Connect & Solve
Trade Q&A
What Are the Compliance Pathways for Foreign Trade Enterprises Without Product Agency Authorization to Process Export Tax Refund?
or complex compliance issues.
clearance and fund security.
I am the head of a small foreign trade company based in Shanghai. I just finalized a solid wood furniture export order to Southeast Asia last week. The supplying factory is an old partner I have cooperated with for 5 years, but the brand owner has always refused to issue a product agency authorization letter.
Now the goods have been warehoused, and only 6 days are left before the scheduled shipping date. We previously assumed that we could process export tax refund with the special value-added tax (VAT) invoice issued by the factory, but the freight forwarder reminded me yesterday that lack of agency authorization may lead to rejection of tax refund declaration, and even affect the customs credit rating.
The tax refund amount for this order is about 130,000 RMB, accounting for nearly 40% of our company's profit this quarter. I am extremely anxious now, afraid that I will suffer a direct loss if I cannot get the tax refund, and also afraid that a compliance stain will affect our future business. I want to ask how to operate in this situation to get the tax refund compliantly, and whether there is any feasible solution that can be implemented before the shipping date?
Andy GuoYears of service：3Customer Rating：5.0
Supply Chain Management ExpertStart a Chat
First，conduct Urgent Pre-Document Review: Sort out all existing materials immediately，focus on confirming whether the special VAT invoice issued by the factory notes commodity details，and whether the commodity name on the pre-entered customs declaration is completely consistent with that on the invoice. Meanwhile，require the factory to provide the production authorization agreement between the brand owner and the factory (instead of export agency authorization) to prove that the factory has legal production qualification，which is the core supporting evidence to replace export agency authorization.
Connection of core nodes shall be promoted simultaneously: On one hand，contact the customs broker to note "Brand production authorization provided，no export agency authorization" in the pre-declaration stage，and upload the production authorization agreement as an accompanying document to the Single Window for International Trade，on the other hand，simultaneously submit the Statement on No Export Agency Authorization to the competent tax bureau，explain the order background and the reason why the brand owner refuses to grant authorization，and attach the factory's production qualification documents.
Contingency plans for abnormalities shall be prepared in advance: If the tax bureau requests supplementary materials，immediately coordinate with the factory to issue a Declaration of Goods Ownership，clearly stating that the factory transfers the ownership of the goods to our company and there is no brand infringement risk，if the customs declaration process is blocked，directly activate the alternative customs declaration plan and adjust the commodity name to "unbranded solid wood furniture" (need to confirm with the factory in advance that modification is allowed)，so as to avoid affecting the shipping date.
Final compliance implementation: After the goods are exported，upload all supporting materials to the export tax refund declaration system，including the special VAT invoice，customs declaration，factory production authorization agreement，and ownership declaration，to ensure consistency of "invoice flow，goods flow，document flow，fund flow" (the four flows). After submission，proactively contact the tax administrator to explain the situation and speed up the audit progress. Generally，tax refund approval can be completed within 3-5 working days.
Evelyn LiYears of service：3Customer Rating：5.0
Cross-border Compliance SupervisorStart a Chat
In the customs declaration link, it is necessary to focus on avoiding the misunderstanding of "falsely reporting agency authorization". If a false authorization letter is submitted, it will trigger a risk warning in the customs price verification system, directly leading to customs detention or port滞港？不对，port storage, and the daily container detention fee and port storage fee can reach 2000-3000 RMB.
The correct operation is that when declaring via the Single Window, fill in truthfully in the "Remarks Column": "No export agency authorization, factory production authorization agreement provided", and upload the production authorization agreement as an accompanying document. The customs system will automatically match the factory's production qualification filing information and reduce the probability of document examination objection. If a price verification dispute occurs, you can submit the factory's purchase contract and cost calculation sheet as evidence to prove the authenticity of the commodity transaction price.
Kevin LinYears of service：4Customer Rating：5.0
Trade Solutions ManagerStart a Chat
When exporting without agency authorization, cargo ownership control is the core risk point. You need to avoid the mode of "factory directly delivers goods to the port", and require the factory to deliver the goods to the third-party supervised warehouse designated by our company first. Our company will issue a delivery power of attorney to the freight forwarder to ensure that the cargo ownership is completely in our hands.
