Carrying huge debts, a freight forwarder in Shenzhen collapsed

Before the middle of March, two freight forwarding bankruptcy incidents have been reported in the cross-border circle.

Since the end of February, news of Shenzhen Xingtai Supply Chain's collapse has been rampant. There are reports that the company's transported containers were auctioned off overseas and needed to be redeemed at a higher price. Xingtai responded to the rumors. General Manager Li Jinxiao told Ennet that the company is currently operating normally, but there are still more than a dozen containers in backlog, and introduced the latest progress in handling the containers.

Another company, Starspeed Latin America (Shenzhen) Cross-border Supply Chain, has given up struggling because it is burdened with huge debts and is deeply troubled by funds. Its financial situation cannot support normal business operations. This week, it has begun to check accounts and process goods in the warehouse. Its customers must complete registration before March 15 (today) and transfer the goods before the 25th.

In the past two years, cross-border logistics companies have frequently gone bankrupt, most of which were freight forwarders in Europe , and the trigger was the controversial "double-clearance and tax package". Many peers have been investigated before, and some even face bankruptcy due to having to pay large taxes or compensation. However, considering the transportation costs and attracting customers, many logistics companies still take the risk of going down this path, and the double-clearance and tax package bomb will explode in the future.

Burdened with huge debts, a freight forwarder in Shenzhen collapsed

A few days ago, Shenzhen Xingsu Latin America Logistics Company issued a "closing" notice.

The company said that due to the uncertainty of Mexico's external environment and serious problems with its internal financial situation, the company was burdened with huge debts and suffered serious financial difficulties. Although the company has taken various measures to raise funds and has been striving for it in the past few months, it has not been able to reverse the situation. The current financial situation can no longer support its normal business operations.

At present, it has started to check the accounts and deal with the goods in the warehouse. All customers of the company need to contact its customer service team to verify the goods in the warehouse and check the accounts with its financial team. Find a suitable partner before March 25 to settle all outstanding fees and pick up the goods in the warehouse in time.

For goods in transit, the company will treat them as abandoned goods in accordance with established procedures to avoid unnecessary additional costs. According to the relevant agreement on compensation for lost goods, the amount of each freight will be paid to the customer as compensation for settling all creditor's rights and debts between the two parties.

In order to handle the affairs smoothly, the company's customers need to complete the registration work before March 15 and complete the transfer of goods before March 25. The company will record the bill amount of various expenses of suppliers to ensure that the data of incurred and paid items are correct.

This notice is surprising. In November and December 2023, Xingsu Latin America was still active in the cross-border circle and participated in multiple cross-border industry seller meetings as a organizer. Now, its official website can no longer be opened.

Public information shows that the company was established in 2022 with a registered capital of RMB 2 million. It is headquartered in Shenzhen and its main business includes first-leg shipping and customs clearance in Mexico and Chile, overseas warehouse business and customs clearance services at local destination ports. It has successively established branches in Mexico and Chile, and built a Shenzhen Longgang warehouse in China. It has established overseas warehouses with 12,000 square meters of warehousing supporting services in Mexico, Chile and other countries and regions . It is a freight forwarding company with a certain scale and strength.

In recent months, the company has frequently changed its person in charge, investors, address and other information. In February this year, the Longgang Bureau listed it in the list of abnormal operations. At the same time, Xingsu Latin America is involved in a lawsuit due to a contract dispute with another company in Shenzhen, which will go to court next month.

Xingtai is in financial difficulties and responds to rumors of "bankruptcy"

Compared with Starspeed Latin America, which is lying flat, another company, Shenzhen Xingtai Supply Chain, is still trying to save itself.

Xingtai was founded in 2020 and entered the cross-border e-commerce boom. Recently, there have been reports in the industry that Xingtai has collapsed and its containers have been auctioned off by customs clearance agencies. Yien.com contacted Xingtai's general manager Li Jinxiao, who said that the company is currently operating normally and is resolving the backlog of containers.

Prior to this, Xingtai also explained various rumors, clearly stating that the company's financial difficulties were the actual situation, but the goods were not lost, nor were they auctioned off as rumored. But how did Xingtai get to this point?

