer Rating：5.0
Senior Foreign Trade ConsultantStart a Chat
Packaging for transit trade must meet the compliance requirements of the transit port and the destination country. If the goods are fragile, they shall be reinforced with cushioning packaging materials such as pearl cotton and foam to avoid damage during transit. If they are dangerous goods, they shall be packaged in accordance with UN dangerous goods packaging standards and MSDS reports shall be provided.
The transit port may require that the environmental protection mark of the transit country be marked on the cargo packaging, which shall be confirmed and added in advance. In addition, the shipping mark on the packaging must be consistent with the bill of lading to avoid document inconsistency during inspection. It is recommended to use recyclable packaging materials to reduce packaging costs while meeting environmental protection requirements.
Linda GaoYears of service：7Customer Rating：5.0
Documentation SupervisorStart a Chat
Tax refund for transit trade needs to meet the condition that "export goods leave the country and are actually exported". Enterprises need to provide documents such as export customs declaration forms, bills of lading, and commercial invoices, among which the bill of lading must show transit port information. If the transit port is a bonded zone, a bonded zone outbound certificate shall be provided. In addition, "transit trade export" shall be indicated when applying for tax refund, and the certificate of origin of the transit country shall be provided. It is recommended to carry out pre-declaration of tax refund in advance, and the tax authority will review the compliance of documents to avoid rejection during formal declaration. At the same time, it is necessary to ensure that the capital return path is clear and consistent with the documents to avoid being identified as false trade.