What Type of Export Does Agency Processing Fall Under? A Comprehensive Guide!

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Our company is planning to start agency processing business and will export the products afterward. However, I'm not entirely sure what export type agency processing falls under. Is it general trade export, or is there a specific classification? How does agency processing export differ from other export types in terms of processes and tax policies? I hope to understand this in detail to better plan our business.
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Daniel Kim
Daniel KimYears of service：4Customer Rating：5.0

Commodity Inspection and Quarantine ConsultantStart a Chat

In terms of export types, agency processing is generally classified as processing trade export. Processing trade exports mainly include two forms: processing with supplied materials and processing with imported materials.

Processing with supplied materials involves foreign clients providing raw materials, auxiliary materials, etc., which domestic enterprises process according to requirements and return the finished products to the clients, with enterprises earning processing fees. Processing with imported materials involves domestic enterprises purchasing raw materials themselves, processing them, and then exporting the finished products to earn the price difference between finished products and raw materials.

Compared to general trade exports, processing trade exports have customs supervision that is more focused on the verification management of materials and finished products in terms of processes. In terms of tax policies, exported finished products from processing with supplied materials are exempted from VAT and consumption tax, and processing fees earned by processing enterprises are exempted from VAT and consumption tax. Processing with imported materials implements exemption, offset, and refund tax policies. Agency processing business needs to accurately select the processing trade method based on the actual situation to adapt to relevant processes and tax policies.

References: Yixing Export Agent, Do You Really Understand?
Emma Zhao
Emma ZhaoYears of service：3Customer Rating：5.0

Export Documentation SpecialistStart a Chat

Agency processing exports and general trade exports differ in the ownership of goods. The ownership of goods in agency processing may not entirely belong to the processing enterprise, while in general trade exports, the ownership of goods belongs to the exporting enterprise. This can have different impacts on the handling of some trade disputes.

Sophia Wang
Sophia WangYears of service：6Customer Rating：5.0

International Logistics CoordinatorStart a Chat

If agency processing involves goods subject to licensing management, the application requirements may differ from general trade. For example, some goods may require a license under general trade, while under specific processing trade methods, there may be simplified policies or different application procedures.

Linda Guo
Linda GuoYears of service：3Customer Rating：5.0

Trade Dispute MediatorStart a Chat

When exporting through agency processing, it is important to clarify intellectual property ownership with the client. This is because product designs, etc., may be provided by the client, and if not clearly defined, legal issues such as infringement may arise later.

Robert Tan
Robert TanYears of service：5Customer Rating：5.0

International Market Development AdvisorStart a Chat

From the perspective of foreign exchange management, the way processing trade fees or payments are settled may differ from general trade. Processing trade may focus more on installment settlements according to contract terms.

Anthony Luo
Anthony LuoYears of service：10Customer Rating：5.0

Trade Compliance ExpertStart a Chat

Enterprises engaged in agency processing exports must clearly distinguish between processing with supplied materials and processing with imported materials in their financial accounting. For example, in cost accounting, processing with supplied materials only requires accounting for processing costs, while processing with imported materials also requires accounting for raw material procurement costs.

Richard Wu
Richard WuYears of service：8Customer Rating：5.0

Global Trade Operations ExpertStart a Chat

When signing agency processing export contracts, delivery clauses are crucial. Because they involve the client's subsequent sales arrangements, failure to deliver on time may result in breach of contract and compensation claims.

Michael Zhang
Michael ZhangYears of service：10Customer Rating：5.0

Customs Clearance SpecialistStart a Chat

For enterprises exporting through agency processing, there are also considerations regarding equipment imports. If equipment is imported to carry out processing operations, there may be preferential policies regarding tariffs, but these must comply with relevant regulations.

Thomas Li
Thomas LiYears of service：7Customer Rating：5.0

Import Licensing AdvisorStart a Chat

Transportation arrangements for agency processing exports sometimes need to be negotiated with the client. For instance, the mode of transportation and who bears the transportation insurance costs should be clearly defined in the contract.

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