In December 2022, the Czech Taxation Bureau sealed a customs clearance company's warehouse and several containers of Xingtai were detained. This incident marked the beginning of Xingtai's financial difficulties. During the same period, the Mala yard also inspected two containers. The inspection fees, storage fees, return and re-transportation fees generated by these incidents, plus the more than 4 million yuan in cash compensation to customers, caused Xingtai to lose a total of more than 5 million yuan.

Not long after, in the Belgian inspection incident in February last year, Xingtai had an Amazon general cargo container seized and compensated the customer more than 800,000 yuan; Poland inspected two containers and compensated about 1.2 million yuan. In August of the same year, the customs of Poland, the Netherlands and Hamburg inspected its five containers, and the total amount of vehicle pressing fees, storage fees, inspection fees, etc. was about 1.5 million yuan. These inspection incidents caused Xingtai to fall into financial difficulties.

The blows came one after another. In October last year, the inspection rates in Hamburg, Poland and Hungary soared, and all the customs clearance agencies that Xingtai cooperated with stopped accepting orders, resulting in the containers arriving at the port being stored at the terminal for more than a month without customs clearance, incurring hundreds of thousands of demurrage fees. In December, Xingtai began to arrange for the clearance of containers at the terminal. Due to the high inspection rate and the long storage time of the containers, the customs clearance costs increased, resulting in the customs clearance fee plus demurrage cost of each container reaching 160,000 to 180,000 yuan.

At the same time, UPS also raised prices significantly, charging peak season surcharges, Christmas surcharges and other fees, resulting in the inability to arrange delivery of its cleared containers. At the end of January 2024, after the customs clearance company cleared three containers, Xingtai temporarily detained its three containers because it failed to pay the bill of 550,000 in time.

Li Jinxiao introduced that the company currently has 17 cabinets waiting to be processed.

"Everyone's opinion now is to let the customers who owe money pay first. If it's not enough, I will share the rest. The customer will advance the amount per kilogram, and I will write them an IOU. For example, it costs 200,000 to process a cabinet, and I still have 100,000 yuan that I haven't collected from the customer. Then I will collect this 100,000 yuan first. There is still a gap of 100,000 yuan, and I will share the rest of the money, 10 yuan per kilogram. This 10 yuan is the debt I owe them, and they will help to advance the money first."

This is consistent with the plan previously announced by Xingtai - customers who owe money will first make up the money they owe, and Xingtai will then borrow some money from some customers in their personal names to pay for foreign customs clearance fees and express delivery fees. In the case of a gap in funds, the owner of each container will make up part of the fees, and Xingtai will solve these containers by writing personal IOUs. According to public statistics, excluding about 1 million bad debts in accounts receivable, the funding gap of all containers is about 800,000 to 1.2 million. Xingtai said it will do its best to make up this gap.

There is also a "Xingtai redemption group" in the industry, claiming that customers can redeem the goods by paying 20 yuan/kg. In this regard, Xingtai advises customers not to be fooled. "Our company did encounter financial difficulties, but we did not run away, nor did we ask customers to pay twice."

According to the plan, Xingtai is working hard to solve the backlog of containers. Li Jinxiao said: "We have already obtained a container from the customs clearance company. The other party wants 550,000 yuan for three containers. We paid 280,000 yuan and still owe 270,000 yuan."

The reason why Xingtai was rumored to have gone bankrupt this time was a letter of notification from the customs clearance agency. The letter mentioned that the customs clearance agency had called and written to Xingtai many times to ask for the payable amount, but received no reply, so it notified Xingtai for the last time: if it still did not receive the payment before 12:00 noon on February 26, 2024, Central European Time , it would have to take further action. Specifically, it would auction all of Xingtai’s goods in its company to offset the receivables, and the shortfall would continue to be claimed through legal claims.

Li Jinxiao said that the goods are currently safe and have not been auctioned, and the notification letter was issued for a reason.

"I asked the customers who owed money to pay me, but they refused to do so because they heard rumors that I owed the customs broker millions of yuan and were worried that they would not be able to get the goods even if they paid. I told them that I did not owe millions of yuan, but hundreds of thousands, but they did not believe me. I added them and the customs broker to a WeChat group and asked the customs broker to send our bills to the group and make them public. In the end, they confirmed that I only owed more than 400,000 yuan."

Even so, the customers who owed money were still unwilling to pay. He said that in order to put pressure on them to speed up the payment, the customs clearance company issued the notice. The news of the goods being auctioned also spread and continued to ferment.

