Archive for August, 2011

Certificate of Origin(CO)

Posted on August 23, 2011  by Xixi  in Glossary, Knowledge   79 Comments »
Certificate of Origin(CO)

Certificate of Origin

The Certificate of Origin (CO) is a certificate used to certify the producing and manufacture place of export products, a certificate of nationality of goods in international trading. In the specific conditions, import countries will provide different tariff treatment according to the CO. In China, all exporting products that follow the “Regulation of Place of Origin for Import and Export Commodity in People’s Republic of China” could apply for General Certificate of Origin.

In the international trading, counties from all over the world, on the basis of their own foreign trade policies, generally practice import control policies such as different tariff and quantity limit, and carried out by customs. Import countries demanding export countries to provide CO of commodities has become a international practice, therefore CO is one of the most important certificates in international trading. Its purposes are boiled down as follows:

(1) Important tool for deciding on tariff treatment and help increase market competitive edge

Most countries now are applying different custom duty rate upon imported commodities from different countries. The difference always depends on commodities’ place of origin while CO is an effective certificate for customs to decide on tariff and treatment. If there are any agreements about tariff between governments of import and export countries regulating Agreed Customs Rate in form of terms, or regulating Most Favored Nation Clause in the agreements, buyers would always request sellers to provide effective CO to prove the origin of imported commodities being the agreement-contracting country, so as to get relevant duty rate treatment.

(2)  Evidence of products’ inner quality or settlement of exchange

In the international trading, general CO also works as an evidence of commodities’ inner quality increasing the competitive edge. For instance, in the international market, silk with CO from China could offer a much better price than silk with CO from other counties.

(3) Reference for trade statistics

Customs of all countries are bearing the responsibility of counting import and export commodities, and the CO is a very important reference for customs to calculate the commodities.

Certificate of Origin Picture:

 

Generalized System of Preferences Certificate of Origin(GSP FORM A)

Posted on August 22, 2011  by Xixi  in Glossary, Knowledge   37 Comments »
Generalized System of Preferences Certificate of Origin(GSP FORM A)

Definition: Generalized System of Preferences Certificate of Origin or FORM A / GSP FORM A is a preferential Certificate of Origin signed on the basis of a kind of tariff preference systems —Generalized System of Preferences that provided by developed countries to developing countries. The certificate applies A form with yellow color and is usually called FORM A or GSP FORM A for short in the foreign trading.

Current favoring countries providing the tariff preference system are France, British, Ireland, Germany, Denmark, Italy, Belgium, Netherlands, Luxembourg, Greek, Spain, Portugal, Austria, Finland, Sweden, Estonia, Lithuania, Cyprus, Latvia, Poland, Hungary, Slovenia, Czech, Slovakia, Malta, Switzerland, Norway, Japan, Canada, Australia, New Zealand, Russia, Belarus, Kazakhstan, Ukraine, Turkey, United States and Bulgaria.

To make sure the products made in benefit countries get preferences of GSP, the products must be originated from benefit countries (Principle of Origin), delivered directly from benefit countries to favoring countries (Principle of Direct Delivery) and provide the FORM A certificate when clearing customs in favoring countries.

The FORM A is signed and issued by Entry-Exist Inspection and Quarantine Bureau in China with charges of 40 to 80 yuan each.

Form A Picture:

 

 

 

An In-depth Research on China Export: SMES Struggled to Survive

Posted on August 20, 2011  by Xixi  in Headline   No Comments »
An In-depth Research on China Export: SMES Struggled to Survive

May 21th, it is reported that many SMEs in clothing and footwear industries in Guangdong are mired in difficulties. This has aroused great concerns in the industry and made many wondering why this case is. After intensive interviews reporters learned that it is the sudden ups and downs in the price of raw materials, rising labor costs and exchange rate appreciation that have made these factories unable to bring about competitive quoted price, which have driven the foreign orders to Southeast Asia and send these factories into a frantic competition for domestic orders. And as a result, the heated competition has sent small and medium sized clothing and footware factories in Guangzhou into semi-suspension.

With the Foreign Orders Shifted Elsewhere, Companies Aimed at Domestic Market

Xintang is a world-famous jeans production base. According to Zhan Xueju, Xingtang’s president, there are altogether 2000-3000 jeans factories of all sizes. And more than 65% of products are sold abroad. For various reasons, overseas orders are now much less than before.

According to Zhan Jiahe, vice president of the Municipal Federation of Industry and Commerce, in the past his company mainly dealt with foreign orders, at peak time the monthly jeans production was as high as 300-400 thousand sets. But now the foreign order per month has shrunk to 30-40 thousand sets.

