• China Export Licenses and Permits: A Complete Guide

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    Today, most suppliers in China hold export licenses. But, it was not always that way, and there are still factories that lack them.

    In this article, we explain what Importers must know about Export licenses in China – and how you can buy from a suppliers without one.

    What is an Export license?

    An Export license, or Export permit, is a document issued to companies by China’s Ministry of Foreign Trade and Economic Cooperation.

    The Export license is required for shipping goods out of China. Without such a license, the cargo will not be cleared through the Chinese customs.

    As such, most export oriented suppliers, both manufacturers and trading companies, hold Export licenses.

    Shall the Supplier or the Buyer apply for the Export license?

    The Export licenses are only issued to Chinese companies, that wish to export goods from China to overseas markets.

    Hence, overseas buyers don’t need to obtain license or permit in China.

    Export License

    Do buyers need to pay any export fees or taxes in China?

    Overseas buyers are not required to pay any import duties or taxes in China. However, there is a set of ‘Export clearance fees’ that are ultimately paid by the Importer, on a per shipment basis.

    However, the all such costs are included in the FOB (Free on Board), CIF (Cost Freight Insurance) and DAP (Delivered at Place) price quotations.

    As such, many Importers are not aware that they are paying these export fees (and perhaps more importantly, not bothered by it).

    If you import goods via EXW (Ex Works) terms, the supplier is not including the export fees in the quoted price. That is still not a way to reduce costs, as you must still pay it to another party in the end.

    Why do some suppliers not have Export licenses?

    In the past, say 10 to 15 years ago, it was relatively common that manufacturers did not obtain export licenses, and therefore relied on trading companies and export agents to export the cargo.

    There are various reasons for this. First, obtaining an export license used to involve a lot of bureaucracy, and it came at a cost too.

    Things have changed, and China is far more business friendly in 2017, as compared to 1997.

    In addition, the production cost is higher, resulting in less profit margin for manufacturers to share with trading companies.

    That said, there are manufacturers, that to this day, lack export licenses. These tend to be smaller manufacturers, without direct exposure to other markets.

    In many cases, they act as specialized subcontractors, only focused on making a certain kind of material, component or processing for a larger – and more export oriented – manufacturer.

    Should we only work with suppliers that hold an Export license?

    In most cases, the answer is Yes, you should only work with suppliers that hold an Export license.

    Export licenses are sort of taken for granted these days. As such, you should on the other hand not assume that a manufacturer is qualified, only because they hold an Export license.

    While ‘having a license’ may not add a single point to a suppliers score, ‘not having the license’ does take many points away – as it comes with negative implications for your business.

    As I mentioned, manufacturers that lack Export licenses are normally not exposed directly to overseas markets.

    While such factories can be slightly cheaper, they come with a whole range of issues for the buyer:

    1. You need to navigate the bureaucracy of exporting the goods out of China

    2. They only communicate in Chinese, as they don’t have a need to hire English speaking sales representatives.

    3. The role of the Export manufacturer is generally to keep track of their subcontractors, and implement some sort of quality assurance procedures. If you cut them out, then you must manage quality ‘on site’ in the factory. Don’t rely on them to do it for you.

    4. Need to ensure compliance with a whole range of product safety standards? Don’t ask this type of factory for help. They can’t even spell “REACH”, and have never even heard of CA Prop 65.

    Can I get a lower price from a manufacturer without an Export license?

    Yes, you can get a lower price. However, the slight reduction in cost is guaranteed to be a fraction of the extra costs, and not worth the risk, resulting from all the extra processes and administration required – when working with small ‘unlicensed’ factory.

    The only buyers that can save costs by going further ‘upstream in a supply chain, are those that meet the following two criteria:

    1. Buy large volumes on a yearly basis, to offset the extra administrative costs.

    2. Have a permanent presence in China, to manage the operations.

    Hence, you need to take the role of the ‘Export manufacturer’ to offset them. This is the way many established brands operate in China.

