Once they reach a certain size, all importers wonder “should we open a company in Hong Kong for saving on taxes?”
It has been going on for decades. However, a new development is pushing importers–particularly from North America–to think about this option.
The data from US and Canada Customs are available to the public, and are accessible for free through many websites (Import Genius, Panjiva, Trade Mango…).
The problem is, importers have an interest in keeping the names of their suppliers hidden. It is a competitive advantage, as I wrote before.
And one way to keep suppliers hidden is to show your own Hong Kong company on the bills of lading. According to trade records, you are the buyer… and the supplier!
ICS Trust, a Hong Kong-based firm that provides trade services for importers, allowed me to republish some nice infographics from their sales brochure.
Here is how importers typically organize the flow of goods and the flow of money:
And here is how an importer can take advantage of a Hong Kong company:
Related reading: How to hide the supplier’s identity with a Hong Kong company?
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UPDATE: I got two very useful suggestions from a regular reader:
If secrecy is a must, there is a simple way to make sure your company name does not appear on websites like Import Genius. All you have to do is ask your shipping agent to have the Bill of Lading made “to order” of your customs broker in the US. By doing so, you assure that your broker’s name — not yours — shows up in the online trade data. The total cost for this layer of privacy is exactly nothing. That’s a lot easier than setting up a company in Hong Kong.
Now if you really wish to maintain an intermediary between you and your supplier, there is nothing stopping you from incorporating a new company at home. Here I’m talking about creating a second, seemingly unrelated business with the sole purpose of bringing the goods into the US. In this scenario, your company, ABC Marketing Inc., would purchase its merchandise from XYZ Importing Inc. As a domestic sale, you have perfect privacy, so your competitors would never know that ABC was doing its buying through XYZ.