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How Can I Do Business In China From India?

China has been growing at an exponential rate, making it an ideal destination for businesses looking to expand and invest internationally. To help you take advantage of this international opportunity, we've formulated this guide on starting a business in China.

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According to a McKinsey report, China added the entire Australian economy to its GDP in the year 2019. It is undoubtedly, the world’s fastest-growing economy, and a sure-shot destination for importers and exporters all over the world. Given these figures, it’s no surprise that so many Indians want to launch a business in China.  However, before you start you will need to obtain a few mandatory licences.

Import Export Licence

The import-export licence is a prerequisite to doing business in China. The IEC (import-export code) is a 10-digit identification number, issued by the office of the Director-General of Foreign Trade, the Ministry of Commerce and Industries, and the Government of India in tandem. Likewise, obtaining an IEC is mandatory for any Indian business entity that seeks to do business abroad from India.

How Vakilsearch Can Assist in Obtaining an IEC Certificate

Vakilsearch can help you obtain an IEC certificate in 3 simple steps:

  1. We will take the hassle of documentation off your hands by gathering the records that are necessary for filing for an IEC
  2. We will then process your import-export licence application online
  3. Additionally, we will also follow up with the DGFT until your code is issued. 

Guidelines to Import Items from China to India

  • Get your importing business and ensure that you obtain a TIN from the tax authorities at the earliest
  • It is the importer’s responsibility to ensure that the goods imported comply with certain rules and regulations of the DGFT. Importing unsafe goods or those goods that violate foreign trade guidelines could end up costing you a massive sum in fines and penalties
  • Similarly, customs duty should be calculated according to the quantity, quality, and nature of the goods you wish to import
  • Further, obtain the 10-digit tariff classification number along with the certificate of origin for determining the rate of duty
  • Calculate the landed cost
  • Likewise, lastly ensure that you are complying with INCOTERMS guidelines, before placing an order with your supplier.

International Commercial Terms 2021 Explained

International commercial terms, otherwise known as  INCOTERMS, are relevant to import/export businesses. Moreover, these are rules that define the responsibility between a buyer and a seller as to who will handle custom clearances/ duties, carriage arrangements, payments, risk of loss/damage, insurance, permits, permissions, etc. 

INCOTERMS consists of a set of 11 standard international trade terms, which are approved by the International Chamber of Commerce (ICC). The terms are clubbed into four groups as follows:

Departure:

  • EXW (EX Works)

Main carriage not paid by seller:

  • FCA (free carrier)
  • FCA (free alongside ship) 
  • FOB (free onboard)

Main carriage paid by the seller:

  • CFR (cost and freight)
  • CIF  (cost, insurance and freight)
  • CPT (carriage paid to named place)
  • CIP  (carriage and insurance paid to named place)

Arrival

  • DAP (Delivered at Place)
  • DPU (delivered place unloaded)
  • DDP (delivered duty paid)

Incoterms lessen the likelihood of legal disputes by providing buyers and sellers with a single point of reference for trade procedures. While EXW represents a minimum obligation on the part of the seller, DDP represents a maximum obligation on his part. Additionally, when a seller and a buyer agree to use an Incoterm, each of them accepts the accompanying obligations and responsibilities mentioned under that Incoterm. Additionally, to learn more about the underlying significance of each of the above-mentioned terms, get in touch with our import/export experts.

Document Required to Export to China

When exporting to China, the following documentation is crucial. 

  1. Bill of lading
  2. Commercial invoice
  3. Packing list
  4. Sales contract
  5. Proforma invoice
  6. Certificate of origin signed by a local chamber of commerce
  7. AES filing
  8. Customs declaration
  9. Insurance policy

The documents you need to export to China will differ depending on the item you wish to export. For expert help in determining, which of these documents is necessary for your intents and purposes, look no further than Vakilsearch, India’s trusted foreign trade advisors.

Guidelines to Export Items from India to China

  • Determine the applicability of the taxes levied on imports into China. For instance, import duty is different for imports from MFNs and others
  • Check for any new regulations and comply with the same
  • Make submission 24 hours before loading
  • Further, ensure that the cargo description is complete and accurate
  • Full contact details of the shipper/consignee and the enterprise code should be mentioned
  • Further, be aware of the varying guidelines for the different classification of goods that can be imported into China, namely prohibited, restricted and permitted
  • Ensure that your buyers have obtained an import licence as the MOFCOM  mandates its necessity. Also, ensure that the importers in China have obtained their importer customers registration code (CR code).

Every importer and exporter needs to follow these prescribed guidelines to carry out import and export trade with China. Non-compliance thereof leads to complications. Additionally, your cargo may also get stuck in the port of China and may even attract demurrage. To avoid such, futile expenditures don’t hesitate to get legal advice. Get in touch with us today!

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