Demand for Chinese products is surging. In October 2021, the Chinese export market amounted to $300.22 billion – a 27% increase on the previous year. There are many reports of widespread rapid economic development and a rise in the Chinese middle class.
Over the last decade, trade regulations have also opened up – making it easier for suppliers to apply for things like an export license and build strong bonds with e-commerce sellers worldwide.
This article will explain what a China export license is and how it could affect small e-commerce brands when choosing Chinese suppliers to manufacture and ship their goods.
What is an export license?
An export license is a legal document that permits manufacturers to export their goods to other countries. In the case of the Chinese government, export licensing is managed by the State Administration of Foreign Exchange (SAFE). If a China-based manufacturer wishes to sell their goods to international customers, they must first apply to the relevant regulatory body and then verify their export license with their bank in China.
Why is it important for Chinese suppliers to have an export license?
If a supplier or manufacturer doesn't have a China export license, CNH or CNY payments made from international sellers can be blocked by SAFE. Any goods ordered through an unlicensed seller can also be halted at the border by Chinese customs agents. Therefore, marketplace sellers intending to buy Chinese products must check on their suppliers' export license paperwork.
Do all Chinese suppliers have export licenses?
Previously, export licenses were handled by third-party trading companies or export agents; this meant that manufacturers had to go through one of these third parties to sell their goods in other countries. However, the majority of Chinese manufacturers and suppliers now handle these regulations internally. Export agencies still operate in China and can help domestic companies meet export compliance laws. In most instances, an export agency will charge around 1% on the cost of the exported goods.
It's also the case that some manufacturers in China don't carry an export license. The majority of these suppliers are companies that manufacture components. In these instances, they will likely only sell to other domestic businesses that specialise in product assembly and do not sell to international customers directly.
Who is responsible for applying for an export license?
The Chinese manufacturer or supplier is responsible for applying for an export license. Alternatively, a supplier may seek the help of a third-party trading agent who can help them meet the legal exporting requirements.
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What is included in a Chinese export license application?
Suppliers looking to export from China need to fill in a People's Republic of China export application including the following information:
- Details of the shipped goods, including name, specifications, unit price, quantity, shipping destinations and payment details
- Business details, including an annual export plan and copies of contracts they have in place with international buyers
Do international buyers have to pay export taxes or fees on Chinese goods?
You don't have to pay specific export taxes on Chinese products. However, there are fees associated with exporting goods, which in all likelihood, are included in the product price.
The export costs included in the price are broken down into three charges:
- FOB (Free On Board),
- CIF (Cost, Insurance, Freight)
- DAP (Delivered At Place)
In some cases, buyers may also encounter Ex Works (EXW) costs. EXW is an arrangement where the seller delivers goods to an agreed location (usually the nearest port). The buyer is then responsible for covering the cost of export procedures from that point forward. Further, with EXW, the buyer may also be responsible for covering any losses made during the goods' loading, transport, and delivery.
How do I verify a Chinese supplier’s export license?
As an e-commerce brand, you must maintain good business practices and verify your suppliers to ensure they comply with export regulations. Use verified marketplaces such as Alibaba.com as they provide a direct communication link to manufacturers. Once you have found a supplier, you can request a copy of their China export license documentation and verify the information. Any reputable manufacturer utilising marketplace platforms such as Alibaba should be forthcoming when asked to provide their export license documentation. A valid export license will include:
- Company name
- 18-digit registration number
- Entity type
- Official address
- Legal representative
- Date of establishment
- Registered capital
- Expiry date
- Business scope
- QR code linked to China's National Enterprise Credit Information System
Note: Chinese export licenses are written in Chinese. Therefore it is advised to get in touch with a Chinese supplier agent to help you check the documentation. These agencies can also put you in touch with licensed Chinese suppliers that meet your specific needs.
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