The concept of an export license and its existence may leave individuals in a state of confusion. It is imperative to understand your role in obtaining an export license when dealing with incoterms. If you are a foreign trade company (FTC) looking to export goods from China, it is necessary to obtain an export license.

However, if you purchase goods under the incoterm FOB, you may not have to go through the process of obtaining a license since the cost of the export license is included in the price paid. It is imperative to know how this process works, although approximately 90% of exported items in China are sold under FOB.

However, FTCs that export goods using EXW incoterm are directly responsible for obtaining an export license since the supplier does not include the export fees in the quoted price. An export license is a document that collects information about the exporter, buyer, cargo, value, and mode of transportation.

As a form of certification, it serves as a means for a country to regulate and control the legality of exportation. By deciding to deliver or not deliver a license to a company or individual, a country can restrict or prohibit exportation of certain items. The objective of these regulations is to meet the demand of the domestic market and fit the national economy. The validity time of an export license depends on the delivery date established in the contract and typically expires six months after issuance.

However, an exporter can apply for a two-month extension if the goods are not exported during the validity period. It is important to note that an export license is necessary for shipping goods out of China, and without it, the cargo will not clear through Chinese customs. There are two types of export licenses in China: general and special.

A FTC with a general license does not need to apply for an export license for each shipment, while a special license must be applied for each shipment if a product is listed as a restricted item on the MOFCOM list.

Chinese companies that export goods from China to worldwide markets are the only ones concerned with obtaining an export license. Overseas buyers do not need a license or permit in China. It is generally the responsibility of the exporter to ensure a valid export license is obtained. However, smaller manufacturers may not hold export licenses and may rely on freight forwarders to help them find a FTC that holds an export license.

Image of  The Subtle Strand: Unraveling the Resilient Bond Between the USA and Canada
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