Exporting from China…
We have often been asked by our customers to clarify the situations where an export license is needed, which is why we have naturally decided to create this article for you. After having read the first part of this article, you will know exactly how and where to get an export license adapted to your goods. You will see that this is highly related to the type of the items, their volume and their incoterms. Moreover, we advise you to take into consideration each detail because it may be very helpful and allow you to save precious hours.
1.1 Your responsibility in export license when it comes to incoterms
An export license is necessary for a foreign trade company (FTC) as soon as it wants to export goods from China.
However, it is possible that you may not have to follow this process if you have bought goods that are under the incoterm FOB (free on board). This label signifies that the cost of the export license takes part in the price that you have paid.
SINO Info: In China, roughly 90% of the exported items have been sold under FOB. Nevertheless, it is always important to know how it works in order not to be surprised.
Furthermore, the FTC that are directly concerned are those that export goods via EXW (Ex Works) incoterm. In this case, the supplier is not including the export fees in the quoted price. It means that you have to take care of it.
1.2 What is an export license and who delivers it?
An export license is a document that gathers information about the exporter, the buyer, the cargo, the value and the mode of transportation. As a certification, it is a means for a country to control the legality of exportations and to regulate them. Indeed, by deciding whether to deliver or not a license to a company or a private individual, a country can restrict or even more prohibit exportations of certain items. The objective of these regulations consists in meeting the demand of the domestic market and then in fitting the national economy the better way.
1.3 What is the validity time of the export license?
The validity time of an export license depends on the delivery date that is established in the contract. Usually, an export license expires about six months after it is issued. An exporter can apply for a two-months overtime if the goods are not exported during the license validity time.
SINO WARNING: You need an export licence for shipping goods out of China. Without such a license, your cargo will not be cleared through the Chinese customs.
There are two types of export license in China, known as the general licence and the special licence:
- General export licence: when a FTC has a general license, it does not have to apply for an export license as soon as it ships goods out of China. Indeed, in this case, the general export license is valid for any transaction that respects the approved scope of business.
- Special export licence: The MOFCOM regularly publishes a list of restricted items. If a product is listed as a restricted item, a special license must be applied for, for every shipment.
3.1 Who is responsible for the validity of the export license?
The only companies that are concerned by the export licenses are the Chinese companies that export goods from China to worldwide markets. Indeed, overseas buyers don’t have to get a license neither a permit in China.
In general, it is the responsibility of the exporter to ensure that a valid export license is issued. Of course, many smaller manufacturers do not hold export licenses, and will expect the freight forwarder to help them to find a FTC that holds an export license.
3.2 Different steps to get an export license
The MOFCOM is in charge of issuing export licence, in the situation where you would not have chosen the FOB price quotations.
Concretely, the law stipulates that companies wishing to export have to:
- Be recognised as an exporter by the Ministry of Commerce (MOFCOM),
- Register with the local foreign trade department to become a so-called Foreign Trade Company (FTC)
- Apply for an export license
Applicants have to submit written applications to the issuing authority, that is to say the Ministry of Commerce.
a) How to apply for an export license?
Concretely, in the written document, you would have to provide those things:
- Related to the item: The name of the export items, their specificities, the destination countries and regions, the quantity, the unit price, the total amount, the delivery date, the form of payment
- Related to the kind of company: the original contract (or copy) for the FTC, the approval by the competent department for the foreign non-trade companies
Moreover, you have to make sure that you have all the required documents. As an example, if you want to export books and magazines, you will need the approval of the department of publication. When it comes to exporting famous painting or whatever type of art, it would have to be approved by the Ministry of the Culture.
SINO Warning: Be careful, when you apply for an export license as a FTC for the first time, you need to provide the copies of the approval of the establishment of the company and the company régulations.
b) Verification and Form Filling
After having started to verify that the file is complete and respects norms, the applicant wiol fill in the People’s Republic of China export license application form.
c) Issuing of the License
Finally, within 3 working days after having received the application forms, the authority will issue the Export License of the People’s Republic of China.
Example of an export license
The China’s Ministry of Commerce has classified goods in three categories in order to determine what type of export license is required for each goods: the permitted goods, the restricted goods and the prohibited goods.
4.1 The permitted goods
This category is automatically licensed, that is to say that you need a license to ship goods out of China but this latter will be issued automatically on application. The automatic license is valid for six months, and you may have up to six batches of goods on it.
4.2 The restricted goods
These goods can be exported, but either license approval or annual quotas allows their control and their regulation. This type of goods can be exported but an approval has to be issued for each shipment, knowing that its validity time is one year.