Zhan Jiahe said that in the past orders from the United States are the largest. But recently they seldom can get such orders. The profit margin from the U.S. orders is already very narrow, plus the rise of the labor cost and the appreciation of RMB against the U.S. dollar, making these factories’ quoted price too high for the customers to accept. As a result, those customers shift their order to India and Philippine.

Mr. Liang is the owner of a medium and large sized company specialized in making high-end shoes for export. All of his products are sold to European and American markets. According to him, from March to May this year, the orders are about one-third less than in previous years,  which is mainly because that after cost accounting, the quoted price was too high for the overseas customers to accept.

According to Guo Zhenhua, owner of the Bao Fu Rubber Products Factory in Sanxiang, Zhongshan city, many foreign businessmen have shifted their Low-end shoe orders to Vietnam, Bangladesh and Indonesia. They only put the order in China when it comes to technically demanding high-end footwares.

Zhan Jiahe said that as foreign orders keeps on shrinking, factories began to shift their focus to domestic orders, making the competition on the domestic market became increasingly intense. Located on Dadun road, Xintang Qige garment factory has been focusing on the domestic market. According to one of its partners Yan Dunquan, in the past the factory had an annual turnout of over a 100 million pieces of jeans, but now the monthly order is only 30,000 pieces or so.

Pressure I  Rising Labor Cost

When it comes to the reasons leading to the present predicament, there are two major complaints from the owners of the SMEs. The first one is the rising labor cost and recruiting difficulties. And the second on is the soaring raw material price. After interviewed a number of small business owners in Xintang, your correspondent learned that, despite the rising wages, the recruitment difficulty is still a common problem.

Zhan Jiahe said that last year, the wages in the factory rose by 15% and again up by 17% this year. Over the last two years, labor costs alone rose by 30% or more. But it can not alleviate the recruitment difficulties, many workers still do not want to stay in the factory. They would rather be temporary workers who worked for a short period of time and left the factory when the salary is due. They are locally known as “grassroots.”

According to Li Yongqiang, a manager in a garment factory, in 2008, the processing cost for jeans was approximately 1.8-1.9 yuan per piece. But now the cost was 3-3.2 yuan per piece, up by 70%. But still the factory is unable to retain workers. It is estimated that of all the workers he knows, about a quarter of them are “grassroots”.

Zhou Jianping, a clothing factory manager, said that nine out of ten factories are experiencing a low business season. They seldom can get orders, but even if they do get the orders, they cannot guarantee the quality and time of delivery because the workers are getting loose.

Pressure ?  The soaring raw material price has deterred the factories from accepting the orders

The rising raw material price is one of the important reasons why the vast number of SMEs in trouble. Zhan Jiahe said that in previous years when cotton prices are very stable, the cost of garment factory are very easy to control,  and market expectations and sales are stable, too , but in the second half of last year, as cotton prices experienced huge ups and downs, garment manufacturing enterprises  suffered from more and more pressure. For example, in the year before the last, cotton yarn of good quality is only 18,000yuan / ton, in the last year it rose to as high as 43,000 yuan / ton, and now it is still holding up at 37,000 yuan/ ton.

Zhan Jiahe said that with the rising cotton price comes fewer orders, making goods flow slowly. However, today as the cotton price falls, the business situation is still hard. And as people tend to hold a speculative attitude toward the market, the flown of goods is still very slow. During Financial crisis when exchange rates and cotton prices are stable, the cost can be expected and the price can be put under control, but now, due to the rising labor cost, cotton price falls dramatically, making the risk increasingly large and deterring the factories from accepting orders.

Kwok Chun-wah said that in the past year, rubber cost rose 100 percent, as for fabrics ,about 30%, and labor cost also rose by 10%, making the overall production costs   of footwear rise by 30% to 40%.

Chen Wusi also said that though the price of the product increases, it can never match the step of the rising cost, making the profit margins become smaller and smaller. “if the current situation continues, the company’s factory in Zengcheng can only struggle to live for 3 to 5 years before its relocation or restructuring.”

Pressure ?  With the appreciation of RMB, profit from export is shrinking

Along with the soaring price of labor and raw materials, the appreciation of RMB against the U.S. dollar has also generated pressure on export-oriented small and medium enterprises. Ever since June 19 last year, RMB decoupled with the dollar again and began to move towards the road of steady appreciation. By far, the RMB has appreciated by more than 5%. Guo Zhenhua said that the profit from low-end footwear export is only 0.2 dollars a pair, even the profit for high-end shoes is only about $ 1 dollar a pair. And from quoting to shipment, it costs these products generally six months or so. In these six months time, if the RMB exchange rate appreciation as much as 3%, then the factory could make no profit out of it.

