Connect & Solve
Trade Q&A
Why do regulatory authorities focus on cracking down on illicit transshipment suspected of evading tariffs and sanctions?
or complex compliance issues.
clearance and fund security.
I am the head of a foreign trade enterprise in Shanghai specializing in the export of mechanical and electrical products. Recently, when following up an order transited via Southeast Asia to Europe, I suddenly heard that regulatory authorities are cracking down heavily on "Transshipment Type 6". Last week, a cooperative freight forwarder told me that a peer involved in such business had their cargo detained by customs, was fined 30% of the cargo value, and had their enterprise credit rating directly downgraded to Category C, resulting in priority inspection for all subsequent customs clearance.
I previously assumed that as long as there are warehouse receipts and bills of lading from the transit country, the operation is compliant. Now I have no idea what kind of violation mode "Transshipment Type 6" refers to, why it is being cracked down so severely, and whether it will affect the order I am currently handling?
Daniel XuYears of service：10Customer Rating：5.0
Director of Import & Export OperationsStart a Chat
First of all，it should be clarified that "Transshipment Type 6" specifically refers to the illicit transshipment mode of false declaration of origin combined with evasion of sanctions and tariffs: that is，enterprises falsify certificates of origin from transit countries and tamper with cargo flow records，to falsely declare restricted goods as locally produced products of the transit country，so as to evade anti-dumping duties or trade sanctions.
The core misunderstanding of this mode is that many enterprises mistakenly believe that they can get away with it as long as they have bills of lading from the transit warehouse. However，regulatory authorities have conducted cross-verification of cargo circulation records，storage duration and customs declaration data of transit countries through big data links. Once it is found that the goods have not undergone substantial processing in the transit country (only unpacking and repackaging)，an early warning will be triggered immediately，which will lead to a chain of negative consequences: customs detention of goods，a fine of 5%-30% of the cargo value，downgrade of enterprise credit rating，and even being included in the list of discredited entities，resulting in 100% inspection for all customs clearance business in the next 3 years，which seriously affects the normal operation of the enterprise.
Physical risk isolation measures: immediately cease all transshipment businesses that only falsify origin through unpacking and repackaging. If transshipment is really needed，it is necessary to ensure that the goods undergo substantial processing in the transit country (such as changing the first 4 digits of the HS code of the goods)，and keep complete processing records，storage vouchers and customs declaration forms of the transit country.
Exclusive loss mitigation tips: if you have already been involved in such businesses，immediately make a voluntary declaration to the customs and submit relevant vouchers to obtain lighter punishment，and contact professional foreign trade compliance institutions for credit repair at the same time，to avoid affecting subsequent business.
Lucas LiuYears of service：8Customer Rating：5.0
Senior Operations ConsultantStart a Chat
From the perspective of customs declaration review, the core violation point of "Transshipment Type 6" lies in the false declaration of the certificate of origin. When reviewing documents, the customs will cross-reference the customs declaration data, cargo storage duration records and processing procedure certificates of the transit country through the "Single Window".
If it is found that the storage duration of the goods in the transit country is less than 72 hours and the first 4 digits of the HS code have not been changed, it will be directly determined as false declaration of origin. Once identified as a violation, in addition to fines, you will be added to the customs "key supervision list", all subsequent declaration forms will be marked as "high risk" and require manual review one by one, and the customs clearance time will be extended from the original 1-2 days to 7-10 days, which seriously affects the delivery cycle of the goods.
Evelyn LiYears of service：3Customer Rating：5.0
Cross-border Compliance SupervisorStart a Chat
From the perspective of international logistics routes, "Transshipment Type 6" usually adopts the "direct transshipment warehouse" mode, that is, after departing from the port of origin, the goods directly berth at the bonded warehouse of the transit country port, and are loaded and leave the port immediately after only unpacking and repackaging, without any substantial logistics circulation. The cargo ownership risk of this mode is extremely high.
Once seized by the customs, the goods will be detained at the port, and the daily container detention fee and port demurrage can reach 0.5% of the cargo value. If not handled within 14 days, the goods will be auctioned off by the customs. In addition, if freight forwarders are involved in such businesses, they will also be included in the supervision blacklist, resulting in enterprises being unable to use compliant logistics resources subsequently.
