Exporting small low value orders from China is a challenge to do cost effectively, however proper export of bulk stuff is comparatively simple. After hearing what hardware people are going through to get stuff from China we had to offer a better way. A Dirty Way.
Having trouble paying a Chinese supplier? Did things start off ok for small orders, but you’re facing dodgy payment options when you scale to volume? Let’s take a look at why this happens, and how we can help ease your China payment and export problems!
CNY is a controlled currency
Chinese Yuan (CNY, RMB, kuai) is a controlled currency: the government has strict rules for how and why it can be exchanged for other currencies.
You can’t send a wire to China in local CNY currency because there’s simply no way for your bank to exchange the money for you. The Chinese government doesn’t sell CNY on an open market like US dollars or Euros.
Your Chinese supplier can’t just convert foreign currency to CNY either. The bank will call to notify them of the wire, then they go to the bank in person to show their export license, a goods invoice, proof of tax payment, and proof of export declaration. If this verification isn’t completed in a few days the wire is returned to you less fees (~$50).
Mom and pop shops that give amazing China prices rarely have an export license, and often have no idea how to receive foreign currency legally. Foreign “China Guys” who spend some time in Shenzhen and now peddle services to hacker/Makers have even less of a clue!
How to pay a supplier in China
There are three legal routes to get money into China for CNY transactions:
- Payment for goods: Requires invoice, VAT tax receipt proof (fapiao), export declaration proof, import/export permit, banking permit, etc. A portion of VAT may be refundable in the following month if all documents are in order
- Payment for services: Requires invoice. 6% tax charged on incoming payments. If this method is abused to pay for goods without an export declaration the supplier cannot deduct the cost of the goods from their income leading to very high taxes (25% + loss) in addition to the 6% services tax
- Payment to individuals: Chinese residents may exchange $50,000 USD equivalent of foreign currency per year for personal use. Abusing this method to pay for goods carries the risk of high personal income taxes on the recipient at the end of the year
While the process of exporting goods isn’t too difficult, most of the permits require months long applications and deposits of serious amounts of capital. It just isn’t worth it for a lot of small/medium Chinese manufacturers and suppliers to deal with foreign customers directly (which is why there’s so many agents on Alibaba!)
Things people (who should know better) do:
- Smuggle backpacks of cash across the border from Hong Kong (not unsafe, surprisingly, but still illegal)
- Smuggle components in their pants (cargo shorts are not a logistics network…)
- Hire elderly Chinese to bring in $50,000USD through their personal allotment without fully understanding the tax consequences
- Black market exchange banks: warehouses with pallets of cash are busted daily in Guangdong Province
Even people with a decade of experience working with China still do some of these really stupid things to avoid using an export broker.
China has come a long way in the last decade: don’t believe that famous hacker with pants full of chips, these things are not tolerated as they were in the past. At the same time, there really hasn’t been an alternative for open hardware hackers: brokerage firms want a high percent fee and pricing is rarely transparent. Often a brokerage isn’t even willing to handle less than a shipping container in size. We’re trying to change that!
Who needs export brokerage
Does this describe you?
- Have a Chinese supplier lined up and ready
- Need to make an order > $500
- Supplier can’t receive large amounts of foreign currency, has no/crappy shipping options
- You don’t want to go to China personally and pull money from ATM machines
Don’t mess around; we’ll use our Chinese company and licenses to handle the export on behalf of your supplier.
A better way: Big Company export brokerage for dirty prices!
- Give us the details of your already arranged purchase, we’ll get back with freight options (you can ask for a full refund of this service if you’re unhappy with our freight options!)
- We create official invoices and arrange shipping between you, your supplier, and us
- Wire payment for goods, tax (VAT), and freight in foreign currency to our Chinese company or Hong Kong company
- We convert the currency to CNY and make payment to your supplier
- Your supplier ships to our warehouse with an official VAT tax receipt (fapiao) attached
- We export to you with an official export declaration via air freight or sea freight
- Depending on the tariff category, we can apply for a refund of all or part of the VAT paid
That’s it! We have all the permits and experience necessary to handle currency exchange and proper export procedures.
Sit back and wait for your stuffs to arrive without anything dodgy messing up your supply chain! Your backers applaud you for a project delivered on time and without drama!
A few notes
Export is a new feature at DirtyPCBs that we’d like to automate further. We’re looking for a few people to help test this service with schedules that allow for our lawyers and accountants review everything at each step. If you’d like our help exporting from China please get in touch!