How to face the frozen account problem during normal business operation?

Here is Rita, today I want to talk about the headache issue happened in 2020 year and which will last for a long time. Too many China personal accounts have been frozen due to payment from foreign buyers, especially from India, Pakistan, Nepal, Malaysia, Indonesia, Thailand, etc. The buyers from these countries prefer to transfer RMB payment to personal account of their China suppliers.

During this year your China suppliers always sent message to inform that their account was frozen and need to provide new account when the buyer has the transfer action. Sometimes, the buyer does not notice their message and ask the agent to transfer to the old account, and they will say it is the buyer’s mistake and they would not give delivery or arrange production immediately.

The buyer will feel it is so sudden and innocent on this issue. Because as the buyer also did not know who is the final remitter, what problems with the final remitter.

In Guangdong and Zhejiang province, this problem is widely coverage. The account will be frozen by 3 days, 1 week, half a year, one year, even 2 years. Usually, it is frozen by half a year, all the money in the account cannot use. It causes big cash flow burden on the factories’ side.

Why our government did this action so frequently, the aim is to control crime from overseas fraud, telecom fraud, money laundering, and other illegal activity. Now the police in different province have the right to block the suspect account in another province in order to enhance their work efficiency. The money from overseas and unknown exchange agent usually comes from the underground channel, then it would easily have legal problem during the whole transfer stream. The whole transfer stream looks like a tree which has many branches.

What need to do after suffer the block account problem.

Now I give some personal suggestions which would solve the problem:

Go to the bank to check the frozen period, if less then 3 months, it is better to wait. If more than 3 months, to get the contact information of police who did this action on your account.
Contact the police person and know which amount exactly has problem. To chat with the police and explain your own export business is fully legal. To remember, to talk gently and smartly.
To prepare all the related documents with this payment amount, such as, PI, sales contract, packing list, warehouse receipt list, Bill of lading and your factory busines license, ID copy, etc. All the documents with stamp and signature prove that you deal with legal export business.
Then go to the police office in another city with your colleague or your leader, it is better not to go alone. Because that police office is always located in the uncrowded place.
If the police agree with your given documents, and then they would apply to give your account the release. You are so lucky without any loss. But mostly, you need to return the problem payment to police account, and then get the release. If the problem amount is big, please not easy to return.

Anyhow, this process would suffer some loss, it is unavoidable.

Now I want to provide some legal ways or methods for suppliers to handle the income payments with foreign buyers.

The factory is needed to apply the Export license under current economy environment and gets own USD/foreign currency account to receive payments from company accounts of your buyers. You can take USD, EURO, or off-shore RMB, but need to change quotation way with consideration of tax charge and tax refund percentage. I prefer to quote based FOB terms in USD currency.
To cooperate with the professional Imp/Exp company or service agent, they have background of nation-owned enterprise and good relationship with the tax and customs institutions. They will charge 0.8%-1% service fee based on the income amount. But they will guarantee your money safety and transfer money to your company account by RMB and the tax refund. They will help you to do export clearance process and container arrangement. Less headache on factory side. They will give professional guide on the whole process, even the factory does not know too much about it. By this way, the factory needs to issue the formal 13% tax paper to this service agent which causes the cost.
To open the HK off-shore company and HK bank account which can help to receive payment easily. HK bank also has restricts on some sensitive countries’ income, such as, Iran, Iraq, Isreal, some East-European countries,etc. But one problem is how to exchange the USD in HK account to mainland account. If you are the trader, you can transfer the order amount to your suppliers, and just transfer the balance profit part to own mainland account, it would be easier, because this profit amount is not big compared with order amount. At the meanwhile, for the export process, it needs to buy export documents.
To cooperate with the new third-party agent which you can treat as the international Alipay, such as, XTransfer, iPaylinks, Panpay, Alibaba,etc. They charge less fee with 0.4% about and with flexible operations. But they have high requestment for allowance on opening. By this way, it needs to get trust from the foreign buyers, due to the business contributes of the third-party.

What suggestions on the buyer’s side?

As the foreign buyers, they should try to know whether their transfer channel is 100% clear or not. If it has risk, let the supplier know the potential problem in advance and make agreement.
We know the buyer transfers through their company account, it will increase the tax and also accompany with many inspections from their government. But now the trend to handle the payment by company account is coming. The buyers must consider to balance the increasing cost during the marketing and selling channel.
For the medium buyers, if can overcome this barrier, surely develop a lot in near future. Long pain is worse than short pain.

Now you would have clear idea on the problem of frozen account. You need to communicate with your suppliers, especially the new suppliers, for the way of payment in advance. If you must pay them by RMB through some grey channels, also tell them and clarify the risk boundary.

Thanks for your reading, please give me a “LIKE” and I will share more useful and original articles related with different aspects of international trade. Also you can subscribe my YOUTUBE channel, click the following link:

https://www.youtube.com/channel/UCduAQc4aDVldAlYk571ATHg

Rita is always here with you! Welcome for talking!

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