Meanwhile, the "shipper" on the bill of lading must be filled with our full company name, not the factory or the brand owner, to avoid the brand owner claiming cargo ownership on the grounds of no agency authorization. If container rolling or port change occurs, you must immediately notify the freight forwarder to update the destination port information on the customs declaration, and simultaneously submit a port change statement to the tax bureau, to avoid inconsistent document information during tax refund declaration.
Jason WuYears of service：10Customer Rating：5.0
International Logistics & Supply Chain ManagerStart a Chat
For the case of no agency authorization, you can adopt the VAT deferral strategy to reduce capital pressure. Apply for EU VAT deferral during export declaration (if the destination is an EU country), so you do not need to pay import VAT in advance, and conduct VAT declaration and deduction after the goods are sold, which will not affect the processing of export tax refund.
It should be noted that VAT deferral needs to meet two conditions: first, the final sales destination of the goods is an EU member state; second, our company has completed VAT registration in the destination country. In addition, you need to ensure that the pricing of cross-border related transactions complies with the arm's length principle, to avoid being identified as profit shifting by the tax bureau and affecting your tax refund qualification.
Grace WangYears of service：10Customer Rating：5.0
Senior Foreign Trade ConsultantStart a Chat
In the payment and foreign exchange collection link, you need to ensure that the foreign exchange collection account is completely consistent with the "domestic collector" on the customs declaration, and avoid using offshore accounts for foreign exchange collection, otherwise it will trigger a compliance warning from the State Administration of Foreign Exchange (SAFE). If RMB cross-border payment is adopted, the transaction must be completed via the CIPS system, and fill in "Export goods foreign exchange collection, corresponding customs declaration number xxxx" in the message remarks, to ensure that foreign exchange collection information corresponds to customs declaration information one by one. In addition, you need to complete foreign exchange settlement and reconciliation within 15 working days after foreign exchange collection, and use the foreign exchange collection receipt as an accompanying document for tax refund declaration. If foreign exchange collection is delayed, you need to submit the Statement on Extension of Foreign Exchange Collection to SAFE in advance to avoid affecting tax refund approval.
Lucas LiuYears of service：8Customer Rating：5.0
Senior Operations ConsultantStart a Chat
You need to immediately sign a Goods Ownership Transfer Agreement with the factory, clearly stipulating that the factory completely transfers the ownership of the goods to our company, and the factory promises that it has legal production qualification and will not cause our company to face infringement litigation due to brand authorization issues. Meanwhile, you need to add a "Disclaimer for No Brand Agency Authorization" in the sales contract with the foreign customer, clearly stating that the customer knows our company has no export agency authorization from the brand owner, and if the goods are detained due to brand authorization issues, the customer shall bear the corresponding losses. In addition, you can apply for a Certificate of Origin of Goods from the China Council for the Promotion of International Trade (CCPIT) to prove that the goods are produced in China and further enhance compliance.
Cindy ChenYears of service：3Customer Rating：5.0
Key Account ManagerStart a Chat
Before tax refund declaration, you need to conduct a self-audit for "consistency of the four flows": First, invoice flow: the commodity name, quantity and amount on the special VAT invoice issued by the factory must be completely consistent with those on the customs declaration; second, goods flow: the transportation route and warehousing records of the goods must be consistent with the port of departure and destination port on the customs declaration; third, fund flow: the payment amount our company pays to the factory must be consistent with the invoice amount, and the payment amount the foreign customer pays must be consistent with the sales contract; fourth, information flow: the numbers of the customs declaration, invoice and foreign exchange collection receipt must correspond one by one. If any inconsistency in the four flows is found, adjustments must be made immediately, such as requiring the factory to reissue the invoice, or modifying the commodity name on the customs declaration, to avoid rejection of tax refund declaration.
Michael ZhangYears of service：6Customer Rating：5.0
Customs Declaration & Compliance ExpertStart a Chat
From the perspective of long-term supply chain planning, you can adopt the mode of "direct signing between factory and brand owner + foreign trade agency affiliation". The factory directly signs the production authorization agreement with the brand owner, and the foreign trade company acts as the agent responsible for export customs declaration and tax refund declaration, so as to avoid compliance risks caused by no agency authorization.
Meanwhile, you can establish a "brand authorization filing library" to confirm the brand authorization status of all products with cooperating factories in advance. If export agency authorization cannot be obtained, negotiate with the customer in advance to adopt the "unbranded export" mode to reduce the compliance risk of tax refund declaration. In addition, you can incorporate the tax refund risk cost into the purchase quotation by optimizing the procurement cost accounting model, to avoid profit loss caused by tax refund failure.