5/Exporting from China …
You need to export from China to Northern America, Europe or Asia? That is why Sino Shipping’s expert team helps you to understand the specificities of each country when it comes to importing goods from China. In this second part, you will find reliable information about the customs clearance, the demands regarding goods’ control and regarding import licence or permit.
a) Identify your import rights in the U.S
First of all, you would have to identify your import rights, that is to say, if you can actually import goods into the U.S. Indeed, some types of goods and services require a license or permit to import into the U.S. as a part of your business.
In most cases, you will not need a license to import goods into the U.S. But, for certain goods being imported, some agencies may require a license, permit, or other certification.
Remark SINO: Many import regulations only apply to goods imported for commercial – business or resale – purposes. Not to mention that only the customs authority can decided whether importations have a personal purpose or not.
b) Ensure that the goods are importable into the U.S
Indeed, certain goods are prohibited or restricted when it comes to importing them. Each country has its own list of blacklisted products. Therefore, you have to find whether the goods you intend to import are subject to any permits, restrictions or regulations by the U.S government or not.
This is really important because you are responsible for assuring the rules compliance of the product you intend to import in the country. If you were to importing unsafe that breaks the law, it would cost you money or at the very least, the goods would be detained or destroyed.
SINO Advice: Try to gather as much information as possible about the items you wish to import such as descriptive literature, product composition information and, whenever possible, product samples. Indeed, this is essential in order not to fail the custom clearance.
Moreover, two specific documentations are very important: the tariff classification number based on the Harmonized System (HS) Code and the Certificate of Origin.
- The HS Code is an internationally standardized system of names and numbers to classify traded product, established by the World Customs Organization. It determines the tariff classification number of a product.
- The Certificate of Origin is a document used to certify that the products exported are completely obtained, produced or manufactured in a particular country. It should only be issued when they are actually needed, for example to meet customs requirements in the importing process.
The tariff clarification number based and the certificate of origin are both used to determine the rate of duty you would have to pay when importing. You will have to determine the 10-digit tariff classification number for each item you import based of the HS Code.
Remark SINO: Pay attention to the Incoterms, and calculate the total landed cost before you order. Ensure that the supplier agrees to ship under FOB terms from their nearest port or airport as this will greatly reduce your shipping costs and give you more control over the shipment (as explained at the beginning of the article).
a) Customs Clearance in Australia
In Australia, it is pretty different than in the U.S. Indeed, no effective general license is needed strictly speaking in order to import goods into Australia. However, this does not signify that Australian Customs do not clear imported goods. Indeed, all goods imported into Australia must be cleared through the border.
Before importing into Australia, you would have to know if the goods you want to import need whether a specific import permit, a quarantine permit or diverse treatments or not. Moreover, you would have to know if there are subject to regulations or if there are information standards.
SINO Info: Be sure that if you don’t follow respects regulations, you would be considered to be a law-broker and you would not receive your imports. To make sure, contact our SINO Expert or check official regulation: Import in Australia
b) Ensure that the products are importable into Australia
The Department of Home Affairs is the competent authority that can provide you with information on importing goods, such as import clearance requirements and in particular what you need to know about prohibited goods and import license. Indeed, like in any other country, some goods are subject of special restrictions or even more, cannot be imported.
The cost of your importation depends on the type and value of the items that you want to import, this includes costs such as clearance fees, customs duty, goods and services tax and other tax.
If you want to import goods into Canada, make sure that you have a business number (BN) from the Canada Revenue Agency (CRA).
a) Ensure that the products are importable into Canada
Try to gather as much information as possible about the items you wish to import such as descriptive literature, product composition information and, whenever possible, product samples. Indeed, this is essential in order not to fail the custom clearance. Then, identify if the goods you want to import are subject to specific constrains.
You will have to inquire about whether the goods you want to import are subject to regulations, restrictions, import license or permit or not. The Canada Border Services Agency has listed the principal imported items that need permit or license.
SINO Info: If you posses or control goods domestically, don’t forget to register with Public Works and Government’s Service’s Controlled Goods Program relatively to the Defense Production Act (and Controlled Goods Regulations).
b) Classify the goods you want to import into Canada
After having ensured that your goods can effectively be imported, you will have to determine the 10-digit tariff classification number based on the HS Code of each of the item you import. The tariff clarification number and the certificate of origin are both used to determine the rate of duty you would have to pay when importing.
Here is the composition of an HS Code, you can now see what an HS code is and what does it mean.
a) Historic of the free-trade agreements contracted between China and ASEAN
- In November 2002, both China and ASEAN Member signed the Framework Agreement on China-ASEAN Comprehensive Economic Cooperation at the sixth China-ASEAN Summit;
- In November 2004, both parties signed the Agreement on Trade in Goods of the China-ASEAN Free-Trade Agreement;
- In January 2007, the two parties signed the Agreement on Trade in Services;
- In August 2009, the two parties signed the Agreement on Investment.
b) How to benefit from this free-trade agreement when importing?
