All About Legal Risks in Import/Export Trade
With the acceleration of globalization, the international trade environment has become increasingly complex, and Chinese import/export enterprises face diversified legal risks in cross-border transactions. Due to insufficient awareness of potential legal risks at various stages of import/export operations, some enterprises fail to adopt effective preventive measures or handle risks professionally, leading to significant financial losses. This article outlines key legal risks for Enterprises engaged in import/export trade in China, aiming to help mitigate such risks.
1. Enterprise Qualification Risks
(1) Qualifications for Import/Export Trade
i. Customs Registration for Import/Export Entities
Enterprises must complete the Customs Registration for Consignors/Consignees of Import/Export Goods to obtain a Customs registration code before conducting import/export activities.
Note: Under the latest simplified procedures, enterprises no longer need to apply for the Foreign Trade Operator Registration Certificate.
ii. Electronic Port Card (a digital certificate for China’s customs clearance system)
Enterprises must apply for an Electronic Port Card to conduct online customs declarations.
iii. Trade Foreign Exchange Enterprise List Registration
Starting from June 1, 2024, the State Administration of Foreign Exchange (SAFE) has optimized trade foreign exchange management. The Trade Foreign Exchange Enterprise List Registration, previously approved by SAFE, will now be directly processed by commercial banks.
iv. Export Tax Refund Registration with Tax Authorities
Requirements and procedures for export tax refund registration will be covered in a separate article. Stay tuned for updates.
(2) Special Industry Licenses
–Food Import/Export: Enterprises must complete food-related business qualifications on the China International Trade Single Window platform. enterprises selling imported food domestically also require a Food Business License.
–Hazardous Chemicals: A Hazardous Chemicals Operation License is mandatory.
–Pharmaceuticals: Enterprises must obtain a Pharmaceutical Business License.
Note: We need to pay attention to the expiry date of the above qualification. Expired or non-compliant licenses may result in cargo detention or return.
(3) Destination Country Certification Requirements
–EU: CE certification
–Japan: PSE certification
–USA: UL certification
–Saudi Arabia: SASO certification
2. Import/Export Restriction Policies
(1) Prohibited Goods
China’s Ministry of Commerce and General Administration of Customs annually update the Prohibited Import/Export Goods Lists. For example, the Prohibited Export Goods List (8th Edition) bans exports of:
-Decabromodiphenyl ether
-Perfluorooctane sulfonic acid (PFOS) and its salts
-Short-chain chlorinated paraffins
-Dechlorane Plus isomers
Other countries also enforce similar prohibitions. Better pre-verify policies to avoid cargo seizures.
(2) Goods Subject to Quotas
China imposes export quotas on minerals, fertilizers, and other goods to limit export volumes.
(3) Goods Requiring Licenses
i. Export Licenses(e.g., under the Export License-Managed Goods Catalog (2025)):
-Wheat, corn, rice, beef, pork, chicken
-Rare earths, tungsten products
-Automobiles (including complete knock-down (CKD) kits), motorcycles
ii. Import Licenses(e.g., under the Import License-Managed Goods Catalog (2025)):
-Cranes, papermaking machinery, power equipment, agricultural machinery, ships, toner cartridges
(4) Goods Subject to Additional Tariffs
Some countries impose high import/export tariffs on specific goods to restrict their cross-border trade. For example:
–USA Trade War(April 2025): USA imposes 145% additional tariffs on most Chinese goods, and China imposes 125% additional tariffs on American goods.
3. Intellectual Property (IP) Risks
(1) Trademark Infringement
Unauthorized use of registered trademarks may lead to claims.
(2) Patent Infringement
Exporting goods with unlicensed patents exposes Enterprises to liability.
(3) Copyright Infringement
Unauthorized use of images, designs, or advertising materials violates copyright laws.
(4) Territoriality of IP Rights
IP protection varies by jurisdiction. Enterprises shall verify IP status in target markets to avoid disputes.
4. Settlement Risks
(1) Payment Risks
–Cash on Delivery (COD) / Deposit Sales: Risks include delayed payments, cargo rejection, or commercial fraud.
–Foreign Exchange Controls: Political or economic instability may block fund transfers.
–Quality Disputes: Buyers may withhold payment citing quality issues.
(2) Letter of Credit (L/C) Risks
–Document Fraud: Sellers may forge or alter documents to receive payments before cargo delivery under letters of credit fraudulently, which results in the bank paying the seller for the goods without the buyer actually receiving the goods.
–Bank Insolvency: Financial crises or bank liquidity problems may lead to default or bankruptcy of the issuing bank, affecting the settlement of payments.
(3) Exchange Rate Risks
Currency fluctuations between contract signing and settlement may reduce profits or cause losses.
5. Transportation Risks
(1) Cargo Damage/Loss
Risks arise from improper handling, equipment failure, or extreme weather.
(2) Freight Forwarder Risks
Unreliable agents may cause disputes due to informal operations.
(3) Abandoned Cargo at Destination Ports
When no one picks up the goods at the port of destination, if the export enterprise chooses to ship the goods back, it will face the costs of re-declaration of customs, return shipment and taxes, etc.; if selling them locally, it may face the discount of the price, which will lead to losses.
6. Tax Risks
(1) Customs Duty Risks
Enterprise shall do the customs declaration in accordance with the actual price and quantity, otherwise the tax evasion reaching a certain amount may constitute smuggling crimes.
(2) Export Tax Refund Fraud
Fabricating exports, falsifying invoices, overstating tax rates or prices (falsely declaring low tax rebate rate commodities as high tax rebate rate commodities or falsely declaring the prices of the goods) or recycling goods to claim refunds may lead to export tax refund fraud crimes.
7. Policy Change Risks
(1) Tariff Adjustments
Sudden tariff hikes or anti-dumping measures impact costs.
(2) Trade Agreement Revisions
New or terminated agreements alter market access rules.
(3) Non-Tariff Barriers
Technical standards, environmental rules, or quotas may restrict market entry.
(4) Political Instability
Conflicts or legal uncertainties may disrupt transactions.
Conclusion
Enterprises must comprehensively assess and scientifically manage these risks to ensure stable operations in international trade.
Saway Wang
Email: sawaywang@billionslawyer.com
Tel/Whatsapp: +86 18017682422
