1

What is entrepot trade?

Transit trade (transit trade) refers to the trade of import and export goods in international trade, which is not carried out directly between the producer and consumer countries and is carried out by a third country.

Goods traded are transported from the exporting country to a third country and re-exported to the consumer country without processing in the third country (except for changing packaging, classification, selection, sorting, etc.). Or directly from the country of production to the consumer country, and the transaction will be carried out by the transferring country separately with the producer and consumer countries.

2

The form of entrepot trade

(1) Re-export trade, that is, the way in which the exporter buys and sells goods from the exporting country to the importing country through an intermediary.

In re-export trade, the goods have not passed through a third country, and the intermediaries only deal with the transaction documents, that is, re-export of ownership of the goods.

(2) pure re export trade, the middleman of third countries reexports the imported goods without processing. Grading, mixing, packaging and labeling are not part of the processing area.

(3) processing entrepot trade, goods in third countries, after processing value-added, and then exported to the importing country.

Processing and re-exporting trade can process whole batches of goods, or procure some parts and components from the country, and assemble them into large-scale equipment for export.

Processing entrepot trade requires a large number of labor force, low wages, good infrastructure, and bonded warehouses or bonded areas to reduce the cost of processing goods.

3

The mode of re export trade

(1) entrepot trade in the real economy

The middleman does not want the exporter to obtain the information of the importer. He may use a negotiable L/C or a back-to-back L/C.

(2) arbitrage entrepot trade

This kind of trade is mainly used for the low-risk business such as the long-term letter of credit, standard warehouse receipts, non-ferrous metals, banks and so on.

(3) import business to re export trade

Domestic dealers import US dollars from the Hong Kong platform, and the entire process is settled in US dollars, which can be used to avoid exchange rate risk.

(4) transshipment business of export business

Issuing letters of credit from abroad to domestic factories requires no advance payment. Exchange rate risk can also be avoided.

4

Through third party companies

Entrepot trade operation

(1) sign a contract with the third party entrepot trading company.

Verify the qualification of the entrepot trade company, the customs fees of the host country and the destination country, and sign the contract.

(2) the client signs a contract with the third party entrepot trading company.

Ask if the client can accept the export documents of the third party agent as payment terms, and whether the export documents provided by the agent can be used as customs clearance documents.

After the customer agrees, the payment will be made to the three party agent of the entrepot trade.

(3) sign contracts with customers

Contract terms with customers. Calculate the time of delivery, including the time of shipment to the country of transit, the transit time for the entrepot trade party to go through the formalities of entry and exit, and the time of changing cabinets.

5

Risks of re export trade

Risk of cargo Rights:

Goods are colluded, customers collude with agents, and goods are released.

Capital risk:

Misappropriation of funds, or rolling money away.

Risk of clearance in port of destination:

If the entrepot trade agent issues false third party transit country certificate of origin documents, in the port of destination was found, will lead to customs clearance difficulties, high fines and so on.

Customs inspection:

The export volume of export agency companies will increase the inspection rate. If there is a problem with the agent documents, there will be more difficult problems such as goods detainment, fines and so on.

6

Matters needing attention in re export trade

Preventing disclosure of trading information:

Neutral packing or indicating the origin of a third country.

Ensure the safety of funds:

Payment by T/T: Notify the customer to pay the agent in advance, and arrange the production after receiving the payment from the agent. The customer will send the balance to the agent company, receive the payment from the agent company, and then send the documents to the agent company, or release them.

A letter of credit is required to indicate the acceptance of third party documents by letter of credit.

Ensure cargo safety:

(1) arrange the transport service for the first and second journey by the entrepot company, and arrange the corresponding full set of documents. The B / L bill of lading was issued from the transit port.

(2) Book shipping space for domestic logistics designated by the entrepot company, and then submit a two-way bill of lading, indicating the conditions of booking space on the consignment note, showing a two-way bill of lading.