The China–ASEAN Free Trade Certificate of Origin (E-FORM) is now valid for exportations to the main following countries: Indonesia, Thailand, Malaysia, Vietnam, the Philippines, Singapore, Brunei, Cambodia, Myanmar and Laos. It has to comply with the relevant provisions of the E-FORM. The 10 countries mentioned before can benefit from preferential tariffs (up to a 5% lower tax rate).
SINO INFO: The “Trade in Goods Agreement” defines the sample format of certificates of origin that has to be respected. The “Trade in goods agreement” Protocol II also requires a description of the contents that has to be mentioned on the back page.
Therefore, your supplier must provide us with an E-form, in order to be checked and validated by our import service.
SINO Danger: Beware! If the E-form contains errors, you will end up paying taxes. This is why we will check for you before the scheduled departure. Please note that E-Form exempts duties and taxes, but VAT is still mandatory.
a) Customs clearance in Singapore
If you want to import goods into Singapore, you have to to make a declaration to Singapore Customs.
- In Singapore, importations are regulated under the Customs Act, the Goods and Services Tax known as the GST and the Regulation of Imports and Exports Acts.
- The customs value equals the CIF cost (Cost, Insurance and Freight), that is to say the product cost, the transportation insurance and the transportation cost.
Imported goods are subject to GST and/or duty payment. Indeed, there are two categories of goods: the dutiable goods and the non-dutiable ones.
- The dutiable goods gather intoxicating liquors, tobacco products, motor vehicles and petroleum products. There are subject to both GST and duty. Indeed, specific duty rates may be applied for dutiable goods. Many products, imported from China to Singapore, are subject to Import duties. The Import duty is normally a percentage, calculated based on the customs value.
- The non-dutiable goods are only subject to GST that equals 7% of the CIF cost.
A customs permit is needed to justify the import and tax payment of the goods.
b) The steps to follow to obtain import rights
If the goods you want to import are rather restricted or prohibited, you will have to follow the steps below to obtain the relevant import permits and authorisation from the competent authorities.
- Register for Unique Entity Number (UEN) with the Accounting and Corporate Regulatory Authority and activate your customs account
- Ensure that the products are importable into Singapore
You can check if the goods you wish to import are restricted, prohibited, controlled by Competent Authorities in Singapore.
c) Classify the goods you want to import into Singapore
If the item you want to import is subject to control, the name of the competent authority will be indicated on the second column of the table of the aforesaid link. This will help you know whether an import permit is needed or not for the importation of your goods.
After having ensured that your goods can effectively be imported, you will have to determine the 10-digit tariff classification number based on the Harmonized System Code of each of the item you import. The tariff clarification number and the certificate of origin are both used to determine the rate of duty you would have to pay when importing.
SINO Warning: Please note that you or your declaring agent has to pay the duties, taxes and fees with an Inter-Bank GIRO. For this, you shall permit your declaring agent to use your IBG for the payment of duties and GST for your customs permit right after the approval of your IBG application. If you do not hold an IBG with Singapore Customs, the duties and GST will be deducted from your Declaring Agent’s IBG.
d) Apply for customs import permit
You or the agent that you have declared for helping you in this process can apply for an import permit. If you decide to do it by yourself, you will have to register as a declaring agent and apply for a TradeNet used ID.
SINO Info: You have to apply for permit via via TradeNet. It usually costs S$2.88 if you are the applicant. For more information on how to register as a declarant agent, please check here : Register as Declaring Agent (DA) or Declarant
a) The CEPA
Hong Kong and the Mainland China signed the “Mainland and Hong Kong Closer Economic Partnership Arrangement” known as the CEPA in June 2003. This agreement provides tariff free treatment to all Hong Kong-origin goods that comply with the CEPA rules of origin. Regular supplements have been signed between the Mainland and Hong Kong governments such as the Supplement VIII implemented in April 2012 and the most recent Supplement X in 2013.
However, despite the free trade of many goods, some of them are prohibited. Indeed, goods that are subject to the tariff preference under the CEPA do not include those prohibited by the Mainland’s rules and regulations. Moreover, those goods are prohibited most of the time because the Mainland’s government is engaged in international treaties or has committed in relevant international agreements.
b) Excise duties
Hong Kong was ranked the freest economy in the world for the 24th consecutive year in the US Heritage Foundation’s 2018 Index of Economic Freedom.
There is no tariff on goods entering Hong Kong. There is no tariff on goods entering Hong Kong but four groups of goods are subject to excise duties, whether they are imported or manufactured locally, for domestic consumption:
- Certain hydrocarbon oil (motor spirit, aircraft spirit and light diesel oil),
- Liquor with alcoholic strength more than 30 per cent by volume,
- Methyl alcohol
- Tobacco (other than smokeless tobacco).
