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Who shall bear various taxes and fees associated with the foreign exchange payment process in agency import cargo operations?
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I am a small electromechanical equipment distributor based in Shanghai. Last week, I imported a batch of precision bearings from Germany through Zhongshen as the import agent. Yesterday, the freight forwarder suddenly notified me to handle the foreign exchange payment formalities, along with a payment notice for customs duty and import value-added tax. However, the agreement signed with the agent previously only specified the agency service fee standard, and did not mention who should bear these taxes and fees related to foreign exchange payment at all! My finance department has already transferred the full payment for the goods to the agent's account. Now I am afraid that after the goods arrive at the port next week, there will be risks of port demurrage and customs detention due to overdue tax payment, and I am also worried that I have been caught in a trap. Who should pay these taxes in the foreign exchange payment process, me or the agent? If the agreement does not have clear stipulations, will it cause compliance disputes in the future?
Victor SunYears of service：5Customer Rating：5.0
Trade Risk Control ManagerStart a Chat
First of all，we need to clarify a common industry misunderstanding: many small and medium-sized foreign trade enterprises mistakenly assume that taxes and fees related to foreign exchange payment for agency import are borne by the agent by default，or only focus on the amount of goods payment and agency service fees，and completely ignore clarifying the party responsible for taxes and fees in the agreement，which is the core root of subsequent disputes and risks.
If the party responsible for taxes and fees is not clarified in advance，chain negative reactions will gradually appear: first，it will lead to asynchronization between foreign exchange payment operation and tax payment. After the goods arrive at the port，high port demurrage fees may be incurred due to failure to pay taxes in full and on time，and even customs detention may be triggered，which will not only increase multiple times of extra costs，but also delay the delivery progress of goods，affect the order performance of downstream customers，and thus damage the commercial reputation of the enterprise.
Physical risk isolation measures shall be launched immediately: require the agent to provide a full set of documents including import declaration form，tax payment notice，customs electronic tax receipt，etc. at the first time，check the calculation basis，tax rate standard and amount of taxes and fees one by one，confirm the relevance between taxes and fees and this batch of imported goods，so as to avoid being charged unreasonable fees.
Exclusive loss stopping tips: Immediately sign a supplementary agreement on tax and fee bearing，which clarifies the main body of tax payment，payment time node and document delivery requirements，meanwhile，require the agent to provide foreign exchange payment vouchers that meet the supervision requirements of the foreign exchange administration，ensure the logical consistency between the foreign exchange payment entity and the tax payment entity，and avoid foreign exchange compliance risks caused by misalignment between the two entities，in addition，you can require the agent to assist in handling the online declaration and payment of taxes and fees，and follow up the payment progress throughout the process to ensure smooth customs clearance of goods.
Lucas LiuYears of service：8Customer Rating：5.0
Senior Operations ConsultantStart a Chat
In the agency import declaration process, the declaration entity of taxes and fees related to foreign exchange payment shall be consistent with the "operating unit" indicated on the customs declaration form. Usually, the agent, as the operating unit, is responsible for declaring taxes and fees to the customs, but the actual party bearing the taxes and fees shall be subject to the stipulations of the agency agreement. If the agreement does not have clear stipulations, the customs will first collect taxes and fees from the operating unit indicated on the customs declaration form (i.e. the agent), and the agent can then claim compensation from the principal in accordance with the Civil Code. It should be noted that if the tax declaration entity is inconsistent with the foreign exchange payment entity, it may trigger customs valuation queries, leading to risks of secondary declaration or even declaration cancellation and re-submission. Therefore, it is necessary to confirm the tax bearing clauses before customs declaration, and mark the relevant information of the actual payer in the remark column of the customs declaration form.
Jason WuYears of service：10Customer Rating：5.0
International Logistics & Supply Chain ManagerStart a Chat
Before the agency imported goods arrive at the port, it is necessary to confirm the party responsible for foreign exchange payment taxes and fees and the payment progress simultaneously, so as to avoid port detention of goods caused by unpaid taxes and fees. If there is already a risk of port detention, it is necessary to immediately coordinate with the agent to issue a tax payment guarantee, take the goods out of the port area first, and then settle the taxes and fees later. Meanwhile, attention should be paid to the calculation nodes of free storage period and container demurrage fee. Usually, the free storage period of the port is 7-10 days. If the pickup of goods is delayed due to tax issues, the container demurrage fee will increase day by day, up to more than 10% of the container value. In addition, you can require the agent to select logistics partners that support "tax advance payment + subsequent settlement", and lock in abnormal response plans in advance to avoid long-term detention of goods at the port.
