Russia-China: Logistics And International Payments

Check out the key findings from the experts at the session dedicated to current logistics and financial issues between Russia and China

Today, as part of the business program of the ToolMash 2024 exhibition, a session "Russia-China: logistics and international payments" was held . The event was moderated by Evgenia Dmitrieva , executive director, support of Russian-Chinese business, former head of the representative office of the Finnish manufacturer of welding equipment "Kemppi", the company "Sinoruss".

Ivan Savushkin , Commercial Director of Nawinia, spoke on the topic "Logistics in the New Economic Reality". The speaker shared data on the container shipping market from January to July 2024. During the above-mentioned period, shipments via Zabaikalsk in export-import traffic increased by 8% compared to the same period last year and amounted to 13 million tons. The speaker also drew attention to the situation with the ports of the Far East and noted the port of Novorossiysk as one of the most efficient. Ivan Savushkin also mentioned the growing imbalance of containers and fittings: there is a shortage of containers and a surplus of platforms on the market. The speaker shared a list of "pains" and solutions for importers when importing machinery, equipment and spare parts for them, including:

// Search for suppliers in new markets
// Search for alternative products from new manufacturers from neutral and friendly countries
// Payment in rubles or national currencies of friendly countries
// Reorientation of trade to the Asian market and the CIS countries

The expert also noted that the usual interaction scheme has changed and such a concept as "proxy buyer" and "proxy partner" has appeared. In this regard, Ivan Savushkin shared current work options at the moment:

// Payment under the agency agreement
// Payment under the purchase and sale agreement
// Foreign Economic Activity Outsourcing

The speaker also noted that one of the main problems that exists in the market is the management of small payments.

Lyudmila Chibisova , Head of Financial and Commodity Logistics Department at Optimalog, focused on the possibilities of financial transactions in her speech. The speaker commented on the general situation with payments and presented 3 main payment options:

// Cross-border payments (Unauthorized banks of the Russian Federation, representative offices of foreign banks in the territory of the Russian Federation)
// Payment agents (Residents/non-residents of the Russian Federation)
// Third Countries (Non-Resident Companies in Third Country Jurisdictions)

The speaker also spoke about new interesting payment schemes via Zambia, UAE (for payments to Europe), and in addition to them, the possibility of payments via Singapore (for payments to China). Lyudmila Chibisova commented on the route scheme from China and presented alternative route options, including Deep Sea, high-speed container trains (HCT) and the use of road freight transport.

In conclusion of her speech, the speaker shared existing risks and options for adaptive measures for business, including diversification of payment agent risks, redistribution of commodity flows, formation of cost taking into account possible fluctuations in logistics costs and introduction of additional criteria when checking permits, etc.

Director of the Business Accounting Support Department, partner at Sapozhnikov & Partners Svetlana Startseva focused on cross-border payments from a legal point of view in her speech. Using the example of payments to China and India, the expert spoke about possible payment options (use of "technical" invoices, agent payment and delivery schemes, assignment of rights of claim and cryptocurrency) and highlighted points that are important to consider:

// Careful selection of banks, discussing all issues of international payments with banks in advance, providing draft transaction documents in advance
// Think of a backup option
// Clear documentation of the purpose of payment
// Careful review of the contract
// Currency and payment amount

Svetlana Startseva also spoke in more detail about the possibilities of using cryptocurrency to make payments, the disadvantages of this method, noting that from September 1, 2024, within the framework of an experimental legal regime, importers and exporters can use cryptocurrencies under the control of the Central Bank for settlements on foreign trade transactions with non-residents.

The final presentation of the session was Evgeniya Dmitrieva's report on "Reducing risks when making cross-border payments under the agency scheme". The expert covered the legal issues of the agency scheme, including the legality of the agency scheme and the need to include the agency fee in the customs value of the goods. In June 2024, the Federal Customs Service published Protocol No. 10, which recommended considering the agency fee depending on whose interests the agent is acting in:

// If the agent acts in the interests of the seller, the commission is included in the price
// If it is in the interests of the buyer, it is not included

The speaker also raised the issue of risks and voiced a number of recommendations for businesses, including:

// To minimize risks, it is important to carefully consider interactions with suppliers, agents and banks
// When preparing an agency contract, it is necessary to take into account not only the specifics of the transaction, but also the risks of customs refusing to recognize it. It is important to ensure that payments to the agent strictly correspond to the invoices for deliveries
// For long-term deliveries, it is recommended to request written clarification from the Federal Customs Service on the issue of including agency fees in the customs value - this will help to avoid disagreements and reduce the risk of disputes with customs authorities.
// With the increasing use of agency systems, many scammers have appeared on the market offering low commissions and guarantees of payment. It is important to carefully check the partner before concluding a contract, since it is almost impossible to get money back from a fraudulent agent.
// In the current environment, the agency scheme has become a necessity, but it requires careful planning and risk assessment. To minimize risks, it is important to cooperate with trusted partners and pay attention to legal aspects