Neither sellers nor freight forwarders can afford to wait too long. Qichacha shows that Xingtai was involved in more than ten lawsuits, of which 63.64% were international railway combined transport contract disputes; among the cases involved, Xingtai was the defendant in 36.36% of the cases, the plaintiff in 54.55% of the cases, and other parties in 9.09%.

There are 990,000 multimodal transport and transportation agents nationwide . Xingtai’s registered capital is RMB 6 million, which is more than 95% of its peers nationwide. If a similar storm occurs, how many logistics companies can withstand the impact?

Thunder roars, but the double-clearance tax package model continues

Xingtai's main business includes European rail transport tax package, European road-rail combined transport, UK independent VAT, etc. At present, it mainly does China-Europe consolidated transport, and the proportion of cross-border sellers' goods is limited. The reason why the goods were inspected and detained many times is that Xingtai follows the "double clearance tax package" model.

"Double clearance" refers to customs clearance (declaration) in the exporting country and customs clearance in the destination country, and "tax package" refers to the tariff and other taxes when clearing customs in the destination country. There are two main operations of the double clearance and tax package model on the market: one is to make a profit by changing the name of the goods, such as changing toys to daily necessities, or under-declaring the value of the goods to pay less or no tax, in order to obtain greater profits; the other is that the freight forwarder finds different countries in the 27 EU countries for customs clearance, such as clearing customs in small countries or more remote countries, and then pulling them to other EU countries to reduce tariffs.

A logistics professional said that the double-clearance and tax-inclusive package is a gray transportation scheme. If it is carried out in a completely legal and compliant manner, the transportation cost will rise sharply, and many sellers are unwilling to accept the increase in freight rates. "The double-clearance and tax-inclusive package is mainly cheap, but it is actually not compliant. Once it is checked, various fees will go up. VAT is the main cost issue. "

After the goods are inspected, the freight forwarder will face large costs such as additional taxes, customs clearance fees, and late payment fees, and the pressure on the capital chain will increase suddenly. If such risks are superimposed, it is easy to get into trouble and fall into a slump. At this time, some logistics companies will try to pass on the capital gap to customers, but in the end some companies still cannot escape bankruptcy.

From 2022 to the present, there are many logistics companies that have gone bankrupt due to investigations into double clearance and tax package.

First, in June, Quanyi announced that due to port control issues, the containers had been piled up at the port for too long, resulting in high storage fees. The company's capital chain was broken and it was unable to handle the piled up containers, which led to large demurrage fees. To solve the problem, Quanyi made a fund-raising plan, hoping that customers would pay to redeem the containers, and the fees raised by customers could be used to offset shipments later.

The customs clearance fee required by Quanyi alone was as high as 3-4 million, and the funding gap was huge. Therefore, most upstream freight forwarders and cross-border sellers did not agree with the crowdfunding plan, fearing that it would be a waste of effort. Facing market doubts, the relevant person in charge of Quanyi shouted, "I must save the market and get the goods out." But a few days later, Quanyi issued a bankruptcy notice. Its neat escape also became a laughing stock, leaving only customers who could not claim compensation and employees who had no salary to pay in a mess.

In November of the same year , another logistics company notified its customers that six containers were inspected at the company's backend, and the handling fee for each container was 300,000 yuan. However, due to insufficient funds, the first container was temporarily handled, and the company itself paid 100,000 yuan, and the remaining amount was distributed to each customer according to the corresponding kilograms.

According to their calculations, after paying the original freight, these customers still have to pay an average of 14 yuan per kilogram for this, and they said that this is "considered as a temporary loan from the company to the customers." This measure is highly similar to the previous Quanyi plan. The company in question hopes to get the cabinets back by raising funds from customers, which has caused controversy.

A fatal problem for the freight forwarders under investigation is digging up old accounts. In Europe, as long as a logistics company is found to have under-declared, the customs will trace back its previous violations. For this reason, freight forwarders in the European market often face a big hole that is difficult to fill after being investigated. This freight forwarder with 6 containers under investigation is in this situation. After the inspection, all the accounts of the company's previous tax arrears and tax evasion were traced, and it was eventually punished for multiple crimes.