    How can suppliers without a license, export product?

    Suppliers without the required license, can use an Export agency.

    When the supplier receives an order from overseas, the supplier issues an invoice to the Export agency, which in turn holds an export license, and issues an invoice to your company.

    Once the Export agency receives the funds, they forward the money to your supplier.

    This is of course not done without a fair commission, normally set at between 2 to 3% of the total order value.

    Notice that an Export agency is not operating in the same way as a Trading Company. The latter is actively marketing and selling products, often within the same category but produced by many different factories.

    An Export agency does none of that, and its only function is to ‘rent’ its export license (and other permits) to smaller factories in China.

    What should we think about before paying an Export agency?

    The main issue you are facing, when paying an Export agency, is that the bank account beneficiary is not the same as the manufacturer.

    If something goes wrong (for example, quality issues or a failed lab test), you can be sure that the Export agent will not take any responsibility.

    On the other hand, how can you prove that the supplier is responsible for the failure, if they claim that they didn’t even get paid? (Remember, you paid the Export agency, not to the manufacturer’s bank account).

    To avoid this kind of situation, you need to do as follows:

    1. Identify the company name, address and bank account details of the export agency;

    2. List all their information in the sales agreement;

    3. Also state in the sales agreement that the supplier must accept a payment to the specified export agency account;

    The objective is to prevent the supplier from using any excuse, involving the Export agency, to delay your order, or justify quality issues.

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  • 27 Responses to “China Export Licenses and Permits: A Complete Guide

    1. Vladimir at 1:22 pm

      Hello! How many chinese companies have some export licenses (permits)?

      1. ChinaImportal at 6:11 am

        Hi Vladimir,

        Most suppliers who are focused on the export market have an export license these days

    2. SILVINA at 10:49 am

      Hello, where did you get all these information?

      1. Fredrik Gronkvist at 11:53 am

        It’s mostly based on our own experience, just like the other articles here on Chinaimportal.com

    3. Martin at 2:13 am

      Hi,

      Any idea what is costs Chinese companies to get an export licence – from scratch and also for a new item they do not currently export. Supplier claims they don’t have a licence to export spare packaging material – empty cartons – for the products they ship to us.

      1. Fredrik Gronkvist at 11:25 am

        Hi Martin,

        Sounds strange. I have never heard that a separate export license is needed for packaging materials.

    4. Martin at 12:03 am

      Thanks Fredrik,

      Any idea what the price range is for an export licence in China?

    5. filip at 6:49 pm

      can company reclaim vat without export licence ?

      1. Fredrik Gronkvist at 10:12 am

        Hi Filip,

        Not directly, but through an export agent

    6. Edmundo at 7:19 am

      Hello Fredrik,

      Thank you so much for all your insights! They are really helpful.

      Fredrik I have a question, I have been looking to source some backpacks from some 1688.com suppliers but both of the suppliers I would like to work with do not have export licenses and also do not have a USD account. Do you recommend using an export agent that the chinese manufacturer would arrange? Since I don’t speak chinese I wouldn’t be able to handle that procedure and it would all be in their hands.

      Also, I would need a PI for legal purposes, should the PI be made by the supplier or by the export agent that is actually sending out the goods? And also, who should I pay and how?

      I know this is a long question but I would really appreciate your advice.

      Thanks!
      Edmundo

      1. Fredrik Gronkvist at 10:50 am

        Hi Edmundo,

        I don’t recommend using 1688.com at all, because it’s for domestic trade within China – not for exporting.

        You better source suppliers on Alibaba.com or Globalsources.com

        If you end up using an export agent, then the PI is issued by the export agent – which receives the payment.

    7. Gerry at 4:12 pm

      Hi, Thanks for the info Fredrick.

