Is Entrepot Trade Actually False Export?

Mr. Zhang recently encountered a vexing matter: The company sold a batch of electronic products to the United States via Singapore, but the finance department said it did not fall within the scope of export tax rebates. However, in Ms. Li's clothing business, which also transited through a third country, the customs determined it to be an export trade. Who is right and who is wrong? Today, let's unveil the "identity mystery" of entrepot trade.

When goods pass through a third country like international express deliveries, the key lies in whether the ownership is transferred. According to the WTO Rules of Origin, a genuine entrepot trade needs to satisfy the following conditions simultaneously:

• The goods do not undergo substantial processing in the intermediate country (the value added does not exceed 10%).
• The transaction documents are indicated as "transit trade" rather than "local procurement".
• The logistics track can be completely traced back to the origin and destination.

Foreign trade experts from Zhongshitong have summarized the ironclad rules for judgment in actual operations:

• The "Mode of Trade" column on the customs declaration form should indicate the "entrepot trade" code (0220).
• The bill of lading shows "THROUGHB/L" and the consignee is the agent in the transit country.
• The payment and receipt vouchers should indicate the words "TriangularTrade".

This is directly related to whether one can enjoy the 13% VAT tax rebate:

• Compliant entrepot: One can apply for tax rebates with the "Non-processing Certificate" from the customs of the transit country.
• Non-compliant operations: Not only do you have to pay back the taxes, but you may also face a fine equivalent to 50% of the goods value.

Want to be safe and make money? Remember these three tips:

• Add a "Retention of Title Clause" in the contract to clarify the ownership of the goods.
• Require the freight forwarder to issue a through bill of lading (ThroughB/L).
• Apply to the customs of the transit country in advance for a "Temporary Import Permit" (ATA Carnet).

Just like the quantum superposition state, entrepot trade has dual attributes: From the logistics perspective, it is transit; from the trade perspective, it may be export. Data from a certain cross-border e-commerce platform shows that merchants who make the correct distinction can, on average, obtain 17% more profits.

Now it's your turn: Has your company encountered a similar "identity confusion"? Welcome to share your practical experience in the comment section. The top three with the most likes will receive the electronic version of the Entrepot Trade Compliance White Paper compiled by Zhongshitong.