By Richie Lin    Photo：CANVA

Medical devices are immersive in our daily life, and they become increasingly important because worldwide populations are aging. And medical devices are typically classified into risk-based classes such as Class I (Low Risk) – Tongue depressors, bandages, manual wheelchairs. Class II (Moderate Risk) – Syringes, infusion pumps, powered wheelchairs. Class III (High Risk) – Implantable pacemakers, heart valves, spinal implants. In the United States, FDA regulates medical devices as Class I, II, III. However, MDR (Medical Device Regulation) of EU has stricter Class I, IIa, IIb, III for medical devices. China is the largest single-country player in the medical device market. In 2024, it accounted for approximately 31.4% of the APAC region's market share for manufacturing and around 13% worldwide. USA has been the number one market for medical devices but the tariffs and ongoing conflicts between USA and China have pushed many USA companies to explore other markets than USA. However, USA companies are afraid that their Chinese suppliers will contact their customers directly if Chinese suppliers find out the final buyers in the other countries. Now, USA companies can utilize a 4PL warehouse in China's Free Trade Zone to optimize their global logistics while maintaining strict control over customer information and supply chain security.

1. Who needs Free Trade Zone:

• Primary Users:
  • U.S. importers and distributors seeking to expand to new regions such as the EU, ASEAN, Middle East, or Latin America.
  • Asian manufacturers supplying multiple overseas markets.
  • Logistics providers (3PL/4PL) managing complex, multi-country supply chains.

2. What Chinese Free Trade Zone can do:

• Definition:
  A Free Trade Zone is a special customs-supervised area in China. Goods can be imported into the zone, stored, processed, and re-exported without paying duties or VAT unless they enter China’s domestic market.
• Core Functions:
  • Bonded warehousing (duty-free storage).
  • Light processing, assembly, relabeling, and repackaging.
  • Quality inspections and compliance checks.
  • Vendor Managed Inventory (VMI) with real-time data.
  • Serving as a global distribution hub.

3. Where are Free Trade Zones:

• FTZs are strategically located near major ports, airports, and trade hubs such as:
  • Shenzhen (Pingshan) – close to Hong Kong and Pearl River Delta supply chains.
  • Shanghai, Ningbo, Tianjin, Guangzhou – positioned along China’s busiest trade routes.
  • Inland hubs (e.g., Chengdu, Chongqing) connected by rail to Europe.

4. When do you use Free Trade Zones:

• FTZs are most beneficial when:
  • U.S. companies want to test new overseas markets without committing to local warehousing in each country.
  • Businesses aim to avoid double taxation when products pass through China but are not sold there.
  • Confidentiality is important (suppliers deliver only to the CBZ, not direct to end customers).
  • Companies require faster response times to fulfill international orders from a central hub.

5. Why you need Free Trade Zone:

• Advantages for U.S. Companies:
  • Cost Efficiency: Goods stored duty- and VAT-free until final destination is decided.
  • Flexibility: Repackaging, relabeling, and customization inside the zone.
  • Confidentiality: Customer information is protected from factories.
  • Market Access: A single CBZ hub can support distribution to multiple countries.
  • Risk Reduction: Mitigates exposure to U.S.-China trade tensions by enabling non-U.S. market distribution.

6. How does Free Trade Zone function:

• Operational Flow:
  1. Products from suppliers are shipped into a CBZ in China.
  2. Goods are cleared into the bonded zone (considered exported from the factory).
  3. Within the FTZ, goods can be inspected, repacked, labeled, or consolidated.
  4. Goods may be:
     • Re-exported worldwide (no duties or VAT paid in China).
     • Imported into China if sold domestically (duties and VAT apply at that point).
  5. Customers benefit from real-time inventory tracking and flexible global shipping.

By moving products into the Free Trade Zone, goods are considered exported and no longer belong to the factories, effectively isolating customer details from the manufacturing side. However, to fully leverage the benefits of this model, it is essential to understand and implement the correct operational procedures at every stage — from export customs clearance, warehouse receiving processes, and rigorous storage management, to the handling of documentation, and distribution of goods. Below referential procedures in Free Trade Zone:

1. Move products into the Free Trade Zone:

To Move the products into free trade zone means deliver the products to the foreign territory. So, it must finish the export customs clearance by following below processes.

✔ Preparing the shipping documents (customs declaration forms, commercial invoices, packing lists).
✔ Sending the truck information to free trade zone (driver’s name, truck registration, truck weight and cargo weight).
✔ Sending export customs clearance (truck cannot go into free trade zone until finished export customs clearance).

✔ Sending customs entry to shipper to confirm finishing customs clearance (normally shipper can use the customs entry to process the VAT refund from government)

2. 4PL Warehouse Receiving Process:

After entering the free trade zone, products will need a warehouse to be accepted and stored for a period before selling to the final customers:

✔ Inspection and verification against critical information (purchase orders numbers, invoice numbers, product codes, product names, lot numbers, expiration date)
✔ Status labeling of received goods (ensuring clear identification such as accepted, quarantine hold).
✔ Proper handling of damaged or questionable goods, preventing them from entering the export stream until problems are fixed.

3. Storage & Inventory Management: Traceability Drives Compliance

Warehouse needs to store the products safe and sound and keep real-time inventory all the time:

✔ FIFO/FEFO (First-In-First-Out / First-Expired-First-Out) application: preventing from delivering latest products to the customers instead of the oldest ones.
✔ Lot and batch traceability: critical for regulated products such as medical devices or pharmaceutical products
✔ Stock rotation and cycle counting: prevent outdated or non-compliant stock from being shipped
✔ Temperature monitoring logs: supporting product quality evidence during customs checks

✔ Pest control and sanitation records: particularly important for medical devices or pharmaceutical products

4. Product Handling & Distribution: Preparing for Export

When products are really sold to final buyers, warehouse will prepare the products and documents to ship out from free trade zone to other countries:

✔ Picking, packing, and labeling must align with shipping documents and regulatory requirements
✔ Preparing documents to declare customs to leave free trade zone: including packing lists and invoices, must be accurate and readily available
✔ Transportation to worldwide customers: arranging ocean freight, airfreight to final buyers after finishing customs clearance outbound from free trade zones.

5. Nonconformance & Quarantine Areas: Risk Containment

Sometimes, the products moved into free trade zones might have quality issues, so the 4PL warehouses must have:

✔ Clear documentation of nonconforming products
✔ Defined disposition processes: whether rework, disposal, or return to supplier
✔ Strict segregation procedures, ensuring NC products cannot mix with export-ready goods

For USA medical device companies, a 4PL warehouse in the Chinese Free Trade Zone provides a strategic global hub that reduces costs, increases flexibility, and simplifies multi-country distribution. It enables companies to store, manage, and re-export products from China to other global markets without paying Chinese import duties, making it an effective tool for international market expansion.

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