China Rare Earth Export Increase 930% in First Half of 2011

Posted on August 18, 2011  by Xixi  in China Export News, Export to China   No Comments »
China Rare Earth Export Increase 930% in First Half of 2011

From January to June this year, the export of China’s rare earth products amounts to $ 1.54 billion, up by 930% over the same period of last year. However, no significant increase had shown in the export volumn.

In the first half of this year, the skyrocketing price of rare earth had brought benefits to rare earth exporters in China.

On August 4, 2011, China Nonferrous Metals Industry Association (hereinafter referred to as CNIA) held a press conference one the performance of China Nonferrous Metals Industry in first half of 2011, economic run.  The data from CNIA show that from January to June, 2011, the export of China’s rare earth products amounts to $ 1.54 billion, up by 930% over the same period of last year. However, no significant increase had shown in the total amount of export.

According to the experts in the rare earth industry, compared with last year this year’s rare earth’s export volume experienced no significant increase, “The reason behind the substantial increase in exports is the soaring rare-earth price.”

According to a previous report on “National Business Daily”, since the beginning of 2011, the price of rare earth products rose more than 200%, some even grew by 6 ~10 folds. However, recently domestic rare earth prices have fallen sharply by even more than 15%.

Jia Mingxing, Vice President and Secretary General of CNIA said on the press conference that the rising rare earth price is a swinging back and the downstream companies should adapt to this change. “In recent months, the adjustment made on the price of rare earth showed that there has really been speculation and hoarding going on in the market, but they are not the mainstream phenomenon in the market.”

Besides, CNIA’s statistics also showed that from January to June, China’s non-ferrous metal export was $ 21.32 billion, up by 61.7% over the same period of last year. And the increase was 50.3 percentage points higher than the average during the “Eleventh Five-Year” period

Jia Mingxing also said that in the second half of 2011, domestic market demand for non-ferrous metal remained steady and the production and operation of the non-ferrous metal industry will continue to run smoothly. “it is expected that increase annual production of 10 kinds of non-ferrous metals will maintain a 10% growth, of which the increase in production of electrolytic aluminum will be within 10%, the positive trend in non-ferrous metal industry will not change.”

It is reported that in the first half this year, the total output of 10 kinds of nonferrous metal was 16.553 million tons, an increase of 7.3%. Among them, output of smelting products experienced a slow down, while mineral and deep processed products enjoyed a much more obvious increase. Besides, profits tend to flow to companies with abundant resource and energy, and fixed assets investment has shown a clear trend of moving to the west of the country.

Appreciation of RMB Influence China Export

Posted on August 01, 2011  by Xixi  in Yuan Appreciation   No Comments »
Appreciation of RMB Influence China Export

A year has passed since June 19 last year when the People’s Bank of China (PBC) announced to increase the flexibility of RMB exchange rate. During this period, the rate of RMB to USD has kept a trend of fluctuating and slow rising. Up to June 17 this year, the price ratio of RMB to USD has increased over 5% than one year ago. Though it helped to repress the inflation China’s economy is now facing, it brought some bad influence upon the competitive power of export enterprises.

China’s financial department has changed their attitude towards policies of RMB rate during the year. Though they still keep a denying attitude to RMB appreciation in fast speed as America demanded, they have tolerant its increasing in value slowly. The main reason for this situation is that China has to deal with inflation. The CPI of May this year has raised 5.5% than last year, largely exceeded the controlled target of 4% set by government. The appreciation has had a certain effect on repressing the price of imported commodities. A report released in 14th by PBC emphasized the further promotion of RMB rate reform to hold back the inflation and capital bubble so as to realize the sustainable development of China’s economy. Among investors, RMB still has a strong expectation of appreciation, and there has been a trend of increasing of RMB reservation in some places such as Hong Kong.

The rising of RMB exchange rate has gradually impacted on China’s export enterprises, with the deflation policy and increasing cost of labor, some medium and small enterprises in Zhejiang or Wenzhou where light industry export enterprises are centered bankrupted one after another, and enterprises of South China started to have problems in their business accounting.

China’s economic exports believe that considering the factor of increasing commodity price, the rate of RMB has increased by 10% actually. If it keeps rising in such speed, China’s economy would feel hard to bear.

