Chinese import tariffs can be as much as 270% for certain products, usually levied on the importer, according to a new guide released by credit insurance specialist Atradius.
This proves an expensive disincentive to buy so foreign suppliers should account for it in their pricing, whilst ensuring that their supply agreements protect against these costs being passed on to them by the importer, advises the guide, called Trade Successfully with China: Ten Important Principles.
Foreign suppliers should also be aware that, although there may have been agreement that their country’s law covers the contract of sale, certain aspects of Chinese law must still be complied with, including China’s competition laws such as those relating to misleading advertising and predatory pricing.
Here are some other important notes from the guide:
Beware of import restrictions
Not all goods can be freely imported into China. The Ministry of Commerce – the government department in charge of foreign trade in China – regularly revises its lists of restricted or banned goods. It is therefore advisable for foreign suppliers to first clarify whether their goods are subject to any licensing or quota requirements. Otherwise, there is a risk that the goods will not be allowed into the country.
Observe foreign exchange administration regulations
Importers must report payments to the Chinese State Administration of Foreign Exchange if the value of the goods and the amount paid differ by more than the equivalent of U.S.$10,000 for a single contract.
Although it is the importer’s responsibility to comply with foreign exchange laws, foreign suppliers should take into account the risks associated with the Chinese foreign exchange control regime, as it can hinder or prevent payment: for example, some importers are not entitled to make advance payments or to pay the purchase price by way of letter of credit.
Atradius’ chief market officer Andreas Tesch commented: “Growing affluence within China is stimulating private consumption and this creates real opportunities for foreign exporters, provided that they understand the nature of the market and take sensible measures to protect their assets”.
Source: Atradius Credit Insurance N.V.