Processing trade refers to the business activity in which an enterprise imports all or part of raw and auxiliary materials, parts, components, packaging materials, etc. from abroad, and after processing or assembly, re-exports the finished products. Its core characteristic is 'two ends outside', meaning raw materials come from abroad and finished products are sold abroad, with the enterprise only charging processing fees. Usage scenarios include two forms: toll processing and import processing. In toll processing, foreign parties provide materials and the enterprise only processes and charges processing fees; in import processing, the enterprise purchases materials itself, processes and exports on its own, bearing profits and losses. Precautions: Goods under processing trade are usually bonded upon import, i.e., temporarily exempt from import tariffs and value-added tax, but must be under customs supervision, and finished products must be re-exported within the specified period, otherwise taxes must be paid. The difference from general trade is: general trade is unilateral import or export with transfer of ownership; while in processing trade, ownership of materials and finished products may not transfer (toll processing) or may transfer (import processing), and it enjoys bonded policies. The difference from transit trade is: transit trade involves goods passing through a third country without substantial processing. Processing trade enterprises must have processing capabilities and comply with customs regulations on processing trade supervision, such as establishing processing trade manuals or electronic ledgers.
📝 Examples
1. Our company signed a toll processing contract with a Japanese client, where the Japanese side provides all fabrics and accessories, and we process them into garments for re-export, charging only processing fees. (This illustrates that in toll processing trade, materials are provided by foreign parties, and we only charge processing fees.)
2. This enterprise imports steel through import processing, processes it into mechanical parts, and exports to European and American markets, enjoying bonded import policies and reducing capital occupation. (This illustrates that in import processing trade, the enterprise purchases materials itself, processes and exports, and uses bonded policies to save costs.)
💡 Foreign Trade Tips
Foreign trade terms are the foundation of international business communication
Trade practices may vary slightly by country; pay attention when using them
When using terms in contracts, specify the applicable version (e.g., Incoterms 2020)
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