Is Transshipment Trade Categorized Under Domestic Trade Scope?
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I am the financial supervisor of a Shanghai-based freight forwarding company focusing on Middle East transshipment trade. Recently, I took over a batch of steel products transiting from Iran via Dubai to Europe. When the cargo first arrived at Yangshan Port, the customs broker suddenly notified that the customs examination system indicated that both "domestic source place" and "final destination" were classified as "domestic trade", leading to the declared tariff rate jumping from 0.5% to 15%, which directly added nearly 3 million yuan in extra costs.
We have always regarded transshipment trade as "overseas trade", but the finance department is worried that this misclassification will affect subsequent tax rebates and foreign exchange settlement. We hope to confirm whether transshipment trade falls into the scope of domestic trade, whether there are compliance loopholes in operation links, and what supplementary documents are required to prove that the goods have not entered the domestic circulation system.
EmilyYears of service：3Customer Rating：5.0
Client Success AdvisorStart a Chat
The core judgment criterion for transshipment trade is "whether the goods have completed substantial circulation within the territory of China". The General Administration of Customs Decree No.127 of 2026 clearly stipulates that transshipment trade goods can be exempted from domestic trade attributes only when they circulate in "areas outside customs supervision" or "special supervision zones". The essence of the misclassification you encountered is the confusion of core differences between transshipment trade and domestic trade，and this misjudgment may lead to three consecutive risks:
1. Classification trap in the document review stage: If a non-transshipment trade entity (such as a Chinese factory) is filled in the "domestic source place" column of the customs declaration form，and a domestic port is filled in the "domestic destination" column，the system will judge it as "domestic procurement". The correct operation is to select "overseas source place" (such as Shahid Rajaee Port，Iran) and "overseas destination" (such as Rotterdam Port，Europe) during declaration，and supplement the Transshipment Trade Filing List (with a statement of "goods not entering the territory of China") in the attached documents.
2. Lack of physical isolation at core nodes: If the cargo completes transshipment through a bonded warehouse，it is required to enable the "departure tax rebate" mode (with pre-filing of "special warehouse for transshipment trade" in the General Administration of Customs system). Otherwise，even if the goods do not enter the domestic market，they may still be identified as domestic trade due to "outbound delivery from bonded warehouse". It is recommended to simultaneously adopt the "multimodal transport + distribution center" solution，set up a virtual transshipment warehouse in Dubai，and keep the whole-process circulation records of three documents: ocean bill of lading，waybill，and transshipment warehouse outbound delivery note.
3. Loss control tips: closed-loop operation of four flows in one: Capital flow shall complete cross-border receipts and payments through an offshore account (such as HSBC Hong Kong)，and avoid directly entering the domestic corporate account，in the information flow，the Transshipment Trade Contract shall clearly specify the "goods ownership transfer node" (it is recommended to complete the transfer at Dubai Port)，the goods ownership flow shall be realized through "endorsement of order bill of lading" (such as "to order" consignee)，the logistics flow shall be marked with "transit" label throughout the whole process.
It is recommended to immediately contact the local customs special supervision zone administration，submit the Certificate of Non-circulation of Transshipment Trade Goods in China，and simultaneously apply for advance classification ruling，to avoid the chain reaction of tax verification in the next 3 months caused by a single declaration error.
SarahYears of service：3Customer Rating：5.0
Foreign Exchange AdvisorStart a Chat
Chief Customs Declaration Specialist: The "domestic trade type" of transshipment trade on the customs declaration form shall be selected as "Transshipment Trade" (code 0110), instead of "General Trade" (0101).
If the customs broker still declares it as domestic trade, you may require it to issue a Classification Objection Letter, and attach the Incoterms 2026 "FCA + Transshipment" clause as supporting document. Special attention shall be paid that the "origin mark" of transshipment trade goods must be "non-China", otherwise the goods may still be identified as domestic goods.
Senior Logistics Specialist: The logistics link shall strictly implement the "Three No Principles": no entering warehouses outside domestic bonded zones, no unpacking or repackaging, no domestic processing.
It is recommended to adopt the "door-to-port" direct transport mode (goods are loaded directly at Iranian port, transshipped at Dubai Port for vessel change and then shipped directly to Europe), and use GPS-tracked temperature-controlled containers throughout the whole process, to ensure no physical stay record of the goods in China. If domestic loading and unloading has occurred, supplement the Certificate of Goods Not Entering the Territory of China immediately and apply to the customs for the Transshipment Transport Permit.
Senior Tax Consultant: The 2026 new cross-border tax policy clearly stipulates that transshipment trade that meets the conditions of "transactions between non-resident enterprises" can apply for 0% withholding income tax rate, but must meet two requirements: "the goods stay in China for no more than 30 days" and "foreign exchange settlement is completed through the CIPS system". If value-added tax has been paid according to domestic trade, you can apply for "VAT deferral" within the declaration period (by submitting the Transshipment Trade Tax Filing Form) to avoid double taxation.
Trade Compliance Specialist: The State Administration of Foreign Exchange implements "T+3" automatic verification for the "receipt pending verification account" of transshipment trade.
If the received foreign exchange goes to the pending verification account due to misclassification, you can apply for a "special mark" with the Transshipment Trade Foreign Exchange Receipt and Payment Voucher to avoid mandatory foreign exchange settlement. It is also recommended to open an offshore RMB account and complete the capital closed loop through the Cross-border Interbank Payment System to avoid exchange rate fluctuation risks.
Foreign Trade Legal Specialist: The Transshipment Trade Contract shall clearly specify the "time of goods ownership transfer" (it is recommended to stipulate "ownership transfers when goods pass the ship's rail" under the framework of ICC URC 522), and add a force majeure clause (specifying that the port detention fee caused by customs classification disputes shall be borne by the responsible party). The bill of lading shall be an order bill of lading with complete endorsement, to ensure legal connection when "delivery of goods without presenting original bill of lading" is performed at Dubai Port.
On-site Inspection Specialist: If the customs inspection finds that the goods are not declared as required, you may require the inspection officer to issue an Inspection Record Sheet (with a note of "goods not entering domestic circulation"), and simultaneously apply for administrative reconsideration. It is recommended to prepare the Transshipment Trade Inspection Response Manual in advance, covering practical points including "seal integrity check", "state record of unpacked goods", "machine inspection image comparison", etc., to avoid over-stay and port detention of goods caused by inspection process delays.。