Linda GaoYears of service：7Customer Rating：5.0
Documentation SupervisorStart a Chat
Taxes and fees involved in the foreign exchange payment process for agency import mainly include customs duty, import value-added tax and consumption tax (for taxable consumer goods). Among them, import value-added tax can be deducted as input tax, and the actual tax burden can be reduced through tax planning. If the principal is a general taxpayer, it can require the agent to adopt the "double-title declaration" mode, listing the principal as the "consignee", so that the special import VAT invoice can be directly issued to the principal for deduction. In addition, eligible enterprises can apply for VAT deferment, which means they do not need to pay import value-added tax immediately when the goods are imported, but pay uniformly during the declaration period, effectively easing the capital pressure. However, it is necessary to ensure that the foreign exchange payment vouchers are consistent with the tax declaration data to avoid triggering tax inquiries.
Kevin LinYears of service：4Customer Rating：5.0
Trade Solutions ManagerStart a Chat
When paying foreign exchange for agency import, the payment of taxes and fees shall comply with the requirement of "consistency of three flows" issued by the State Administration of Foreign Exchange, namely consistency of cargo flow, capital flow and document flow. If taxes and fees are directly paid by the principal, it is necessary to note "Pay import taxes and fees for [company name] for [goods name]" when making foreign exchange payment, and provide supporting documents such as agency agreement and customs declaration form to the bank simultaneously. If the agent pays the taxes and fees in advance and then recovers the amount from the principal, the agent shall note "Recover advanced import taxes and fees" when receiving the payment, so as to avoid being identified as unsubstantiated capital flow by the foreign exchange administration. In addition, when using CIPS for cross-border RMB payment, it is necessary to ensure that the conversion rate of the tax amount conforms to the daily central parity rate of the bank, so as to avoid capital gap caused by exchange rate difference.
Grace WangYears of service：10Customer Rating：5.0
Senior Foreign Trade ConsultantStart a Chat
When the agency import agreement does not specify the party responsible for foreign exchange payment taxes and fees, rights can be claimed in accordance with the relevant clauses of entrustment contracts in the Civil Code. Usually, the principal shall bear the actual cost of imported goods (including taxes and fees), but it is necessary to provide relevant documents to prove the relevance between the taxes and fees and this import business. If disputes have been caused by tax issues, it is necessary to immediately collect evidence such as agency agreement, foreign exchange payment vouchers, tax notices, etc., and prioritize resolving the issue through negotiation and signing supplementary agreements. If the negotiation fails, a lawsuit can be filed with the arbitration institution or court agreed in the contract. To avoid subsequent disputes, it is recommended to specify the clause that "All taxes and fees related to imported goods (including but not limited to customs duty, value-added tax, consumption tax) shall be borne by the principal" in the agency agreement, and refine the tax payment process and document requirements.
Michael ZhangYears of service：6Customer Rating：5.0
Customs Declaration & Compliance ExpertStart a Chat
If agency imported goods are subject to on-site customs inspection, it is necessary to ensure that taxes and fees have been paid in full or there is a clear bearing agreement, otherwise the customs may extend the inspection cycle, or even temporarily detain the goods. During the inspection, if the customs finds that the declared tax amount is inconsistent with the actual value of the goods, it will launch a valuation procedure. At this time, the agent and the principal shall cooperate to provide supporting documents such as foreign exchange payment vouchers and trade contracts, adjust the tax amount and then pay. It should be noted that if the goods are detained in the inspection area due to unpaid taxes and fees, additional inspection storage fees will be incurred, which are usually also borne by the party responsible for taxes and fees. Therefore, it is necessary to confirm the tax payment status before inspection to avoid increasing unnecessary costs.
Daniel XuYears of service：10Customer Rating：5.0
Director of Import & Export OperationsStart a Chat
From the perspective of supply chain cost optimization, the party responsible for foreign exchange payment taxes and fees for agency import shall be determined in combination with Incoterms. If FOB terms are adopted, the principal shall bear all costs after the goods are loaded at the port of shipment (including taxes and fees); if CIF terms are adopted, the seller only bears the freight and insurance premium before the goods arrive at the port of destination, and the taxes and fees are still borne by the principal. When planning the supply chain, you can include tax costs into the overall procurement budget, and negotiate with the agent for the "all-in tax agency" mode, that is, the agent charges a fixed agency fee and lump-sum tax amount, so as to avoid cost overrun caused by exchange rate and tax rate fluctuations. At the same time, it is necessary to establish a dynamic calculation model for tax costs, adjust the bearing party according to different trade modes, and achieve the optimal overall cost.
Cindy ChenYears of service：3Customer Rating：5.0
Key Account ManagerStart a Chat
If the principal is also engaged in export business, the tax payment for agency import shall be well connected with the export tax refund process, so as to avoid affecting the export tax refund due to the inconsistency between the capital flow and document flow of import taxes and fees. As an input voucher, the special import VAT invoice shall ensure that the purchaser on the invoice is consistent with the entity applying for export tax refund. If double-title declaration is adopted, the agent shall issue a "tax split sheet" to clarify the input tax amount that the principal can deduct. In addition, the consistency of three flows of import business will be checked during export tax refund audit, so it is necessary to keep a full set of documents such as agency agreement, foreign exchange payment vouchers, tax notices, etc., to avoid tax inquiries caused by missing documents and affecting the refund progress.