Entrepot Trade Q&A

What core documents are required for entrepot trade accounting to achieve compliance?

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I am the financial head of a foreign trade enterprise engaged in Southeast Asian entrepot trade. Recently, several of our entrepot deals were questioned by the tax authority due to document issues, which also led to suspended financial accounts for half a month.

Last month, for a rubber business transshipped from Thailand to the European Union, the tax authority required supplementary materials due to the missing storage certificate of the transshipment port, which almost disrupted the foreign exchange settlement process. I would like to know exactly what documents are required for entrepot trade accounting?

How to ensure these documents are fully compliant? Should logistics and capital documents involved in the transshipment link be recorded in accounts together? How to remedy the situation if any required document is missing?

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Expert Answer

John
JohnYears of service：6Customer Rating：5.0

Export Tax Rebate AdvisorStart a Chat

Entrepot trade accounting shall be based on complete documents covering the full transaction chain，and the core documents fall into three categories: first，title transfer certificates，such as bill of lading (with clear transshipment port information and goods title transfer path) and warehouse receipt，second，transaction supporting documents，such as commercial invoice (marked with entrepot trade nature，details of both buyer and seller，and transshipment links) and proforma invoice，third，capital supporting documents，such as foreign exchange receipt and payment slips (consistent with transaction amount and currency).

During pre-review，attention shall be paid to: confirm that the bill of lading is an order bill of lading with complete endorsement to avoid disputes over goods title，ensure the goods description，quantity and value on the commercial invoice are fully consistent with those on customs declaration documents (if transshipment customs declaration is involved) and logistics documents. For connection of core links，logistics documents (such as transshipment warehousing agreement，transportation authorization letter) shall be in one-to-one correspondence with capital flow and information flow，to ensure the consistency of four flows.

In case of missing documents，such as the loss of transshipment port storage certificate，contact the storage service provider immediately for a reissue，and keep all communication records as supplementary supporting materials，if there is a foreign exchange difference between the foreign exchange slip and the invoice amount，issue an official exchange rate statement issued by the corresponding bank. For final compliance implementation，file all documents by transaction serial number，and retain them for at least 7 years for future reference，to avoid the situation that valid supporting documents cannot be provided during verification by tax or foreign exchange authorities.

William
WilliamYears of service：10Customer Rating：5.0

International Logistics AdvisorStart a Chat

For customs declaration documents of entrepot trade accounting, attention shall be paid to the declaration nature of the transshipment link. If the goods are stored or processed at the transshipment port, the customs declaration document of the transshipment port (such as the Hong Kong entrepot customs declaration form) shall be provided, to prove that the goods have not entered the domestic territory.

Failure to make such declaration may result in the deal being identified as general import trade and lead to tax risks. In addition, the "notify party" on the bill of lading shall be consistent with the actual buyer, to avoid confusion of goods title that undermines the accounting compliance.

Alexander
AlexanderYears of service：10Customer Rating：5.0

Senior Trade AdvisorStart a Chat

Among logistics documents for entrepot trade, the circulation of bill of lading is of critical importance. In case of sea freight transshipment, negotiable order bill of lading marked "To Order" shall be adopted, and the full endorsement process shall be ensured to avoid loss of control over goods title.

Meanwhile, documents for container demurrage and warehousing fees at the transshipment port shall be attached to accounting records, to prove the actual occurrence of the transshipment link and avoid doubts on the authenticity of the transaction.

Daniel
DanielYears of service：8Customer Rating：5.0

Legal AdvisorStart a Chat

Tax treatment shall be highlighted during entrepot trade accounting. If the goods do not enter the domestic territory, import VAT is not required to be paid, but all documents of the transshipment link shall be retained to prove the nature of "overseas resale".

If related party transactions are involved, the pricing shall comply with the arm's length principle to avoid BEPS risks. In addition, the exchange rate difference generated during foreign exchange settlement shall be recorded into financial expenses in accordance with accounting standards, and shall not be directly used to adjust the revenue amount.

Sarah
SarahYears of service：3Customer Rating：5.0

Foreign Exchange AdvisorStart a Chat

Foreign exchange settlement documents of entrepot trade shall match the accounting documents. The wording "entrepot trade" shall be marked on the receipt and payment slips, and the amount shall be consistent with that on the commercial invoice.

If cross-border RMB payment via CIPS is adopted, the payment instruction and receipt confirmation shall be retained to prove the compliance of capital flow. Capital transactions under offshore accounts shall be accounted for separately, to avoid mixing with other businesses.

Sophia
SophiaYears of service：7Customer Rating：5.0

Senior Customs AdvisorStart a Chat

The nature of entrepot trade shall be clearly specified in the entrepot trade contract, to avoid being identified as domestic trade. The contract shall specify the goods title transfer time (such as after the endorsement of bill of lading) and responsibility division of transshipment links (such as which party shall bear the warehousing risk).

If letter of credit settlement is adopted, soft clauses (such as clauses requiring domestic import customs declaration form) shall be avoided, so as not to undermine the validity of the documents.

Robert
RobertYears of service：6Customer Rating：5.0

Warehouse Management AdvisorStart a Chat

If the entrepot goods are inspected at the transshipment port, the inspection notice, container unstuffing record and release note shall be retained as attachments to accounting records.

During the inspection, the goods description shall be consistent with all documents, to avoid doubts on transaction authenticity caused by mismatch between goods and documents. If inspection fees are incurred, the corresponding fee invoice and payment voucher shall be provided and included into the accounting cost.

David
DavidYears of service：3Customer Rating：5.0

Business Development AdvisorStart a Chat

If dangerous goods are involved in the entrepot trade, UN packaging certificate, MSDS and dangerous goods transportation documents shall be provided as attachments to accounting records.

The packaging documents shall specify the packaging method, material and protective measures of the goods, to prove the compliance of transportation safety. If the packaging is damaged during the transshipment link, the maintenance or replacement record shall be provided, to avoid undermining the completeness of accounting records.

Ella
EllaYears of service：10Customer Rating：5.0

Senior Financial AdvisorStart a Chat

Entrepot trade does not involve export tax refund, but the consistency between documents and capital flow shall be ensured, to avoid being misjudged as export business. If the enterprise carries out both export and entrepot businesses at the same time, separate accounting shall be implemented, and all documents for entrepot business (including logistics, capital and transaction supporting documents) shall be retained for provision during tax verification inquiries.

Charlotte
CharlotteYears of service：4Customer Rating：5.0

Currency Exchange AdvisorStart a Chat

Document management for entrepot trade shall be synchronized with the supply chain process. It is recommended to adopt a digital system to record document circulation, so that documents of each link are traceable.

For example, associate the bill of lading, invoice and bank slip with the same business number, to facilitate rapid verification. Meanwhile, optimize the transshipment path to reduce unnecessary document links and lower compliance risks.

Note: We respect all users' opinions and contributions. However, comments and answers reflect the views of their respective authors only.
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