By Tony Li    Photo：CANVA

Triangular trade refers to a trading method between importers and exporters in which a third-party intermediary (such as a domestic company) purchases goods from a supplier in a third country and then resells them to a foreign buyer. The goods may be shipped directly from the supplier to the buyer, or they may be re-exported through the intermediary’s country. This trade model allows intermediaries to earn profits from price differences while protecting the original supplier’s commercial secrets.

Common Types of Modern Triangular Trade

1. Re-export Trade
   Country A produces goods and exports them to Country B.
   Country B does not manufacture the goods itself but acts as a trade hub, re-exporting them to Country C and earning the price difference.

Examples:

Electronics made in China → re-exported through Hong Kong → to the United States.

German auto parts → transshipped through Singapore → to Indonesia.

*Hong Kong, Singapore, and Dubai are classic examples of re-export trade hubs.

2. Processing Trade / Triangular Settlement
   Country A provides raw materials → Country B performs processing → finished products are exported to Country C.
   However, payment may be made directly from Country C to Country A, or settled by a third-country company.

Example:
Japan supplies components → Vietnam assembles → exports to Europe → profits are settled by Japan’s headquarters.
*This model is very common among multinational corporations, such as major smartphone and automobile manufacturers.

3. Triangular Trade for Tax Avoidance or Trade Restriction Evasion
   To bypass tariffs, trade barriers, or political sanctions, companies may use a third country as an intermediary—often referred to as “origin washing.”

Example:
Country A is under a trade ban with Country C.
A company uses Country B as an intermediary: A → B → C.
The goods ultimately reach Country C, but shipping documents list “B” as the exporter.
***Many countries and regions now strictly monitor origin washing. Importers are often required to provide a certificate of origin; failure to do so may result in high tariffs or fines.

Why Use Triangular Trade?

• Protect Business Confidentiality:
  Intermediaries may not want buyers to know who the actual manufacturer is, to prevent buyers from bypassing them.
• Leverage Professional Expertise:
  Utilize intermediaries’ experience, technical knowledge, and international trade networks to facilitate transactions.
• Earn Profit Margins:
  Intermediaries make profits through buying and selling contracts even though the goods never physically enter their own country.

Features and Functions of Triangular Trade

• A Product of Globalization: Reflects the division of labor within global supply chains.
• Profit Enhancement: Adds value through re-exporting or processing.
• High Flexibility: Helps businesses avoid trade barriers or shipping restrictions.
• Risks: Involves tax, certificate-of-origin, and legal compliance issues.

Additional Note

Triangular trade customs declaration refers to a trading method where a domestic company purchases goods from a third country and resells them to an overseas buyer.
Although the goods do not physically enter the domestic market, the domestic company handles the customs declaration process.

In the past, this required two separate declarations and customs clearances.
However, if certain conditions are met (such as containerized cargo handled at the same logistics terminal), traders may now use a “combined import-export declaration” for one-step customs clearance, significantly saving time.

Appreciate if you could share TGL Blog among your friends who are interested in first-hand market information of supply chain and updated economic incidents.