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by Matt Slater
13 March 2014
As well as verifying a Chinese company’s business license, it’s also possible to verify that they are registered to do foreign trade. This registration is necessary for them to legally engage directly in import / export operations.
Chinese law requires that any individual or organisation engaging in export of goods with a value over 1000 RMB (i.e. pretty much any export of batch products) must first apply for an export license. Exporting without this license is illegal. There are also restricted categories of products that can’t be legally exported even if a company has an export license.
There are a few terms surrounding foreign trade registration in China. Foreign trade registration takes place through Ministry of Foreign Trade and Economic Cooperation (中华人民共和国商务部网站), and a company that has gone through the process will be recorded as registered. This is what we mean when we refer to foreign trade registration.
The actual documentation that the company gets is an export license or import license. If they attempt to carry out foreign trade operations without this document (and without being registered in the official record), customs will refuse to release their goods at the port.
The company or individual that has the license is then termed a ‘foreign trade dealer’. This refers to entities that have gone through the required legal procedures and engage in foreign trade. An important point to note about foreign trade dealers is that they are fully permitted to engage in foreign trade on behalf of others. This is actually a very common set-up for foreign trade in China.
If you like reading reams of legal details, you can read more about the exact legislation surrounding foreign trade in China.
It would be a mistake to think that Chinese suppliers must have an export license / foreign trade registration in order to do business with companies outside of China. It is in fact very common for Chinese suppliers to do business without one, as Renaud Anjoran points out here.
A common arrangement is for a Chinese factory or supplier to arrange their foreign trade through a licensed foreign trade dealer. The trade company handles the formalities and procedures for the foreign trade so that the factory doesn’t have to go through the process of registering or develop the experience and procedures to carry out exports successfully.
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Because of this, it is not unusual to see the trade company’s name on the exportation documents and not the supplier’s. In some cases this causes confusion, and may make it difficult to properly check and verify the companies involved. The best practice is to verify all of the involved companies and confirm that they all have the correct registrations for their role in the process.
Further confusion can be created when one ‘company’ registers separate business entities for its production and export operations. In other words, it acts as two companies – a supplier and a foreign trade dealer. The actual arrangement of this by the owners could take many permutations. Again, it’s wise to individually verify each involved registration (business registration and foreign trade registration) and confirm that they are permitted to do what they claim to be responsible for in the process.
There is a common misconception among those sourcing products from China, which is that a Chinese export license in some way indicates the quality of the products, services or company. This is not the case at all, and it would be unwise to read any meaning into the fact that a Chinese company has an export license.
The export license simply shows that the company has applied for and been granted permission to export. They only have to go through a procedure and provide basic documentation to achieve this. No checking of their products are processes are performed for this, so the export license is no indication of quality.
Whilst business registrations can be checked through the relevant AIC, foreign trade registrations cannot be checked in this way. Instead, there are two avenues for confirming a Chinese company’s foreign trade registration status.
If the company provides a copy of its import / export license, it is possible to verify this by identifying the specific issuing authority (which is likely to be local to the company) and communicating with them to confirm the documentation.
If simply given a license number or foreign trade registration number, it may be possible to corroborate this with records in the official government database. Again, there is no set method and the process usually requires some lateral research to carry out successfully (read more on checking Chinese certificates here).
However, you can easily get the confirmation you need with China Checkup’s Certificate Verification services. You’ll get a streamlined verification process to confirm that a Chinese company is permitted to engage in foreign trade. It takes less than 10 minutes to fill in the details, and less than 2 days to get the result.
Hi there, I'm Matt, the Founder & CEO of China Checkup. Originally from the UK, I am now based in Brisbane, Australia.
Frustrated by the scarcity of concise, high-quality and timely information about Chinese companies, I setup China Checkup whilst living in Shanghai in 2013.
My team are proud that China Checkup's company verification reports have now helped thousands of clients from all corners of the world to do business in China more safely.
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This article takes a look at the 6 different China city types and the various levels of autonomy and power each type holds.
China has over 700 official cities, from the metropolises of Beijing, Shanghai and Hong Kong down to the smaller cities of Beihai, Shangrao and Qufu, but they are not all governed equally.
Read this guide if you want to understand the difference between China city types, including municipalities, prefecture-level cities, county-level cities and more.
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This article highlights some of the most significant events during this period in the form of a year by year timeline.
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Listening to China business podcasts can be a great way to get insights on the Chinese market, pick up new knowledge and get fresh perspectives.
The great news is that there is actually a lot of great podcasts out there on this topic - and in this article I have chosen my current top ten.
These podcasts cover business in China from a range of angles - including tech startups, importing/sourcing, economics and more - so if you are interested in learning more about China business you are sure to find quality material here.
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