Is the profit margin of steel shelving re-exporting in Dongguan more than 200%? Unveiling the hidden track in Dongguan

When Mr. Zhang was asked by a Southeast Asian customer for the third time "Why are your steel shelves 30% cheaper than the local ones", he smiled and pointed to the packing boxes printed with Spanish in the warehouse. Behind this is an undercurrent of the re-export trade of steel shelves in Dongguan worth billions of yuan - the intelligent game of breaking through tariff barriers by "taking a detour".

In the bonded warehouse in Houjie Town, Dongguan, Ms. Li's team is replacing the Turkish labels on heavy steel shelves. This seemingly simple action can help products avoid the highest 67% anti-dumping duties in the target country. The core reason why steel shelves have become a popular category for re-export lies in three characteristics:

• High standardization degree: No custom modification is required, and it can "transform" by just changing the labels
• Moderate value of goods: The value of a single container is 200,000 - 500,000 yuan, and the profit is sufficient to cover the re-export cost
• Steady global demand: The transfer of manufacturing industries has given rise to the continuous procurement demand in Southeast Asia and the Middle East

The logistics director of Zhongshitong Logistics revealed that mature players usually take three steps:

• First stop: "Replacement in the bond area": Use the 7 bonded logistics parks in Dongguan to complete primary processing and document handling
• Second stop: "Gilding in the third country": Obtain the certificate of origin through transit countries such as Malaysia/Turkey
• Third stop: "Penetration into the terminal market": Enter the European and American or ASEAN markets in the name of the transit country

Mr. Zhang's account book shows that although re-exporting increases the logistics cost by 18%, the net profit actually increases by 12% after comprehensive tariff savings. However, on the other side of this double-edged sword are:

• The target country's customs may require the provision of a complete supply chain audit report
• The risk of sudden policy changes in the transit country (such as Vietnam suddenly tightening the review of re-export documents in 2022)
• Brand building is hindered, and it is trapped in the cycle of low-price competition for a long time

As more and more "Ms. Li" join the re-export army, new trends are emerging in the industry: Shifting from "gray operations" to compliance design. Some enterprises have started to set up physical assembly lines in the transit countries, meeting the origin rules by increasing 10 - 15% local processes. As a senior practitioner said: "The real winner is not the one who takes advantage of loopholes, but the one who turns the loopholes into doors."

When you finish reading this article, you may wish to think: In the tug-of-war between globalization and trade protectionism, besides "taking a detour", can China's manufacturing industry also "build bridges"? Welcome to share your insights in the comment section.