Nearly 1,000 imported vehicles delayed in Hong Kong for more than one year due to cross-border L/C disputes

Nearly 1000 imported cars have been stranded in Sri Lanka ports for more than a year due to regulatory disputes over the "Cross-Border Letter of Credit"(Cross-Border LC) transaction method...

According to Sri Lanka Newswire, nearly 1000 imported cars have been stranded in Sri Lanka ports for more than a year due to regulatory disputes over the "Cross-Border Letter of Credit"(Cross-Border LC) transaction method. Relevant importers have recently called on the regulatory authorities to provide a legal, unified and final treatment plan as soon as possible, otherwise the accumulated freight charges, storage fees, financing costs and vehicle depreciation will further amplify corporate losses.

The money has been remitted, but nearly a thousand vehicles have been "lying" in the port for more than a year

Thabith Naja, CEO of Providence Auto, said that the long-term failure of the disputed vehicles to customs clearance has brought high port storage, demurrage, financing and depreciation costs to importing companies. At the same time, vehicles cannot be registered and sold, large amounts of corporate liquidity have been frozen, and tariffs and related taxes that the government could have received from these vehicles have been postponed.

Naja specifically pointed out that in many of the transactions investigated, the letters of credit had actually been paid and overseas suppliers had received payment. This means that foreign exchange has long left Sri Lanka, and continuing to detain vehicles will not allow the foreign exchange that has already been paid to return to the country.

According to the importer's interpretation,"cross-border LC" means that the beneficiary of the letter of credit and the actual shipment of the vehicle may be located in different countries. For example, a trader collects payment for a letter of credit in Country A, but vehicles may be exported directly from a port in Country B to Sri Lanka. Such models are not uncommon when they involve international trading companies, overseas suppliers, and banks in different countries.

Naja said that the letters of credit involved in this dispute were all opened through licensed commercial banks in Sri Lanka before the vehicle was loaded on board, and payment was also completed through the formal banking system. Affected importers believe that they have not concealed the origin of the vehicles, bypassed the banking system, and have not tried to evade taxes and fees.

The real controversy focuses on "how to recognize" the document

Judging from the information disclosed so far, the core of this dispute is not the importer's request to reduce tariffs, but how to interpret and verify some trade documents.

For example, some overseas banks adopt paperless or electronic processes and do not stamp physical seals on relevant documents, resulting in issues of document authenticity and formal compliance. Importers believe that regulatory authorities should make unified judgments based on the laws, banking and trade rules applicable at the time of the transaction, and cannot determine that there is a problem with the transaction just because of the cross-border LC structure itself.

Naja also denied that cross-border LC naturally has the advantage of "understating customs prices." He stated that the customs valuation of vehicles should be determined separately in accordance with the customs valuation system applicable in Sri Lanka, and there is no inevitable connection with whether the beneficiary of the letter of credit is located in the actual exporting country of the vehicle.

Affected importers stressed that what they are now asking for is not tax exemptions, special undervaluations or so-called "amnesty", but that they hope that these vehicles will undergo a consistent and legal review in accordance with the system in effect at the time of the transaction, and pay as much tax as they should, and then allow the vehicles to complete customs clearance.

At present, this cross-border LC dispute has entered court proceedings, and how the relevant legal provisions will ultimately be interpreted will be determined by judicial proceedings. Naja also admitted that if regulatory authorities have doubts about the authenticity of documents, vehicle valuation or import compliance, they should certainly investigate, but the investigation needs to maintain appropriate proportions and consistent standards, and cannot be delayed indefinitely.

For the Sri Lanka automobile industry, the impact of the long-term detention of nearly 1000 vehicles in Hong Kong has exceeded the impact of the importers involved. On the one hand, the supply of vehicles in the market has been affected; on the other hand, the turnover of relevant funds of dealers, maintenance companies, logistics companies, financial institutions and insurance companies has been slowed down. This is also an important reason why importers want to resolve disputes as soon as possible.

written in the end

Nearly a thousand cars in Sri Lanka have been stranded in Hong Kong for more than a year. The most lesson worth learning by China used car exporting companies is not that "cross-border LC cannot be used", but that the more complex the cross-border transaction structure, the more ambiguous the document chain can be. Especially for the business of collecting money through a third-country trading company and departing directly from China or other countries, it is best to have the local bank, customs clearance agent and importer jointly confirm whether the letter of credit, commercial invoice, bill of lading and vehicle source documents match before shipment. Once the vehicle arrives in the port and then debating whether the document is valid, warehouse rent, demurrage and depreciation increase every day. In a policy-sensitive market like Sri Lanka, the feasibility of customs clearance should be confirmed before collection and shipment, rather than waiting for the ship to arrive at the port.

Source: Guangdong Good Car

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