Doing Business in China

Q: What do I need to know about doing business in China?

A: Most companies today know why China is a great place for business for manufacturing, regional distribution, and domestic consumption.

What companies may not know is that the logistics costs of doing business in China are quite high. China’s trade rules and regulations are complex. A company that tries to replicate its overseas supply chain processes without taking into account China’s unique rules and requirements faces negative consequences, including hefty fees and fines, and even criminal complications. China’s multiple regulatory agencies all have their own set of rules, and, to make things more complicated, the rules can be enforced differently by province and can change with very short lead times.

Q: How much of a problem are these China trade issues?

A: While doing business with China is an opportunity for companies of all sizes, most face a wide range of challenges trying to navigate China’s complex trade programs. A survey of Amber Road customers found that fully 100 percent were concerned with persistent issues involving the management of their supply chains in China, including excessive costs, fines and penalties imposed by Chinese customs, and reduced efficiency rates from manual errors. About 60percent expressed concerns that their company could face a "reduced agency rating" from Chinese compliance officials, which would lead to an increase in inspection rates and time-consuming trade flow difficulties. Thirty percent cited costly, extensive audits of their operations as a major issue.

Q: How can I best address these factors so they don’t become problems?

A: To address these complexities, many multinational companies are turning to global trade management (GTM) software platforms that incorporate trade functionality specific to China, known as China trade management (CTM). A GTM solution provides a single centralized platform for managing the cross-border movement of goods, and automates and manages sourcing optimization,foreign supplier management,global transportation management,export/import management,supply chain visibility, andduty management. CTM allows companies to navigate the complex rules and regulations specific to China.

CTM is particularly helpful in lowering trade costs by taking advantage of such duty deferral regimes as Processing Trade and foreign trade zones. Companies also need people in China to constantly monitor and interpret regulatory changes and have the technology architecture that can quickly incorporate them into CTM functions. For instance, China Customs just introduced its first post-clearance self-compliance and voluntary disclosure program. In the past, if a company voluntarily told Customs the declaration was wrong, Customs would start an extensive audit and could downgrade the enterprise classification and impose fines.

With the new program, Customs does not take those administrative measures if the error is not intentional or grossly negligent. To take advantage of the program, a company needs to first know the problems, and the way to do it is through regular, voluntary internal audits.

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