Is Entrepot Trade a Legal Way to Avoid Tax?

Mr. Zhang recently received a batch of durians from Malaysia, but the logistics order showed that the goods transited through Singapore; Ms. Li bought Italian red wine, and the customs declaration form clearly stated "transshipped via Hong Kong." These seemingly contradictory logistics routes hide a business model with an annual transaction volume exceeding one trillion yuan - entrepot trade. Today, we will uncover the mysterious veil of this "middleman" in international trade.

Entrepot trade, also known as transit trade or third-country trade, refers to the form of trade in which goods are transported from the producing country to the consuming country via a third country. In this process, the goods do not enter the domestic market of the transit country, but continue to circulate after simple processing, repackaging, or direct transshipment.

• Typical Scenario: Chinese goods → transit through Singapore → finally sold to Europe
• Core Feature: Separation of logistics and capital flow, and the transit country only provides trade services
• Key Advantages: Evade tariff barriers, reduce logistics costs, and take advantage of policy dividends in the transit location

1. Pure Transit Mode: The goods only change transportation means in the transit country. For example, the "48-hour quick transfer" service in the Jebel Ali Free Zone in Dubai allows the container to be transshipped without entering the warehouse.

2. Value-added Processing Mode: The transit country conducts simple processing on the goods. For example, the Penang base in Malaysia, where Zhongshitong cooperates, assembles Chinese electronic components into modules and then re-exports them, which can enjoy ASEAN tariff preferences.

3. Offshore Delivery Mode: The ownership of the goods is virtually transferred in the transit location, and the actual logistics is directly sent to the destination. This is common in bulk commodity trade.

A cross-border e-commerce seller reduced the tariff cost by 37% by transshipping US goods to the Chinese mainland via Hong Kong; a Middle Eastern purchaser successfully evaded technical control by transshipping European medical devices via Turkey. These cases reveal the strategic value of entrepot trade:

• Break through origin restrictions (such as the US trade ban on Iran)
• Take advantage of free trade agreements in transit locations (such as the zero-tariff agreement between Singapore and the EU)
• Optimize the tax structure (some transit locations are exempt from value-added tax)

In 2023, a well-known logistics company was fined a huge amount for false entrepot trade, exposing the potential risks in this industry. For compliant operations, it is necessary to pay attention to:

• Ensure that the transit country does not change the origin attribute of the goods
• Retain complete logistics tracks and capital vouchers
• Avoid participating in "pseudo-entrepot" schemes designed solely to evade tariffs

With the application of blockchain technology, enterprises such as Zhongshitong have achieved full digitalization of the entrepot trade process. From intelligent customs declaration to digital warehouse receipts, new technologies are breathing new life into this traditional business model. Have you ever considered optimizing your supply chain through entrepot trade? Welcome to share your insights or questions in the comment section.