"The Chinese embassy in Spain tweeted that the company behind the kits, Shenzhen Bioeasy Biotechnology, did not have an official license from Chinese medical authorities to sell its products."
Like that would have made any difference?
I suspect that's incomplete. What the embassy probably meant is that the company hasn't gotten an export license, which is what Chinese companies need to sell their products abroad. The idea is to prevent substandard products from harming the reputation of the Made in China label. While not exactly up to American or European standards, export quality products are superior to the domestic Chinese product.
A campaign launched last year to encourage Chinese food companies to bring the same production processes used for exported goods to those sold locally has attracted more than 1,500 brands.
Now more than RMB10bn (US$1.48bn) of export-quality products have been sold on the Chinese market, according to the Certification and Accreditation Administration.
The campaign has seen nearly 5,800 products, from farm produce to frozen snacks and seasonings, go to market across China since it began. The administration now hopes this number will grow significantly as the policy gathers steam.
To encourage exporters to supply the local market, the CAA has been providing them with support and guidance on how to promote domestic sales.
China has nearly 20,000 certified companies that export food and agricultural products valued at more than US$50bn to more than 180 countries each year, according to the administration.
One Gansu-based fruit juice manufacturer said that recently launched domestic sales now account for some 20% of its total business.
Previously, Longnan Changcheng only sold its products outside China, but has since found that domestic growth has outpaced its exports to overseas markets.
This is despite the higher production costs needed to maintain export standards make its product lines around 50% more expensive than those of its competitors in domestic stores.
"The overseas market has not been performing well in recent years because of the economic downturn," operations manager Qiao Yajun told China Daily.
"We hope our business can develop even faster in the domestic market.”
Is an export license a must for Chinese suppliers?
Some quality control firms say to their clients: “You should book an audit on the factories you intend to work with. We’ll check if they have an export license. If they don’t, it is a bad sign because they are not authorized to export their products.”
Well, it is not so simple, as often in China. Factory audits are quite helpful in screening potential suppliers. But the absence of an export license is not such a bad sign. Most small factories don’t have that license, and they have no problem to export.
I remember asking some suppliers why another company name was written on the shipping documents. They explained that they don’t have the export license themselves, so they use an “agent” (notice the very general term) to “do the paperwork”. This agent’s work costs them about 1% of the value of the order.
This is quite common. But is it strictly speaking legal?
At the end of a previous article on freight forwarding, a reader called Callum asked this question in the comments:
A lot of Chinese suppliers do not have export permits. Instead they pay a fee to a third-party company with an export permit and in exchange they are allowed to put that company’s name on the commercial docs. I don’t know much about Chinese law, but I have a feeling this practice could be considered fraud.
To which Sandra Nguyen Thanh, from Karl Gross, responded:
In fact, in order to export products from China a supplier must either have a dedicated export permit (license) of their own or must “outsource” this process to an Import-Export company licensed to export any (non-restricted) product. The Import-Export company would accordingly appear on the export documents for the customs clearance. This is a normal procedure and totally legitimate in China.
Reasons why some suppliers prefer to use an Import-Export companies may be as follows:
1) They pay agent fee but it saves them labor cost and other costs.
2) Import-Export companies may have beneficial know-how about the market and government regulations. They are professional to settle documents and refund matters.
3) Import-Export companies have regular business so they get the tax refund faster from the government.
At the same time, there is another misconception to debunk. Some importers think the Chinese government audits factories and approves only the best ones for export. Wrong! If you are not careful, you might work with a company that is producing for the first time…
For more misconceptions about buying in China, I suggest that you go and read this article.