Entrepot Trade Q&A

Is Advance Payment Allowed Under Transit Trade?

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I am a foreign trade practitioner engaged in transit trade, and I just took over this type of business this year. Last week, I handled an order for goods shipped from China to Malaysia for transshipment to the EU, and the other party required a 30% advance payment.

However, I heard from peers that advance payments are not allowed in transit trade, so I am now very confused: I am afraid of missing the order, and also afraid of being investigated by the State Administration of Foreign Exchange (SAFE) or customs due to compliance issues. We control the cargo right throughout the process, and the bill of lading is endorsed to order. I just want to know whether advance payment is allowed and what specific compliance requirements there are?

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Expert Answer

Ella
EllaYears of service：10Customer Rating：5.0

Senior Financial AdvisorStart a Chat

In 2026，transit trade does not absolutely prohibit advance payments，instead，it can be operated only after meeting compliance requirements. The core is to closely adhere to the consistency of cargo flow，fund flow，and contract flow.

First，complete pre-document review: Prepare two complete upstream and downstream contracts，transshipment port storage certificates，and full ocean bills of lading (endorsed to order) in advance. The advance payment ratio usually does not exceed 30% of the total contract amount，if it exceeds，provide a reasonable explanation of fund use，such as proof that the other party needs to advance transshipment port storage fees.

Second，control the connection of core nodes: Before paying the advance，confirm the cargo right transfer node to ensure that the bill of lading endorsement process matches the payment rhythm. For example，the shipper endorses to the transshipment agent first，then completes the final endorsement after receiving the corresponding proportion of advance payment. At the same time，make the payment through CIPS or compliant SWIFT channels，and keep complete message vouchers and bank receipts.

Finally，formulate an abnormal plan: If inspected by SAFE，submit a full set of supporting materials within 3 working days，including payment explanations，upstream and downstream communication records，and transshipment port operation vouchers，if there is a delay due to inspection at the transshipment port，adjust the payment node in time to avoid additional costs caused by port detention.

It should be noted that advance payments without a background through offshore accounts are strictly prohibited，and fund reflow to domestic related enterprises is also not allowed. Otherwise，it will be identified as abnormal payment or receipt，facing fines or trade restrictions.

William
WilliamYears of service：10Customer Rating：5.0

International Logistics AdvisorStart a Chat

Advance payment for transit trade needs to confirm the authenticity of the trade background. In 2026, the State Administration of Foreign Exchange (SAFE) requires complete transshipment certificates, upstream and downstream contracts, cargo right certificates, etc. for transit trade payment and receipt. First, confirm whether the upstream and downstream contracts clearly specify the transshipment link; the advance payment ratio should be within a reasonable range for a single trade, usually not exceeding 30%.

If the other party requires an over-proportion advance payment, provide a reasonable explanation of fund use to avoid being identified as abnormal. At the same time, submit full transport documents for transit trade during customs declaration, including ocean bills of lading and transshipment port storage certificates, to ensure the consistency of cargo flow, fund flow, and contract flow. If inspected by SAFE, provide a full set of supporting materials in time to explain the matching between the advance payment background and the trade process.

Charlotte
CharlotteYears of service：4Customer Rating：5.0

Currency Exchange AdvisorStart a Chat

The advance payment in transit trade is directly related to cargo right control. In 2026, the transshipment link of international logistics needs to clarify the bill of lading endorsement rules.

Usually, the bill of lading for transit trade should be an "order" bill of lading, endorsed by the shipper to the transshipment agent, then by the transshipment agent to the final consignee. Before paying the advance, confirm the cargo right transfer node to avoid paying a large advance without obtaining the cargo right certificate.

At the same time, choose a compliant transshipment port to avoid customs inspection delays caused by transshipment in high-risk areas. If there is a container detention fee at the transshipment port, agree on a free storage period with the logistics provider in advance to ensure that the advance payment time matches the cargo right delivery time, reducing fund risks.

Robert
RobertYears of service：6Customer Rating：5.0

Warehouse Management AdvisorStart a Chat

The advance payment for transit trade involves cross-border tax compliance. The 2026 BEPS rules require enterprises to disclose the pricing details of related transactions. If the upstream and downstream of the transit trade involve related enterprises, prepare a related transaction pricing report in advance to explain the rationality of the advance payment.

At the same time, the application for VAT deferment needs to comply with the local regulations of the transshipment port; if storage fees are incurred at the transshipment port, ensure that part of the advance payment is used to pay compliant fees to avoid being identified as profit transfer by tax authorities. In addition, the application for export tax refund needs to provide complete payment and receipt certificates; the advance payment records need to be consistent with contracts and invoices to ensure the integration of four flows (cargo, fund, contract, and invoice).

Emily
EmilyYears of service：3Customer Rating：5.0

Client Success AdvisorStart a Chat

In 2026, the message parsing requirements of CIPS and SWIFT are stricter. The advance payment for transit trade needs to be made through compliant cross-border payment channels.

First, confirm whether the payee's account is compliant, and avoid using offshore accounts for abnormal payments or receipts. At the same time, the settlement and reconciliation process needs to comply with the requirements of SAFE; the advance payment should be completed within the time agreed in the contract, and complete payment certificates should be kept.

If there is exchange rate fluctuation, use forward foreign exchange settlement and sale tools to lock the exchange rate and reduce fund costs. In addition, regularly pay attention to the latest policies of SAFE to ensure that payment and receipt operations comply with the latest compliance requirements.

John
JohnYears of service：6Customer Rating：5.0

Export Tax Rebate AdvisorStart a Chat

The advance payment for transit trade needs to clarify terms in the contract, including payment ratio, payment time, cargo right transfer node, liability for breach of contract, etc. Avoid vague terms such as "advance payment can be refunded at any time" to prevent subsequent disputes. At the same time, the use of Letter of Indemnity (LOI) needs to comply with international trade practices; if the other party requires an advance payment guarantee, ensure that the issuer is a compliant financial institution and the guarantee terms clearly state the effective conditions.

If the other party refuses to provide cargo right certificates, terminate the advance payment in time to avoid fund loss. In addition, pay attention to the application of force majeure clauses; if a force majeure event occurs at the transshipment port, clarify the handling method of the advance payment.

Daniel
DanielYears of service：8Customer Rating：5.0

Legal AdvisorStart a Chat

Goods in transit trade may be inspected by customs at the transshipment port; the advance payment needs to match the inspection situation. First, ensure that the packaging of the goods meets the compliance requirements of the transshipment port to avoid inspection delays due to packaging issues. At the same time, keep the seal records of the goods to ensure they are not opened during transshipment.

If customs inspection occurs, provide advance payment certificates in time to explain the trade background of the goods. In addition, pay attention to the results of machine inspection; if the goods are required to be sent for inspection, arrange professional personnel to be present in time to ensure the inspection process is compliant and avoid affecting the advance payment progress.

David
DavidYears of service：3Customer Rating：5.0

Business Development AdvisorStart a Chat

The advance payment for transit trade affects the application for export tax refund; the 2026 export tax refund audit requires complete payment and receipt certificates. First, ensure that the advance payment records are consistent with contracts and invoices to avoid fund reflow.

At the same time, prepare full supporting materials for tax correspondence in advance, including upstream and downstream contracts, transport documents, payment and receipt certificates, etc. If tax correspondence occurs, reply in time and provide relevant materials to ensure the tax refund application is approved smoothly. In addition, pay attention to cross-month declaration requirements; advance payment records need to be filed within the declaration period to avoid tax refund delays due to incomplete documents.

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