Tax Exemption for Entrepot Trade: Tax-saving Loopholes Unknown to 90% of Foreign Traders

Mr. Zhang recently noticed a strange phenomenon: For the same batch of electronic products, his peers' profits were actually 15% higher after transshipment through Hong Kong. The tax exemption rule for entrepot trade hidden behind this is becoming a new "strategic high ground" for foreign traders. This article will uncover this compliant tax-saving solution overlooked by 90% of small and medium-sized enterprises.

When goods are finally sold from country A to country C via country B, tax exemption can be enjoyed as long as three conditions are met:

• The goods do not undergo substantial processing at the transshipment place.
• Complete certificate of origin documents are held.
• The transit residence time does not exceed 6 months.

When Ms. Li's textiles were transshipped to Europe through Singapore, she avoided a 12% anti-dumping duty just by filing with the customs of the transshipment place. This operation of "transiting without landing" essentially takes advantage of the principle of tax neutrality in international trade.

The commonality of successful cases lies in strictly following these steps:

• Stage 1: Sign a tripartite agreement with the bonded warehouse at the transshipment port.
• Stage 2: Apply for the "temporary import" qualification of the transshipment country.
• Stage 3: Use the ATA carnet to simplify the customs clearance process.

When a certain mechanical and electrical enterprise transshipped through Dubai, 200,000 US dollars worth of goods were detained due to missing proforma invoice filing. This reminds us that tax exemption does not mean exemption from procedures.

High returns often come with high risks, and the main pitfalls are concentrated in:

• Gray areas: Slight processing of goods may be reclassified.
• Document flaws: Decimal point error in the value of the FORM A certificate.
• Logistics out of control: Force majeure such as strikes at the transshipment port.

In 2023, a collective return of goods incident occurred at a transshipment port in Southeast Asia due to HS code classification disputes, with losses exceeding tens of millions.

It is recommended to build a defense system from these aspects:

• Dimension 1: Establish a legal search list of the transshipment country (including customs cases).
• Dimension 2: Develop an intelligent document verification system.
• Dimension 3: Purchase special insurance for the transshipment link.
• Dimension 4: Regularly conduct transfer pricing tests.

When traditional foreign trade is caught in a price war, the tax exemption dividend of entrepot trade is reshaping the competitive landscape. Have you:

• Reviewed the list of SKUs suitable for transshipment?
• Calculated the critical costs of different transshipment ports?
• Reserved multilingual compliance talents?

Welcome to share your practical experience of entrepot trade in the comment area, or leave the detailed questions you most want to know. In the next issue, we will decrypt the letter of credit operation traps of entrepot trade.