Key points
- Entrepôt trade involves two independent sales contracts: the intermediary’s purchase contract with the supplier and its sales contract with the buyer. Each side is settled separately, and currency, price terms and payment method can differ between them.
- Where goods are transhipped via the intermediate location, bonded storage or transhipment supervision may be involved; where they go straight to the buyer, the intermediary mainly manages the flow of documents and funds.
- Banks and foreign exchange authorities pay close attention to the genuineness of entrepôt trade and expect documents, logistics and funds to corroborate one another.
In practice
Profit in entrepôt trade comes from the spread between the two sides, and so does most of the risk: delivery dates, quantities or quality from the supplier that do not match the sales contract, letter of credit terms that do not align, and exchange rate movements between payment and receipt. The intermediary needs to manage both contracts, both sets of documents and both payments together, and calculate gross margin shipment by shipment.
On the document side, common practice is to issue a switch bill of lading (switch B/L) and a new commercial invoice; if the buyer pays by letter of credit, the switched documents must also comply with its terms. For compliance, the intermediary should keep bills of lading, warehouse receipts or tracking records that prove the goods genuinely moved, for bank review and foreign exchange checks.
How Tranexio supports it
Tranexio supports entrepôt trade as one of the trade models in the current release: purchase-side and sale-side contracts are linked and settled independently, documents can be issued on sale-side terms, and receipts, payments and gross margin on both sides are summarised per shipment. See Entrepôt trade.