I’ve recently become very interested in entrepot trade and want to gain a deeper understanding of its financial operations. I’d like to ask: is there such a thing as an advance payment in entrepot trade? If so, under what circumstances would an advance payment be involved? What is the typical proportion of an advance payment? I’d appreciate it if someone knowledgeable could help answer these questions. Thank you!
I want to understand the "advance payment" in entrepot trade, inquire about its meaning, the links in the trade process and its functions, and also hope to have practical cases for illustration. The best answer states that the "advance payment" is the funds prepaid by the importer to ensure the exporter's performance of the contract. It is paid after the contract is signed and before the goods are delivered, which can help the exporter start production, etc. For example, Zhongshitong may pay the "advance payment" in entrepot trade. Attention should be paid to risks when making the payment.
The company plans to engage in entrepot trade and inquires whether advance payment/receipt is possible, operational considerations, and potential risks. The best answer confirms feasibility but warns of risks like non-delivery after payment or default after receipt, suggesting credit checks and clear contract terms.
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Professional consultant answers
Michelle ChenYears of service：3Customer Rating：5.0
Business coordination consultantConsult
In entrepot trade, advance payments do occur. Certain specific scenarios in entrepot trade may involve advance payments. For example, when goods are in high demand, suppliers may require importers to pay a portion of the amount in advance to secure the supply. Alternatively, when both parties have established a trusting relationship through long-term cooperation, importers may be willing to pay an advance to support suppliers in preparing the goods.
There is no fixed standard for the proportion of advance payments, as it depends on negotiations between the buyer and seller. In some standard entrepot trade scenarios, if the goods carry low risk and the market supply is stable, the advance payment proportion may range from 10% to 30%. However, for high-risk goods or those subject to significant market fluctuations—such as high-tech electronics or highly seasonal products—the advance payment proportion may increase to 50% or even higher.
In summary, the advance payment in entrepot trade must be determined by considering multiple factors.
David LiYears of service：6Customer Rating：5.0
Senior customs declaration consultantConsult
Advance payments exist in entrepot trade. If the exporter is concerned about the importer’s creditworthiness and wants to mitigate risks, they may require the importer to pay an advance.
Elizabeth LiYears of service：3Customer Rating：5.0
Compliance and risk managerConsult
Yes, when the production cycle of the traded goods is long and the supplier needs funds to initiate production, the importer may provide an advance payment, typically around 20%.
Joseph ZhouYears of service：10Customer Rating：5.0
Senior foreign trade managerConsult
Advance payments are common in entrepot trade. For new business partners, the importer may pay an advance as a gesture of goodwill. The proportion depends on mutual agreement and is not fixed.
Robert ChenYears of service：6Customer Rating：5.0
Customer service consultantConsult
Advance payments definitely exist. If market conditions are volatile and the supplier worries the importer might back out, the importer may pay an advance—often around 30%—to secure the goods.
James LiuYears of service：10Customer Rating：5.0
Foreign trade tax refund consultantConsult
Advance payments occur in entrepot trade, especially for customized goods. If the supplier fears the importer might cancel after production begins, the importer may pay an advance, with the proportion varying.
Sarah ZhangYears of service：8Customer Rating：5.0
Document expertConsult
Advance payments happen when suppliers face cash flow difficulties and need funds from importers to purchase raw materials. The proportion usually ranges between 20% and 40%.
William YangYears of service：5Customer Rating：5.0
International logistics consultantConsult
Advance payments exist in entrepot trade. For instance, if sudden market changes occur, importers may pay suppliers an advance to secure supply, with the proportion depending on the situation.
Andrew HuangYears of service：7Customer Rating：5.0
Supply chain optimization expertConsult
Certainly, advance payments exist. For high-value or scarce goods, importers may pay a higher advance proportion to ensure the transaction is completed.