      Quick question, how do the export agent deals with special certificates? They have to include the name of the factory in various certificates, like for the origin of the product, right? so will the buyer receive an invoice from the agent and all related certificates from the manufacturer? wouldn’t that be tricky when clearing customs?

      Also, is it true that subsidiaries collect the payment from the “mother company”, just add U$S 1 to the invoice received by the manufacturer and then export the goods with it`s own export license? is the only reason to “cover up” their supplier`s names?

      Thanks a lot!

      1. Fredrik Gronkvist at 7:24 pm

        Hi Gerry,

        1. What certificates are you referring to?

        2. No, not always. Sometimes they use Hong Kong companies, other times the payment goes directly to the factory.

    8. George at 4:41 am

      Hi

      Would you that MadeInChina.com is reputable?

      Best wishes

      1. Ivan Malloci at 8:16 am

        Hello George,

        Madeinchina.com is a B2B directory, like Alibaba.com and Globalsources.com. Even if the first 2 are more popular, Madeinchina.com is also there since longtime.

        However, what’s more important is to select the right supplier, among the ones you find in a given directory (often you can find the same supplier in more than 1 directory).

    9. nahian at 3:46 pm

      thanks for this valuable information

    10. RTE at 4:19 pm

      Hi,
      If we are purchasing or importing from Aliexpress then who is responsible for the China custom clearance – (1)Aliexpress (2)Supplier.
      If Alibaba is responsible for the custom clearance the on the imported product Alibaba name and address should appear. which does not happen.
      If supplier who posted on Alibaba is responsible then on the imported product suppliers name has to appear. which is currently happening.
      So don’t you think that Alibaba/Aliexpress should check the licenses of the supplier which they are posting on there website?
      Similarly, the if we are importing some material/item from Amazon then Amazon should check the export licenses of these suppliers which they are posting on their website.
      Is it happening in real life?

      1. Fredrik Gronkvist at 8:08 pm

        Alibaba do check the business license of all Gold Suppliers, and they cooperate with third parties to verify ISO and other certificates.

    11. RTE at 12:37 pm

      It’s good that Alibaba verify business licenses but are they verifying Export licenses too? because they are selling the products online to any country.
      And how about Amazon?

    12. RTE at 12:54 pm

      Also why alibaba permits other suppliers than Gold Suppliers for international deliveries? May be that’ the reason we receive these products as GIFT and not through the complete business process. Alibaba promoting it, does it loyal to the country?

      1. Fredrik Gronkvist at 10:38 pm

        Not sure which company you refer to. The freight forwarder?

    13. Luis at 12:16 am

      Hello mate! I hope you are good!! I have a question, I need to know the ID/
      TIN number of a Chinese Company. How do I get it?How do I find out it? Many thanks!!

      1. Fredrik Gronkvist at 10:24 pm

        Are you referring to the business license number?

    14. Divan at 3:22 pm

      I already did the Legwork of Finding the Suppliers Factory and Distribution shop mostly they are in the area of GuangZhou can you recommend on how to find Freight Forwarding Companies/Agents in DongGuan to handle my small company orders in Receiving/Buying the goods from my chosen suppliers to be shipping out. and can walk through us to the process? or the BANKS could help?

    15. Divan at 3:25 pm

      The Supplier Companies should provide it themselves to you if they Don’t they don’t have a Business License.

    16. Jasper Lyons at 10:52 am

      Hey Fredrik

      Thanks for all the insights.

      I’m looking at 1688 as a cheaper alternative to Alibaba as I live in China. I could, in theory, have the goods sent to my Chinese address and I then post them on (using fedex, DHL) to the US.

      The goods in question (at this time) aren’t substantial – maybe max 50kg. Would this also have problems at customs as I personally don’t hold an export license, or would this be OK?

      Jasper

      1. Fredrik Gronkvist at 7:19 pm

        Hi Jasper,

        Yes, you will not be able to ship the items outside of China without an export license. Further, you’ll also pay VAT on all purchases as the transaction is domestic.

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