In first semester of 2018, 1.2% of all imports were subject to excise duties.
a) European Community Marking
Is this certification mandatory?
For certain types of goods, this marking is mandatory because it will assure the products’ compliance with health and security-related regulations required by the European law.
If the goods do not have the European Commission marking, or if they are declared not to comply with it, they could not be introduced on the European market.
Why is it necessary?
The EC marking does not refer at all to the goods’ quality. Indeed, it is a security proof that assures the respect of norms in force in the European Union. The products are subject to “mandatory conformity process” before being certified.
How to ensure that they comply with this marking?
When importing Chinese goods in the EU, you have to ensure that they are correctly marked. Even if numerous factories have obtained the CE marking certification, each item has to be certified by a third party, theoretically. Practically, you will be able to auto-certify your goods.
SINO Advice: However, ensure the compliance of your goods with directives in force before appending the marking. In the case where your product is subject to the certification process, then compliance and risks analyses shall be led.
The marking has to be appended directly on the product, that is to say whether on the product data-plate or on the good’s packing. Moreover, it has to appear on the administrative documents that are transmitted by the supplier and by the actors in charge of the product distribution in the market. It has to be visible, easy to read and impossible to erase. No specific dimension is required, except the fact that a height of 5mm is require.
SINO Info: Being aware of the norms to respect in term of marking will be a plus for your future, you will be able to select the best suppliers taking into consideration this issue and ensuring the compliance of your goods with the European norms.
b) Who is responsible for it?
Please note that the responsibility is yours when it comes to complying with European Union regulations. Indeed, because EU regulations do not apply outside of the EU, the Chinese manufacturer does not comply with it most of the time.
SINO Advice: In order to facilitate this process of compliance, you should limit your supplier selection to those that are already exporting to the EU because they are used to making products that comply with EU safety standards.
When importing from non-EU countries, as an importer, you have to verify that:
- The non-EU manufacturer has respected the EU demands in order to allow the product to be placed on the EU market
- The EU Declaration of Conformity and the technical documentation are available upon request
- Have a relationship of trust with your manufacturer
If you import non-compliant products, then, your products will not be cleared through the EU customs authority and then, your products will be destroyed or seized. And in the worst case, if somebody is injured, you will get severe penalties for sure.
SINO Info: Currently in the EU many companies that import Chine products into the EU play down product compliance because of a misunderstanding of who is accountable for the compliance.
c) About the Value Added Tax
When importing goods from China, please note that you cannot pay the VAT directly to the supplier because Chinese companies belong to a different tax system, and are not VAT registered in the EU.
SINO Warning: You should not pay EU VAT to any non-EU entity, as they are not VAT registered in the European Union. Neither shall you pay China VAT, as the supplier in China receives a VAT refund when exporting products.
a) The steps to follow to obtain import rights
- First of all, for importing products from China, you need to have a registered company name in India.
- Then, you must register with the State Tax Department and CST or Central Sales Tax in order to get a tax identification number.
- Apply for the IEC Code Registration –After getting the TIN; you need one license from the DGFT Department that is called IEC Code.
- b) Ensure that the products are importable into India
Try to gather as much information as possible about the items you wish to import such as descriptive literature, product composition information and, whenever possible, product samples.
SINO Contact: As an international freight forwarder, SINO Shipping can handle and manage for you the customs and other documentation activities required for international shipments. Please fill our form in 1 min and get an answer within 48h !
c) Classify the goods you want to import into India
If you are interested in importing any kind of goods from China to India, then there are lots of things to be considered to meet your needs. First of all, you need to respect the criteria for international trading.
The Importer Exporter Code is necessary, while importing or exporting goods from China to India. This harmonized system consists of a 10-digit code, which is issued by Director General of Foreign Trade, Government of India or Ministry of Commerce to Indian firms or companies.
Customs fee when importing from China to India completely depend on the type of product you are importing. In some products you do not have to pay ant customs fee and in some restricted product you need to pay custom fee according to the law because they are subject to restriction or prohibition.
After the Brexit vote, the Lisbon Treaty states that the United Kingdom has 2 years to draw back from the European Union. Hence, Brexit officially goes from the March 29 2017 to the March 29 2019. This is why the procedure that has to be followed when importing in the post-Brexit UK is still uncertain. Indeed, for the moment, there are no agreed upon terms for the exit.
This means that the effects on importing into the UK will be stated in more than a year. And it is likely to expect that it should take even longer for the new policies and regulations to be implemented.
SINO Plus: Our experts will update the new modalities as soon as there are stated by the UK government.
Our SINO experts answer within 48h !