Is Entrepôt Trade Killing Traditional Foreign Trade?

Recently, Mr. Zhang, who is engaged in the foreign trade industry, found that his European customer began to require that the goods be first shipped to Vietnam and then transshipped to Europe. "This adds two more procedures than direct export, but the customer insists on doing so." Mr. Zhang's confusion is not an isolated case. Against the background of reshaping the global trade pattern, entrepôt trade is quietly becoming a new choice for enterprises to avoid risks and reduce costs.

According to the data from Zhongshitong Research Institute, the global entrepôt trade volume in 2023 increased by 23% year-on-year, reaching a new high in nearly a decade. The revival of this trade model is mainly driven by three factors:

• Avoidance of Tariff Barriers: By transshipping through a third country, enterprises can rationally utilize free trade agreements to reduce the final tariff cost
• Need for Supply Chain Resilience: Multi-location transshipment disperses the risk of single-route disruption
• Reconstruction of Regional Value: Transit locations such as Southeast Asia provide value-added processing services, creating new profit spaces

After Ms. Li's textile enterprise transshipped through Malaysia, it successfully increased the profit margin of its products by 8 percentage points. But she specifically reminded: "Compliance is the lifeblood. Special attention should be paid to:

• The origin certificate documents must be complete
• The transit country needs to have real processing links
• The logistics tracking system should be verifiable throughout the process

Different from the global layout of large enterprises, small and medium-sized enterprises need more ingenuity when participating in entrepôt trade:

• Leverage digital trade platforms to share transit warehouse resources
• Choose transit hubs covered by agreements such as the RCEP
• Establish long-term cooperation with professional customs brokers

Industry insiders predict that the proportion of entrepôt trade may exceed 30% in the next five years, but it will not completely replace direct trade. As Ms. Li said: "This is like walking on multiple legs. The key is to flexibly choose according to the characteristics of the products and the needs of customers."

Has your enterprise considered entrepôt trade? You are welcome to share your experience or confusion in the comment section. In the next issue, we will deeply analyze the five pitfalls in entrepôt trade tax planning. Stay tuned.