How to Avoid Foreign Exchange Risks? An Export Policy Helps You!

In 2021, the new forms and models of foreign trade have made great contributions to the sustainable development of China's foreign trade. In the first three quarters of last year, cross-border e-commerce grew by 20.1 percent and market purchase trade grew by 37.7 percent. The new business forms and models of foreign trade truly promote upgrading of the industrial structure and advance high-quality development of the trade sector. 

Looking ahead to 2022, China's foreign trade faces both opportunities and challenges. China will boost the new forms and models of foreign trade to foster new drivers of foreign trade, and will also encourage market purchase trade and other new business forms and models of foreign trade to propel the transformation and development of foreign trade.

Nowadays, the outbreak of COVID-19 still has big influence on global economy. How to prevent the cashflow crunch, avoid bank accounts being frozen, and realize foreign exchange settlement legally has become a common concern for people engaged in foreign trade.  

What is Market Purchase Trade (1039)?

The market purchase trade refers to a mode of trade in which qualified business operators purchase goods within the markets designated by the state commercial authorities and complete the export commodity clearance procedures at the place of purchase. The code of customs supervision is "1039", usually referred to as market purchase trade (1039).

From 2013 to 2018, China started pilot projects of market purchase trade in 14 markets in four batches, covering several provinces such as Zhejiang, Jiangsu, Guangdong, Shandong, Hubei, Hebei and Sichuan.  Guangdong province has carried out pilot projects of market purchase trade in Guangzhou, Shunde, Zhongshan and Dongguan respectively.  

In September 2020, the Ministry of Commerce expanded the scope of the pilot projects, adding 17 markets as the pilot markets of market purchase trade in the fifth batch. Since then, there are 31 pilot markets of market purchase trade in 15 provinces.

source：www.customs.gov.cn

As the epidemic still has huge impact on our life and the international trade competition is increased, the new forms and modes of foreign trade, represented by market purchase trade, are growing rapidly. In order to expand the scale of foreign trade, Guangzhou launched the pilot work of market purchase trade in 2020.  

On October 25, 2021, Guangzhou Liuhua Fashion Wholesale Market became the fifth pilot market to expand market purchase trade in Guangzhou, which meant that merchants could export goods more conveniently, and it helped inject vigor into the old market, promoting high-quality development of foreign trade.

source：Guangzhou Liuhua Fashion Wholesale Market

Merchants can exports goods without VAT invoice. Small, medium and micro individual businesses can also participate in foreign trade exports, which stimulates the vitality of the market.  

The customs clearance is convenient. If there are more than 5 varieties listed in the commodity list in each customs declaration, the procedure of declaration can be simplified.

The risk of buying export documents from other companies can be avoided. Merchants can exports goods legally without documents.

The cross-border payment and settlement is flexible. It breaks through the restriction of "who exports, who collects foreign exchange", and allows multi-subjects to collect foreign exchange. Merchants, entrusted agencies and purchasers can collect foreign exchange.  

It will avoid your domestic bank accounts being frozen. If you adopt the trade mode of market purchase trade, you will not be charged with illegal money laundering, for the country has verified the authenticity of the trade and it’s lawful and compliant.

You will be exempted from Value Added Tax (VAT) and enjoy tax bonus. Foreign traders can get 30 million RMB tax-free welfare for each account every year. According to the policy, Foreign traders can enjoy low tax rate, and some smaller traders can even enjoy zero tax rate.

The trade mode of market purchase trade (1039) is largely encouraged by the Chinese government, and it attracts the attention of various small and micro enterprises.

1.Small and medium-size as well as medium and large foreign trade companies  

2.Small Office Home Office (SOHO)

3.Factories without import and export rights

4.Cross-border e-commerce sellers  

1.The export of goods is prohibited or restricted by the country.

2.Goods have not been confirmed by the identification system of market purchase trade.

3.Goods are not applicable for market purchase trade according to the authorities of trade control .

The Business Processes 

of Market Purchase Trade (1039)

1.Market operators engaged in market purchase trade shall go through business registration and tax registration in the market gathering area and merchants shall put on record on the network information platform of market purchase trade.  

2.After signing purchase contracts with foreign businessmen, market operators shall register and input the transaction information on the network information platform of market purchase trade.

3.Market operators shall select the market purchase trade operators entrusted for export from the platform, reach the agreement on agency, and submit it to the market purchase trade operators.

4.After confirming the agreement on agency that are submitted by market operators, market purchase trade operators shall deliver the export goods to the relevant freight forwarding companies and customs clearance companies, and complete the procedures of cargo organization, customs declaration, inspection work and so on.

5.After the goods are declared for export at the customs, market purchase trade operators shall apply for the certificate of export agency from the tax authorities within the deadline.

6.Within the VAT declaration period, a month following export declaration, market purchase trade operators shall apply for tax exemption for export goods of market purchase trade to the competent tax authority according to rules.

The trade mode of market purchase trade (1039) has simple and convenient procedures. Through this trade mode, export customs clearance is safe and fast, foreign exchange collection is legal, and you can also enjoy benefits from polices. Therefore, it is really a good way to export goods, saving money and avoiding risks.

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