Our client is a North American-based entrepreneur who began sourcing home appliances in China in the mid-1990s and importing them to his warehouse in Canada, for sale to Canadian Tire. Five years ago, Canadian Tire began insisting on buying his product direct from Asia, cutting out intermediary costs and taking advantage of economies in shipping and insurance. Unless our client could find a way to sell on an FOB basis, he would lose his business.

SOLUTION:

ICS TRUST has established a strategic working partnership with this company, allowing its president to focus on finding and selling his product, while ICS TRUST handles all of his day-to-day commercial activities in Hong Kong – banking, accounting, invoicing, managing letters of credit, liaison with factories in China. To ensure our client can operate a successful trading business, we have done the following:

1. Strategic Structuring Advice: Working with our client and his vice president, we devised a customized solution allowing them to sell FOB Asia, using Hong Kong as their base.
2. Hong Kong Structuring: We established a Hong Kong subsidiary of the Canadian company in a "virtual office" environment, to act as their international sales and marketing arm.
3. Trade Services: We act as the client's trading back office in Asia. Our staff receive orders from their customers, place orders on their vendors, and book trading revenue in Hong Kong.
4. We receive and transfer international letters of credit (L/Cs), review shipping documentation, prepare bills for collection and instruct the bank to retire them when due. We also liaise with the vendor, the customer's buying office and freight forwarder as required to ensure timely shipments in accordance with the terms of the purchase orders and L/Cs.
5. Banking: We set up all bank accounts required, including L/C accounts. ICS TRUST is a signatory to the accounts to facilitate timely transactions on an Asian-time basis (while head office staff are sleeping).
6. Accounting: We prepare management accounts for the head office and annual financial statements. We will have the statements audited in accordance with Hong Kong law.
7. Taxation: We helped the client to achieve a zero-tax rating on his Hong Kong profits. We also succeeded, working with his Canadian tax advisors, in establishing the Hong Kong subsidiary as an "active trading" company in the eyes of Revenue Canada, allowing our client to defer tax on his income in Asia. We continue to advise on Hong Kong taxation, and to respond to the Hong Kong Tax Department's queries regarding his annual accounts.

CONCLUSION:

Not only did our client maintain his business with Canadian Tire, he also used his Hong Kong company to establish relationships with other large retail chains in North America, such as Wal-Mart and Sears. In his first two years of operations, his business grew rapidly, and in 2003, his Canadian company and its Hong Kong subsidiary were bought by a large, listed US company for US$600 million. He remained in control of his division within the larger company, and continues to use ICS TRUST for all of his trading transactions in Asia.