Some insiders of PBC suggested raising the allowed fluctuation rate of basic value of exchange rate to 1% from 0.5% in order to increase the possibility of rate declining, so that the speculation activity with expectation of appreciation of RMB could be restricted. Now China’s financial authority are seeking delicate management on it.

Cantong Fair: Made-in-China Products Raise Price Together

Posted on August 01, 2011  by Xixi  in Exhibition   No Comments »
Cantong Fair: Made-in-China Products Raise Price Together

Yesterday was the first day of 107th session of China Import and Export Fair (Cantong Fair). Though it was cold and raining outside, the atmoshpere inside of the pavilion was pretty liven up. An exhibitor in household applican business told journalist that in the first day, the amount of purchasers coming for enquiry were two to three times as that of last session. The prepared business cards and brochures were not sufficient for distribution. A booth supervisor from Cantong Machinery Import&Export Co. said that the Hong Kong Spring Electronics Fair was just concluded on April 16th, many purchasers were still in Hong Kong. The third day might be a peak of purchasers attending.

The attendence of buyers on the first day verified the economists’ prediction on the global consumer market that there would be a recovery but not robust enough. Journalist learned from Guangzhou trading delecation that their exhibiting enterprises had a turnover of more than USD 80 million on the first day of the Fair, which was a two times increase from the corresponding period of last session. In the pavilion, heated discussions regarding orders were in the process, and their only focus was the Price.

As cost soaring up, exhibitors raised price generally

Before the Cantong Fair, the main concern from exteral was that would the appreciation of RMB affect the price negotiation. But when stepped into the pavilion, journalist found that the worst nightmare of exhibitors was the soaring price of raw materials. In order to keep the profit margin, many exhibitors raised the price. But since the economy is still in the process of recovery, purchasers thought the prices were too high to accept at once. Bargains between buyers and sellers are carried on passionately.

Picture source: radeshow.com

“Since this year, raw materials for wheel tyres have increased their price by 15% to 20%. Meanwhile, all the three mining giants are demanding a 100% raising of iron ore price, which is still under discussion. This caused a 10% increase during these two to three months nationally.” Li Fei, the sales manager of Zhejiang Shine Time Vehical Co., showed a helpless face when mentioned the word “cost”. Because of the 10% increase of raw materials, Li Fei quoted 10%-15% higher than last session. “The quotation was on the verge of losing money. After making it through the test of financial crisis, enterprises been left no longer pursue the quantity of export products, but turn to the quality and profit. Thus to raise the price became a commen choice”, Li Fei even claimed that he prefers raising price to purchase order.

Yu Shuyuan, international business manager of Guangzhou Hedy Holding Co., Ltd, told journalist that the price for computer memories has soared by 50% this year, while the price for hard disks has fallen down. So the altegether cost raised by 10%. “The raised part will definitely be reflected immediately in our quotation sheet.”

Will purchasers accept the raising price? Li Fei expressed that in fact they have already had the expectations on the increasement caused from the raising price of raw materials. If Chinese suppliers bear the burden themselves, the buyers will be extremely happy. “Of course, they will complain anyway saying that the price of the end market could not be raised to its place at once.” After a round of bargain, Li Fei reached the agreements with some of his regular customers to raise the price by around 3%-5%.

Guangzhou Shenglong Electronic Technology Co., Ltd, which engaged in digital image devices has its own way to solve the problems—taking the advantage of the promotion of a series of newly updated products. Their prices are increased by about 5% and are agreeable to most customers.

Exchange Rate of RMB is rarely mentioned

Since the opening of the Cantong Fair, exhibitors have been worrying a lot about the cost. But they didn’t seem quite nervous about the appreciation trend of RMB.

“We will also tell the buyers that the value of RMB may be increased. But it is only a by-the-way topic. Compared with the raising cost, it is, after all, only a prediction. And its amount of increase is far less than the raw materials.” Li Fei, sales manager of Zhejiang Shine Time Vehical Co., told journalist, even if it appreciated, the expected increase would be 1%-2% to the maximum. By contrast, the raising cost is more stressful.

Pu Zhongyou from Guangzhou Shenglong Electronics said that export enterprises who have endured the hardship of RMB appreciation period will no longer be at loss in that situation. A mature enterprise will always keep a profit margin to increase the flexibility and at the same time have some solutions to that problem. Therefore, when discussing the orders, they don’t need to mention the issue of exchange rate. Even if it increased in the future, they will face it honestly.