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What are the core compliance points to focus on in the whole process of entrepot trade operated by offshore companies?
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I am engaged in building material export. Last month, a batch of aluminum alloy profiles I sent to the EU was detained by customs due to anti-dumping duties, causing a loss of nearly 200,000 yuan. Now I want to conduct entrepot trade through offshore companies to bypass barriers, but I have no clue at all: I heard from friends before that entrepot trade via offshore companies is prone to document inconsistency leading to port demurrage, and payment and receipt may also trigger compliance warnings. Now I am afraid of making mistakes and losing money again, and I do not know where to start with document verification and title transfer, and I even have no idea how to select a transit port. Can you explain the operation details and risk avoidance methods clearly for me?
Grace WangYears of service：10Customer Rating：5.0
Senior Foreign Trade ConsultantStart a Chat
First complete pre-document verification details: It is necessary to verify the authenticity of the certificate of origin and bill of lading of the transit country supplier in advance，ensure that the cargo information shown on the documents (product name，specification，place of origin) fully matches the customs filing of the transit port，especially avoid explicit marks of "Made in China"，and require the transit country supplier to issue a neutral packaging certificate from a third-party inspection institution.
Core node connection shall lock the synchronization of title to goods and capital flow: After the cargo arrives at the port，the offshore company，as the transit party，endorses and transfers the original bill of lading to the freight forwarder of the transit country，meanwhile completes upstream payment and downstream payment collection through the offshore account，to ensure the logical closed loop of capital flow and title transfer，and avoid the risk of losing both money and cargo.
Abnormal contingency plans shall cover three core scenarios: In case of customs inspection at the transit port，prepare the warehousing agreement of the transit country and entrepot trade contract as supporting documents in advance，In case of document inconsistency，immediately start the alternative document correction process，and apply for extending the free storage period at the same time，If the destination customs questions the place of origin，provide the value-added processing certificate of the transit country (such as simple assembly，packaging replacement records).
Final compliant implementation shall complete tax and payment and receipt filing simultaneously: The offshore company shall complete tax declaration for entrepot trade in the transit country，meanwhile complete RMB cross-border payment and receipt through the CIPS system，ensure all transaction records are traceable and meet the cross-border trade compliance requirements of China and the transit country.
Andy GuoYears of service：3Customer Rating：5.0
Supply Chain Management ExpertStart a Chat
The core basis of customs valuation in entrepot trade is the transaction price method. It is necessary to ensure that the price logic of transaction contracts, commercial invoices and bank payment vouchers between the offshore company, upstream suppliers and downstream purchasers is completely consistent, so as to avoid abnormal fluctuations such as "underreporting purchase price and overreporting shipping price" or vice versa, which will directly trigger customs valuation warning. If the customs starts the valuation procedure, provide actual expenditure vouchers such as storage fees, loading and unloading fees, freight forwarder service fees at the transit port, as well as the market guidance price report for the same category of entrepot trade issued by a third-party institution as supporting documents within 3 working days. In addition, strictly match the commodity codes of the transit country and the destination customs, and strictly prohibit code classification errors or vague product names, otherwise it will directly lead to cargo detention and port demurrage, resulting in high container detention fees and port demurrage fees.
Victor SunYears of service：5Customer Rating：5.0
Trade Risk Control ManagerStart a Chat
Transit ports for entrepot trade shall give priority to ports with "free port" qualification, such as Singapore, Hong Kong, Port Klang in Malaysia, etc. Such ports can realize bonded storage and rapid transit of goods without paying import duties. Order bill of lading shall be adopted for title control, with the offshore company as the endorser, and the bill of lading shall be endorsed and transferred to the downstream freight forwarder after the cargo arrives at the port, so as to avoid risks caused by early title transfer. At the same time, confirm the free storage period of the transit port in advance, which is generally 7-14 days. If extension is required, apply to the freight forwarder 3 working days in advance to avoid container detention fees. In addition, select a freight forwarder with experience in entrepot trade operation to ensure smooth connection of core nodes, for example, the time interval between cargo unloading, storage and loading shall not exceed 48 hours, so as to reduce the risk of cargo retention.