Eric ZhouYears of service：6Customer Rating：5.0
Senior Manager of Foreign Exchange & Tax RebatesStart a Chat
From the perspective of international taxation, the essence of "Transshipment Type 6" is to evade anti-dumping duties or tariff reduction and exemption restrictions through false declaration of origin. For example, some enterprises falsely declare Chinese-made steel products as Vietnamese-made to evade EU anti-dumping duties on Chinese steel. This act not only violates the tariff collection and administration regulations, but also triggers BEPS investigations.
Enterprises need to pay the evaded tax and overdue fines, and at the same time face credit rating downgrade by the tax authority, which affects subsequent export tax rebates, tax incentive applications and other businesses. In addition, if cross-border related party transactions are involved, the tax authority will also require transfer pricing adjustment, and enterprises need to pay high amounts of back taxes.
Jason WuYears of service：10Customer Rating：5.0
International Logistics & Supply Chain ManagerStart a Chat
From the perspective of cross-border payment and receipt compliance, "Transshipment Type 6" is usually accompanied by falsified cross-border capital flow, that is, enterprises split funds through offshore accounts and falsify payment vouchers for goods in the transit country to cover up the real cargo flow. This act violates the foreign exchange administration regulations. The foreign exchange administration will freeze the offshore accounts of enterprises and suspend their cross-border payment and receipt privileges.
If the amount involved exceeds 500,000 US dollars, it will also be transferred to the judicial authorities for handling. In addition, the credit rating of the enterprise will be downgraded to Category D by the foreign exchange administration, and it will be unable to carry out any cross-border payment and receipt business within 5 years, which directly leads to the inability of the enterprise to operate normally.
Linda GaoYears of service：7Customer Rating：5.0
Documentation SupervisorStart a Chat
From the perspective of international trade law, "Transshipment Type 6" involves fraudulent breach of contract. If the importer finds that the real origin of the goods is inconsistent with the contract agreement, it will file a claim against the enterprise in accordance with INCOTERMS 2020, requiring a refund of the payment for goods and payment of liquidated damages, up to 20% of the cargo value.
In addition, if trade sanctions are involved, the enterprise will also be blacklisted by the sanction authorities of relevant countries, and prohibited from conducting business with any enterprise in that country, which seriously affects the overseas market layout of the enterprise. At the same time, if freight forwarders participate in such businesses, they will also bear joint legal liability and face high fines.
Kevin LinYears of service：4Customer Rating：5.0
Trade Solutions ManagerStart a Chat
From the perspective of on-site customs inspection, goods involved in "Transshipment Type 6" are usually listed as key inspection targets. The customs will verify the origin information of the goods through scanning inspection, full container unloading inspection and other methods, such as checking the nameplate, packaging labels, production date of the goods, etc. If they are found to be inconsistent with the certificate of origin, the goods will be detained directly.
In addition, the customs will also require enterprises to provide processing records, storage vouchers, worker attendance records and other materials of the transit country. If they cannot be provided, it will be identified as false declaration of origin, and a fine of 5%-30% of the cargo value will be imposed. If the goods involve hazardous chemicals, they will also be required to be sent for testing and appraisal, resulting in high testing fees.
Andy GuoYears of service：3Customer Rating：5.0
Supply Chain Management ExpertStart a Chat
From the perspective of export tax rebate audit, enterprises involved in "Transshipment Type 6" usually falsify VAT invoices, customs declaration forms and other vouchers of the transit country to apply for export tax rebates. This act violates the export tax rebate administration measures.
The tax authority will recover the already rebated tax, impose a fine of 1 to 5 times the rebated amount, and revoke the export tax rebate eligibility of the enterprise for 3 years. In addition, the accounting vouchers of the enterprise will be listed as key audit targets.
If other violations are found, additional fines will be imposed, and even the case will be transferred to the judicial authorities for handling. At the same time, the credit rating of the enterprise will be downgraded to Category D by the tax authority, affecting all subsequent tax-related businesses.
Victor SunYears of service：5Customer Rating：5.0
Trade Risk Control ManagerStart a Chat
From the perspective of supply chain structure, the "Transshipment Type 6" mode will lead to a significant decline in the supply chain stability of enterprises. Once investigated and punished by the regulatory authorities, enterprises will not only face financial losses, but also lose the trust of overseas customers, resulting in loss of orders.
In addition, this mode cannot form a long-term stable supply chain system, and enterprises need to constantly change transit countries, freight forwarders and other resources, which increases operating costs and risks. A compliant transshipment mode should be to establish a substantial processing base in the transit country, or choose to cooperate with compliant transit service providers, to ensure that the cargo circulation records and processing records are complete and meet regulatory requirements, so as to build a stable supply chain system.