Exports from China: Shenzhen Free Trade Zone
- Source products from multiple manufacturers and need shipment consolidation
- Ship the goods to multiple destinations around the world
- Require VAS (Value Added Service) such as postponement, kitting, labeling or other value added services to comply with destination country retail or regulatory requirements.
When FTZ makes sense? When Hong Kong?
There are two basic considerations when thinking Hong Kong over Shenzhen FTZ locations:
1) Costs, labor and storage
If you require more storage space, store your goods long term or require VAS activities, then the Shenzhen FTZ is a good fit for your business.The supplied graph speaks for itself. It shows how Hong Kong and China labor costs and warehouse costs (bonded, based on Shenzhen) compare against each other, as well as USA and Australia
2) Fees, customs and local transportation
If you have more small inbound and outbound shipments valued less than US$ 5,000 (invoice value), then Hong Kong might be a better fit. Other way around, the more you have large, high value shipments, the cheaper FTZ will be. As an example, if you are exporting $5,000 USD shipment from Shenzhen to overseas via a Hong Kong based warehouse, your fees and local transportation would be roughly the same vs. the same shipment going via Shenzhen FTZ. However, if the value of your shipment would instead be $500,000, your total declaration fees via Hong Kong would be approximately $1,087 USD (including China export fees) vs.$158 USD via Shenzhen FTZ. This is due to the fact that Hong Kong import / export declaration costs are based on invoice value, whereas Shenzhen FTZ declaration costs are fixed and do not depend on value of the goods. When shipping from Shenzhen FTZ, it is critical key is to ship goods on one single Air Waybill (AWB) from FTZ, directly to destination. If the goods stop by a warehouse in Hong Kong, Hong Kong import and export declaration fees apply. Ingram Micro now offers cross-border express service, from Shenzhen Qianhai FTZ to Hong Kong airport, in less than 2 hours with no stops at customs and border stations. Companies with Radio Transmitting Equipment (RTE), such as mobile phones or smartphones, should notice that such products may be subject to Import and Export Control in Hong Kong. Each permit is good for one shipment, see customs webpage. There are other considerations as well, such as potential Permanent Establishment taxation risk. If your company has an entity in China, your products are made in a bonded factory in China, and after export, will be re-imported for local sales in China, then Hong Kong or a Hong Kong u-turn process is recommended. A u-turn process is a term in which goods from China or a Free trade Zone are shipped to Hong Kong and then back to mainland China. Companies should seek advice from their tax lawyers to identify potential taxation issues in China.