Returning defective products to China is one of the biggest headaches you will come across as a shipper. The Chinese government developed a very complex process that you will have to go through if you do need to return goods. They thought that if they made damaged products duty free, then businesses would take advantage, declaring non-damaged cargo as defective.
Because of this, you’ll have to follow a few rules if you want to return defective products back to China without paying duties. These rules involve having the proper paperwork, allowing your goods to be inspected, and re-exporting an exact number of goods within a set period of time.
Goods as Returned Cargo
China does wave tax and duty charges on items that are returned to the country due to damage. However, getting your defective goods approved for this can be a complicated process. The first thing you need to do is make sure you have all of your documents on hand. Here is a basic checklist of information you’ll need and why:
- Original exporter: Take a look at your paperwork and see who the original exporter was. You will have to use this same company when importing the goods.
- Quantity: Double check the number of items that you received and will be returning. If your new export shipment includes even one additional product, you could run into some serious issues. Double check each document during the process to guarantee you only re-order the exact number of products you originally purchased.
As we mentioned earlier, you will also have to have your goods inspected upon arrival in the country. This will be done by a third-party inspector. The waving of taxes and duties on your goods will only be approved when this third-party produces a report showing that your products were indeed damaged or defective in some way.
If the third-party inspector happens to mark your goods as non-damaged, you won’t be able to import then duty-free. There are cases in which you can dispute their report, but generally, you’ll have to accept the classification that the inspector gives you.
If your goods are marked as defective, you can move forward. You’ll have up to six months to have your goods repaired and re-exported. Again, you will need to make sure that the country that you export to is the same one you shipped to the first time around. You will also need to triple check that the shipment contains a 100% quantity match to the original manifesto.
Handling Goods as Import Shipments
Now, there are other options for returning defective goods to China. If you don’t want to have to jump through all of the hoops, you can simply choose to pay import duties again. For reference, this is usually 12% and you’ll have to pay 17% VAT. However, there are several benefits to going this route.
For one, the quantity and the destination to which you re-export is not limited to the original amount and location. That means you can order more products if you realized you needed them after your original shipment arrived. You can also ship the new items to a different destination if your warehouse locations happen to have changed.
There are also ways that you can recoup some of the money you’ll spend on repeat import fees. Here are a few options for you to consider:
- Negotiate: You can always try negotiating with the supplier that sent you damaged or defective goods. Sometimes, they will be willing to credit you the cost of import duties on a future order. However, this won’t always work. Large companies that don’t need your business will simply choose not to work with you again in the future rather than fix their mistake.
- Take Legal Measures: If a company is being especially difficult, consider a lawsuit. In China, you can sue for lost revenue. This can be a complicated and lengthy process if the business decides to fight you. On the other hand, they could give in to your demands if they want to avoid legal fees and bad press. This really is a last-ditch effort that should only be used if all other options are exhausted and you need to recoup your losses. ?
- Exploit the Gray Areas: Another way to reduce your costs is to work around Chinese tax codes. This is a very gray area and is not necessarily recommended. However, it is an option that many shippers in these situations use. First, you’ll need to ship your products to Hong Kong under a different name. You’ll then use a third party that has leverage with border officials. They will rework the tax code to get you reduced rates. If you choose to go this route, be sure that you work with an established company that only gets paid after you receive your goods. You don’t want to end up with more losses because your items got held up in customs.
Friendly Reminder to Importers and Exporters
There are a few other things to keep in mind when importing goods to China for repair. Firstly, know that China has one of the most complex customs systems in the world. Their procedures are very specific and must be followed exactly. Because of this, you’ll want to refrain from moving goods until custom charge issues are taken care of at your shipment’s destination. If products get moved too soon, you may end up incurring even more unnecessary charges.
How to Prepare
If you find yourself in a position to return damaged goods to China, make sure you are prepared for the complicated process. Be organized and ensure that you stay coordinated will all parties involved. A simple miscommunication can lead to a huge issue when it comes to Chinese customs procedures. You’ll also need to make special arrangements for Chinese destinations.
If you follow all of these steps, you should be able to successfully return damaged goods to China without paying import duties and taxes.