The Story of Steel Strand's Secret Voyage: The Global "Guerrilla Warfare" Made in Suzhou

At the Suzhou Port in the dead of night, a batch of steel strands with Russian markings are quietly being loaded onto ships. Mr. Zhang, the freight forwarder, stared at the words on the customs declaration form "Final Destination: Central Asia", with the corners of his mouth slightly upturned - this was already the third batch of "Made in Suzhou" that had gone through entrepot trade via Southeast Asia this month. In today's era of high global trade barriers, the steel strands of this industrial city are weaving an invisible trade network covering three continents with unexpected routes.

As the "steel bones" in the infrastructure field, steel strands are indispensable in projects such as bridges and nuclear power plants. However, the anti-dumping duties as high as 28% in European and American countries have instantly evaporated the export profits of Suzhou manufacturers. Ms. Li's factory once had zero orders for three consecutive months until she discovered the strange request from a Vietnamese customer to "repurchase at a 20% markup": "Only later did I understand that they were using our goods to fill American orders."

• Cost Advantage: The production cost of steel strands in Suzhou is 15-20% lower than that in Southeast Asia.
• Quality Endorsement: The coverage rate of international certification for Chinese steel products has reached 92%.
• Logistical Convenience: There are more than 30 weekly direct routes from Taicang Port to RCEP member states.

A trade expert from Zhongshitong revealed that the current mainstream operation mode can be called a "modern Trojan Horse": Whitewashing with origin certificates + Deep processing in a third country + Arbitrage of tariff quotas. A batch of Suzhou steel strands are first exported to Malaysia, and after being coated by local factories, they enter the European Union with zero tariffs through the ASEAN origin certificate. More astute players will take advantage of Canada's duty-free policy for Mexico to complete a chain jump of "China - Mexico - Canada - the United States".

But risks follow closely. A certain enterprise last year had an entire batch of goods seized by the US customs because the entrepot documents from Vietnam showed the words "Loaded in Chinese Port". Mr. Zhang showed a "perfect" entrepot document: "The shipper is written as a Singapore company, the bill of lading shows 'Vietnamese raw material processing', and even the container number has to be rearranged."

Facing the increasingly strict anti-circumvention investigations, Zhongshitong recommends that enterprises establish "three firewalls":

• Legal Firewall: Establish a physical company in the entrepot country and truly employ local employees.
• Financial Firewall: Settle with offshore accounts, separating the capital flow from the goods flow.
• Technical Firewall: Substantially change the tariff code of the product by adding a patented coating, etc.

It is worth noting that the cumulative rules of origin under the RCEP are changing the rules of the game. A certain factory in Suzhou transports semi-finished steel strands to Thailand, and after adding 15% steel fibers purchased locally, it successfully obtains the origin identity of the ASEAN. "This is safer than pure entrepot trade, but it requires accurately calculating the cost balance point." Ms. Li frankly said.

When the global supply chain shifts from "efficiency first" to "safety first", entrepot trade has evolved from a makeshift measure into a strategic choice. Customs data shows that in 2023, the steel strands exported from Suzhou Port to ASEAN increased by 37% year-on-year, and about 60% of them appeared in the European and American markets three months later.

This cat-and-mouse game has no eternal winners. An old foreign trade person who has been engaged in the business for twenty years said: "Now it's not about who has the wilder way, but about who can turn the gray into light gray." Standing under the gantry crane at Taicang Port and looking at the containers with different national markings, perhaps as Mr. Zhang, who is unwilling to disclose his name, said: "Steel strands can be bent, but the vitality of trade will never be broken."

Does your enterprise also explore the entrepot path? You are welcome to share your "curve-saving experience" in the comment area. In the next issue, we will reveal how to use blockchain technology to create a "digital amulet" for entrepot trade.