Imagine completing all export procedures only to have your tax refund denied—or worse, face penalties—because of a minor error in your customs declaration. Export documentation requires meticulous attention to detail, as even small mistakes can trigger significant financial consequences.
This analysis examines common declaration errors through real-world cases and provides actionable guidance to help businesses secure export tax refunds while avoiding costly mistakes.
Case Studies: Costly Mistakes in Export Documentation
Case 1: Misclassified Commodity Codes
A foreign-owned company exporting fiberglass fabric mistakenly used a commodity code (7019909000) qualifying for a 13% tax refund rate. Customs inspection revealed the correct code (7019509999) only permitted a 10% refund.
Result: The company faced penalties, re-declaration requirements, and tax authorities recovered the overpaid refund amount.
Case 2: Quantity Discrepancies
A footwear exporter declared 20,000 pairs of shoes but actually shipped only 10,280 pairs—a 48.6% overstatement.
Result: Customs imposed fines and tax authorities reviewed the company's other refund claims, recovering amounts related to the inflated quantities.
Case 3: Vague Product Descriptions
An exporter declared "plastic brushes" for multi-functional cleaning tools with composite materials. Customs required more specific descriptions like "plastic cleaning brushes with sponge heads" or "multi-functional brushes with replaceable heads."
Risk: Inaccurate descriptions may lead to incorrect classification and refund rates, potentially requiring repayment of excess refunds.
The Seven Deadly Sins of Export Declarations
1. Incorrect Production/Seller Information
The declared manufacturer/seller must match the exporter's information—not the actual production facility listed on VAT invoices.
2. Wrong Domestic Origin
The declared origin must correspond with the VAT invoice issuer's location (using standardized regional codes). For multiple sourcing locations, separate declarations are recommended.
3. Improper Product Names
Descriptions must precisely match VAT invoices and include all relevant details (e.g., "100% cotton woven dyed fabric"). Currently, composition ratios aren't mandatory on invoices.
4. Commodity Code Errors
HS codes directly determine refund rates. Use official classification tools to verify codes.
5. Incorrect Declaration Elements
Customs requires specific product details for each HS code. Common mistakes include:
- Listing "printed" for dyed fabrics
- Inconsistent weight specifications
- Mismatched weave patterns (e.g., declaring "twill" for plain-weave codes)
- Inaccurate material compositions
- Wrong manufacturer information
6. Unit of Measurement Mistakes
Declarations require three lines: primary statutory unit, secondary unit (if applicable), and transaction unit (if different from statutory units).
7. Incorrect Trade Terms
Example: Declaring CFR shipments as FOB may lead to refund discrepancies. Authorities may require declaration amendments or recover excess refunds.
Regulatory Consequences
Declaration inaccuracies—whether intentional or not—trigger multiple consequences:
- Customs penalties under Article 15 of China's Customs Administrative Penalty Regulations
-
Tax authority actions
per State Taxation Administration announcements (2013 Nos. 12 & 65):
- Suspension of refund processing
- Recovery of improper refunds
- Potential reclassification as taxable domestic sales
Cascading Risks
Beyond refund issues, declaration problems may lead to:
- Downgraded exporter classification
- Suspension of refund privileges
- Criminal liability in fraud cases
Best Practices for Accurate Declarations
- Stay informed: Regularly update knowledge of customs and tax regulations.
- Verify documentation: Cross-check declarations against invoices, contracts, and shipping records.
- Classify precisely: Use correct HS codes and declaration elements.
- Train staff: Enhance customs personnel's expertise and attention to detail.
- Consider specialists: Engage professional customs brokers or consultants when needed.
Special Consideration: EXW Transactions
For EXW (Ex Works) shipments, ensure:
- Complete and accurate customs declarations
- Valid transport documents (even when buyer arranges shipping)
- Proper retention of contracts and invoices
Export documentation requires professional diligence to secure tax benefits and avoid regulatory complications. Implementing rigorous verification processes helps safeguard a company's financial and operational interests.