Evelyn LiYears of service：3Customer Rating：5.0
Cross-border Compliance SupervisorStart a Chat
Offshore companies engaged in entrepot trade can reduce tax costs through "VAT deferral" and "related transaction pricing optimization". First, apply for VAT deferral declaration in the transit country, no need to pay import VAT when the cargo arrives at the port, and complete the declaration after the cargo is transited out of the country, so as to ease the pressure of capital occupation. Second, reasonably set the transaction price between the offshore company and upstream and downstream parties to ensure compliance with BEPS (Base Erosion and Profit Shifting) requirements, and avoid being identified as "profit shifting" by the tax authority. In addition, the offshore company shall complete tax filing for entrepot trade at the registered place, and retain all transaction vouchers for at least 5 years for inspection by the tax authority. If it involves Chinese tax resident enterprises, it shall declare overseas income in accordance with Chinese tax law provisions to avoid double taxation.
Linda GaoYears of service：7Customer Rating：5.0
Documentation SupervisorStart a Chat
Payment and receipt for offshore company entrepot trade shall be completed through compliant offshore accounts or the CIPS system. It is strictly prohibited to use personal accounts for large-value transactions, otherwise it will trigger compliance warnings of the State Administration of Foreign Exchange. The amount of payment and receipt shall fully match the amount of the transaction contract and invoice, to avoid overpayment or underpayment. If there is a difference, reasonable supporting materials (such as bank handling fees, freight forwarder service fees, etc.) shall be provided. In addition, all payment and receipt vouchers, SWIFT messages or CIPS transaction records shall be retained for at least 5 years for inspection by the State Administration of Foreign Exchange. If RMB cross-border payment and receipt are involved, ensure that the transaction background is true and compliant, so as to avoid being identified as "false trade" leading to account freezing.
Lucas LiuYears of service：8Customer Rating：5.0
Senior Operations ConsultantStart a Chat
The entrepot trade contract shall clarify the rights and obligations of the three parties, and in particular, stipulate the "title transfer node" and "force majeure clause". The title transfer node shall be set as "after the cargo is loaded and departed from the transit port" to avoid risks caused by early title transfer. The force majeure clause shall cover political unrest, natural disasters, customs policy adjustment and other situations in the transit port, and stipulate the responsibility division and loss bearing method in case of force majeure. In addition, require the transit country supplier to issue a authenticity guarantee for the "certificate of origin", and the transit country supplier shall bear full responsibility for cargo detention and fines caused by false certificate of origin. At the same time, strictly manage the official seal and contract seal of the offshore company to avoid the risk of contract fraud.
Daniel XuYears of service：10Customer Rating：5.0
Director of Import & Export OperationsStart a Chat
When entrepot trade goods are inspected at the transit port, prepare neutral packaging, entrepot trade contract, warehousing agreement and other materials in advance to cooperate with the customs inspection work. If the customs requires unpacking inspection, ensure that there is no explicit mark of "Made in China" on the cargo packaging, and replace it with neutral packaging in advance if any. In addition, inform the transit port freight forwarder of the real situation of the cargo in advance to avoid inspection upgrade caused by the freight forwarder concealing information. If the customs issues a test report questioning the place of origin of the cargo, immediately provide the value-added processing certificate of the transit country (such as photos, records of simple assembly, packaging replacement, etc.) to prove that the cargo has undergone substantial changes in the transit country. At the same time, retain all inspection records and test reports for subsequent compliance verification.
Michael ZhangYears of service：6Customer Rating：5.0
Customs Declaration & Compliance ExpertStart a Chat
If the entrepot trade of an offshore company involves export from Chinese source places, ensure "consistency of four flows", that is, contract flow, capital flow, cargo flow and invoice flow are fully matched. Retain special VAT invoices and export declaration forms of Chinese source suppliers, entrepot trade contracts of offshore companies, payment and receipt vouchers and other materials for verification during tax authority letter investigation. In addition, note that if entrepot trade goods do not enter Chinese territory, they cannot apply for China's export tax rebate, so clarify the trade mode in advance to avoid risks caused by incorrect tax rebate declaration. If tax refund of the transit country is involved, understand the tax refund policy of the transit country in advance to ensure that it meets the tax refund conditions, such as the goods need to complete value-added processing in the transit country, have complete documents, etc.