Boasting the world’s second-largest consumer market, and Asia’s largest consumer market, China is a prime destination for businesses looking for expansion opportunities. Its over 1.4 billion population, with a growing tech-savvy demographic, is further driving China’s e-commerce sector. This has already facilitated its import rate, a value worth US$237.1 billion as of July 2022, figures by Statista reveal.
China is also Indonesia’s biggest trade partner and a significant source of investment. In 2021, China imported US$63.8 billion worth of goods according to official state data. Among the popular imported goods include mineral resources, steel and metal ore. In addition, coal was the top imported goods from Indonesia – China brought in 67 million tonnes of Indonesian coal in the first half of 2022, which amounted to US$7.96 billion. Animal and vegetable fats and oils also remained among the top products in demand – US$2.4 billion worth of such products were imported into China in the first six months of 2022.
It is clear that Indonesia and China share a strong trade relationship, making the latter a lucrative market to invest in.
And as with any successful international venture, paying attention to trading policies, business regulations and other trade barriers is key. We deep dive into them below.
What’s required to export to China?
1. Payment of duties, taxes and tariffs
Before planning your entry strategy, it’s good to understand China’s customs clearance requirements and regulations for successful exportation. For example, one would have to pay a value-added tax (VAT), consumption tax and import duties to allow the goods to enter the country.
There may also be tariffs to pay, depending on what product is being imported. However, due to Indonesia’s Free Trade Agreement with China, signified via the ASEAN-China Free Trade Area (ACFTA), local businesses may enjoy reduced rates, which can significantly lower shipping costs.
2. Documentation
Once you have paid the required VAT and tariff for your product, you will need to complete a series of documentation to facilitate the import process. A list of documentation can include but is not limited to:
- Certificate of Origin signed by a local chamber of commerce
- Bill of lading
- Commercial Invoice
- Packing List
- Sales Contract
- Proforma Invoice
- Automated Export System (AES) filing
- Customs Declaration
- Insurance Policy
It is pertinent to contact the relevant authorities, as well as your international logistics partner, to ensure that you have provided the necessary documentation and completed paperwork as part of your shipment before you export to China. This will help eliminate any delays in the process.
If any, what are the trade policies in China?
China’s trading policies have four general influential factors behind them: push for indigenous innovation; a drive for self-sufficiency; enhancing the country’s national security; and market reform and opening. As such, any export to China may be reviewed from the lens of these four factors. Accompanying this is the Catalogue of Industries for Encouraging Foreign Investment (2020 Version) which outlines the prohibited, restricted, encouraged and permitted goods that businesses can sell China.
However, it must be said that due to the economic and geo-political challenges caused by COVID-19, China may aim toward embracing more lenient foreign trade policies and regulations to stabilise their market, a decision that could potentially benefit Indonesian exporters.
Are licences required to export to China?
1. Export licences
Export licences are required when exporting from Indonesia to China, and will be issued by the Ministry of Trade (MoT) These include the Tax Payer Identification Number (NPWP), Trade Business Licence (SIUP), Company Registration (TDP), Business Identification Number (NIB) and other licences required by the regulations, depending on the type of goods leaving the country. Restricted goods will require specific licences, such as the Registered Exporter (ET), export permits (SPE), Surveyor’s Report (LS), Certificate of Origin (COO) or other licence as needed.
2. Import licences
When importing into China, you may need to apply for pre-import licensing. These are divided into two types – automatic licences and non-automatic licences, and vary across two categories of goods – permitted goods that are monitored and restricted goods. For example, while most food products don’t require pre-import licences, those that are part of the 2019 Goods Catalogue for Automatic Import Licence Management will need to secure an Automatic Import Licence. These goods are typically those that do not have import restrictions but are being tracked by the Ministry of Commerce (MOFCOM). Some examples of these include unprocessed foods, dairy products and meat. Clothing and textile items are other permitted goods that require an automatic licence.
In other instances, a Tariff Rate Quota Licence is required for goods that are subjected to import quotas set by MOFCOM. This is a non-automatic licence. As long as the shipment remains within the trade quota, businesses can waive off heavy tariffs. Sugar, wheat, rice, certain animal feed and used electronics are the common commodities pegged to quota numbers.
Find the right partner and grow your business in China
The growing economy and the differentiated consumer markets that exist in China provide an opportunity for businesses to expand out of Indonesia. With such a strong market, you need a reliable international logistics provider to support all your shipping needs, from choosing the right packaging to being able to track the movements of your shipment along the supply chain. With DHL Express, you can enjoy a seamless exporting experience, supported by a team of specialists to help you at every step of the way. Let us make your business expansion into China convenient for you. Sign up for a business account and start exporting to China with us.