Sellers are frightened by all these precedents, but even if they know the risks of double-clearance and tax-inclusive package, they will continue to use this model because it is more cost-effective and worry-free. It is precisely because this model has a market that many logistics companies still use this model after many freight forwarders have failed. It is not difficult to guess that even if there are thunders around, freight forwarders will continue to fail due to double-clearance and tax-inclusive package.

The booming cross-border e-commerce needs logistics support

China's cross-border e-commerce industry is moving forward at a high speed.

In 2023, my country's cross-border e-commerce exports developed rapidly, with a total value of more than 1.8 trillion yuan, an increase of 19.6%, far exceeding the overall national export growth rate in the same period. Emerging e-commerce platforms such as Temu gradually occupied the foreign e-commerce market share. From the perspective of Shanghai Pudong Airport Customs alone, there were three e-commerce platforms whose export declarations increased by more than 10 times year-on-year in 2023, showing explosive growth.

Taking the industry as an example, Wang Xin, executive president of the Shenzhen Cross-border E-commerce Association, introduced that in 2023, Shenzhen's import and export of goods will reach 3.87 trillion yuan, a year-on-year increase of 5.9%. It is worth mentioning that Shenzhen's cross-border e-commerce has set a new record with an import and export growth of 75.2% and a total volume of over 300 billion yuan, accounting for nearly 8% of Shenzhen's total import and export volume and more than 12.6% of the total volume of cross-border e-commerce in the country.

Guangzhou is not far behind. In 2023, Guangzhou's cross-border e-commerce import and export volume will reach 200 billion yuan, and the city's cross-border e-commerce import and export scale will increase 136 times in 9 years.

At present, there are more than 100,000 cross-border e-commerce entities in China , more than 200,000 independent sites have been built, and there are more than 1,800 overseas warehouses. Such a booming industry requires support from policies, logistics and other aspects.

In early March, Guangzhou reviewed and approved the "Several Policy Measures for Further Promoting the High-Quality Development of Cross-border E-commerce in Guangzhou" to support the development of cross-border e-commerce enterprises. The specific aspects mentioned are:

Select a certain number of cross-border e-commerce "Qilin" enterprises based on merit, and give a one-time reward of no more than 2 million yuan to the cross-border e-commerce enterprises that enter the list for the first time;

A certain number of cross-border e-commerce "Kunpeng" industrial parks (clusters) will be selected based on merit, and rewards will be given to cross-border e-commerce industrial parks that enter the list for the first time, with a maximum reward of RMB 5 million.

In terms of supporting cross-border e-commerce companies to carry out "brand going global", Guangzhou will select a certain number of outstanding cross-border e-commerce "brand going global" companies and provide financial support of no more than 50% of the actual expenses incurred for their brand promotion. The annual support amount for a single company will not exceed 1 million yuan.

Many sellers are encouraged by the news that they are expected to obtain financial support.

In addition to Guangzhou and Shenzhen, more cities are also using "real money" to promote the development of the cross-border e-commerce industry. For example, according to the Zhengzhou Airport Economic Zone Investment Promotion Bureau, the zone has issued "17 policies" to support cross-border e-commerce.

According to Henan Daily, in terms of industrial park construction, the policy encourages enterprises to build or operate cross-border e-commerce industrial parks, and the investment entity can receive a one-time reward of 5 million yuan; encourages enterprises to invest in warehousing and logistics facilities, automated sorting lines, robots and other equipment and facilities in the park, and provides a one-time support fund of up to 3 million yuan; if the park is successfully declared as a national or provincial cross-border e-commerce industry demonstration park or incubation platform, it will be given an additional reward at a 1:1 ratio of the provincial and municipal reward amount. Cross-border e-commerce companies registered in Zhengzhou Airport can receive a reward of 20 million yuan if they are successfully listed on the main board.

This year, many cities have significantly accelerated their efforts to promote cross-border e-commerce. In addition to financial support, industry seminars have also been held everywhere, all hoping that local companies can take advantage of the overseas expansion trend and gain new growth in overseas markets.

Cross-border logistics is an indispensable part of the goods from merchants to overseas consumers. How to cooperate with the rapid development of the industry and support the booming cross-border e-commerce industry with compliant and appropriate logistics products will also become the key task of logistics companies. However, judging from the current cross-border logistics situation, this may not be achieved overnight.