Entrepot Trade = Import? 90% of Enterprises Are Wrong

Mr. Zhang recently encountered a headache: his company transshipped a batch of electronic products to Europe via Singapore, and the customs required the payment of supplementary import duties. His mind was full of questions - "The goods didn't even enter China. How can it be considered an import?" Such confusion is not uncommon in cross-border trade. Today, let's uncover the "identity mystery" of entrepot trade and see if it is the same thing as import.

1. The "Transit Game" Rules of Entrepot Trade

Entrepot trade is like a "transfer station" in international trade. When goods are transported from Country A to Country B, they pass through Country C but do not enter the market of Country C. For example, Thai rubber is directly shipped to Germany after being repackaged in the Hong Kong warehouse of Zhongshitong Logistics without declaring import to Hong Kong throughout the process.

• Key Feature 1: Physical Transit Without Declaration - Goods only stay briefly at the transshipment place and do not go through formal import procedures
• Key Feature 2: Ownership Can Be Changed - The buyer and seller may have completed the transaction during the transit process
• Key Feature 3: Logistics ≠ Cash Flow - The settlement of payment for goods may be completely separated from the path of the goods

2. The "Import" Identification Criteria from the Perspective of Customs

Ms. Li, as a customs declarant, has to distinguish three situations every day:

• True Import: Goods enter the customs territory and are put on the market, and tariffs and value-added tax need to be paid
• False Entrepot: Claiming "transit" but secretly selling, which is a smuggling behavior
• True Entrepot: Conforming to the "temporary admission" system, and customs duties can be waived by providing a deposit

In 2023, 200 tons of coffee beans imported in the name of "entrepot trade" were seized at a certain port, and actually all flowed into the domestic market. The customs judgment criteria are very clear: Whether the final consumption place of the goods is changed.

3. The Three Biggest Misunderstandings That Enterprises Are Most Likely to Fall Into

The typical cases summarized by the Trade Service Department of Zhongshitong show:

• Misunderstanding 1: The Bill of Lading Shows the Transshipment Port = Entrepot Trade - Actually, it is necessary to check whether the goods are declared to enter the territory
• Misunderstanding 2: Incomplete Entrepot Documents - Lacking key documents such as the certificate of non-processing in the transit country
• Misunderstanding 3: Contradiction Between Cash Flow and Goods Flow - The payer and payee are obviously inconsistent with the logistics information

Last year, an enterprise was directly regarded as an import behavior because it added Chinese labels when changing the packaging during the entrepot process, and the amount of supplementary tax payment was as high as 40% of the value of the goods.

4. The Three Keys to Compliant Operations

Want to conduct entrepot trade safely? Remember these three key points:

• Document Closed Loop: The certificate of origin, transit declaration, and proof of final destination are all indispensable
• Logistics Monitoring: Choose a warehouse with bonded qualifications to temporarily store the goods
• Tax Planning: Utilize the transit clauses in free trade agreements to reduce costs

An electromechanical enterprise transshipped through the bonded warehouse of Zhongshitong in Dubai, not only saving 17% value-added tax but also shortening the delivery cycle by 11 days.

Which Situation Does Your Cargo Actually Belong To?

Next time when encountering a tax dispute in entrepot trade, you might as well ask three questions first: Do the goods actually enter the customs territory? Is the ownership transferred at the transshipment place? Can you provide complete proof of the trade chain? The compliance of international trade is often hidden in the details. Welcome to share your entrepot trade experience or questions in the comment section.