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Risk Early Warning and Avoidance of China's Export Agents

11 May 2021 -

        Due to the difference in productivity levels at home and abroad, China export agents have comparative advantages in light industry manufacturing, textile production and small household appliances production. Many domestic manufacturers choose to export to obtain higher profits. However, foreign trade exports involve a series of issues, such as handling export-related certificates, handling shipments, document preparation, foreign exchange collection and settlement, and tax refunds. Smaller manufacturers cannot handle it by themselves, so some manufacturers will entrust larger traders as export agents.

       1.Introduction to business model

       Generally, there are two modes of export agency: the first mode is that the agency buys products directly from the manufacturer and then sells them directly to foreign merchants. This model called agency is actually a transaction relationship, which only shows the essence of profit sharing in terms of price and share. Second, the agent signs an export agency contract with the manufacturer, and then sells it to a foreign company designated by the manufacturer. Although foreign trade agents will issue special value-added tax invoices, they will actually pay the manufacturer, process receipts, foreign exchange settlement and tax refunds. Foreign trade agents only charge a fixed agency fee, do not share profits, and do not take risks.

      2.Risk warning

      Criminal risk

      Because export agents are not true exporters, the nature of the two is completely different, so they do not understand customers and suppliers, the entrusting party and foreign merchants collude, and there is a possibility of export trade fraud. At the same time, the company may also be suspected of fraudulent export tax rebates and fraudulent foreign exchange.

      (1) The crime of fraudulently obtaining export tax rebates refers to the use of fraudulent means such as false reporting of exports to deliberately obtain tax laws and regulations in order to obtain export tax rebates by a large margin.

      (2) The crime of fraudulent purchase of foreign exchange refers to the use of forged or altered customs declaration forms, import certificates, foreign exchange management approval documents issued by the customs and other vouchers or documents, or the repeated use of customs declaration forms, import certificates issued by the customs, and foreign exchange Manage approval documents, other vouchers, receipts or other means of fraudulently purchasing large amounts of foreign exchange.

China export agents

      Civil default risk

      In the export business of an export agent, the agent signs a contract with a foreign investor in his own name. If the foreign investor fails to pay in time, the foreign trade agent needs to claim compensation from the foreign investor in his own name. If the client fails to deliver the goods in time, the foreign investor can also request the foreign trade agent to deliver the goods and bear the liability for breach of contract.

      3.Risk aversion measures

       In view of the risk of criminality, it is recommended that Chinese export agents verify the suppliers and customers of each transaction. In principle, only suppliers and customers who can provide complete historical transaction information are accepted to ensure the authenticity of the transaction. At the same time, the export agent should Handle the export procedures of each transaction to ensure the normal export of each transaction.

       in view of the risk of civil default, it is recommended that the company stipulate in the agency agreement that all payments are based on external payments and sign a tripartite agreement with the foreign investor and the entrusting party, specifying that if the entrusting party cannot deliver the goods, the entrusting party and the foreign investor shall negotiate by themselves , The export agent only provides necessary assistance and does not assume any responsibility.

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