China’s Sweeping Export Compliance Overhaul: Navigating New Realities for Global Supply Chains (Effective October 1, 2025)

Introduction

In a move set to reshape the landscape of global trade, China has enacted a sweeping overhaul of its export compliance regulations, effective October 1, 2025. This comprehensive reform, underpinned by key policy documents including Announcement No. 8 and Announcement No. 17 of 2025, signals a definitive end to long-standing informal export practices and ushers in an era of unprecedented transparency and regulatory scrutiny. For years, the global business community has navigated a complex and often opaque Chinese export environment, frequently relying on a network of agents and intermediaries to facilitate the movement of goods. These new regulations dismantle this system, mandating a direct and verifiable link between the manufacturer, the exporter, and the goods being shipped. This shift towards a real-name, data-driven tax supervision system will have profound implications for every stakeholder in the global supply chain, from Chinese manufacturers and exporters to international freight forwarders, importers, and cross-border e-commerce platforms. This article provides an in-depth analysis of these transformative changes, explores their far-reaching implications for businesses, and offers strategic recommendations for navigating this new, more stringent compliance environment.

The End of an Era: Dismantling “Grey” Clearance and Informal Practices

For decades, a significant portion of China’s export economy operated within a “grey zone,” characterized by informal arrangements and a lack of direct regulatory oversight. The most prevalent of these practices was the use of third-party export licenses, a system colloquially known as “buying export documents.” This allowed manufacturers without their own export qualifications to ship goods internationally by using the license of an unrelated trading company. While technically a legal loophole, this practice created a significant blind spot for tax authorities and regulators, making it difficult to trace the origin of goods, verify transaction values, and ensure proper tax collection. This system, while offering a degree of flexibility and cost-effectiveness for smaller manufacturers, also created opportunities for tax evasion and other illicit activities. The new regulations, particularly Announcement No. 17, directly target this practice by mandating that the actual manufacturer or “production and sales entity” be clearly identified on all export documentation, regardless of whether an intermediary is involved. This effectively ends the era of anonymous exports and forces a new level of transparency upon the entire supply chain.

Key Regulatory Changes: Announcement No. 8 and No. 17 of 2025

The core of China’s export compliance overhaul lies in two pivotal announcements from the State Taxation Administration (STA): Announcement No. 8 (2025) and Announcement No. 17 (2025). Both regulations come into full effect on October 1, 2025, and collectively aim to establish a more transparent, accountable, and formal export environment.

Announcement No. 8 (2025): VAT/Consumption-Tax Export Administration

Announcement No. 8 introduces stricter requirements for the administration of Value-Added Tax (VAT) and consumption tax on exports. This regulation mandates improved documentation and stringent compliance with tax filing obligations for all exporters and relevant service providers involved in cross-border transactions. The primary objective is to ensure that all goods leaving China are subject to proper tax scrutiny, aligning export taxation with domestic tax rules. Key provisions include [3]:

• Mandatory Tax Registration: All exporters of goods subject to VAT or consumption tax must now be formally registered with Chinese tax authorities prior to customs clearance. This eliminates any ambiguity regarding the tax status of exporting entities.
• Enhanced Documentation: Exporters are required to provide more detailed and accurate documentation to support VAT and consumption tax claims, ensuring consistency across invoice records, customs declarations, and foreign exchange receipts.
• Penalties for Non-Compliance: The announcement stipulates clear penalties for late or inaccurate submissions, signaling a more aggressive enforcement stance by tax authorities.

This announcement is expected to significantly increase the scrutiny of export transactions, impacting supply chain administration and potentially lengthening export tax rebate cycles for businesses that are not fully compliant [1].

Announcement No. 17 (2025): Corporate Income Tax (CIT) Reporting for Agent Exports

Announcement No. 17 directly addresses the long-standing practice of using third-party export documents and aims to close loopholes related to Corporate Income Tax (CIT) reporting for agent exports. This regulation establishes clear requirements for agent exporters, ensuring that CIT obligations align with the actual flow of goods and revenue [1].

Key changes under Announcement No. 17 include [1, 3]:

• End of Third-Party Declarations: The previously accepted practice of using an unrelated company’s name or license to declare exports is now prohibited. Shipments must be declared under the exporter’s own license. If a factory exports directly without using an agent, this requirement does not impact them.
• Dual-Title Requirement: For factories that do not hold their own export license, all export paperwork must still clearly list them as the “production and sales entity.” Their full details, including legal name, registered address, and tax ID, must be disclosed for verification.
• Real-Name Reporting for Agent Exporters: Agent exporters, including those operating under market procurement trade or foreign trade comprehensive service platforms, now face stricter reporting duties. During the prepayment declaration, agents must submit a transaction-level summary table, disclosing the name of the actual entrusted exporter, their Unified Social Credit Code (USCC), and the export amount and declaration number.
• Liability Shift: If an agent fails to accurately report the information of the actual entrusted exporter, or lists a non-actual exporter (such as a freight forwarder or non-resident entity), the transaction will be reclassified as a self-operated export. In such cases, the agent will be liable for CIT on the full export value [1]. This provision effectively eliminates the “don’t ask, don’t tell” approach previously tolerated by some freight forwarders and logistics firms.

These provisions ensure that tax obligations are aligned with the actual flow of goods and revenue, closing loopholes that previously allowed income to go undeclared. The regulation pierces through intermediary layers to identify the true cargo owner, shifting full tax liability to the agent if the actual production and sales entity is not correctly reported [1].

Impact on Cross-Border E-commerce

The burgeoning cross-border e-commerce sector, a significant driver of China’s export growth, faces a particularly complex set of challenges under the new regulations. Many e-commerce sellers, especially smaller ones, have historically relied on logistics intermediaries (such as YunExpress or Yanwen) to handle export declarations. These intermediaries often aggregated shipments from multiple sellers, simplifying the export process but also obscuring the individual seller’s identity from a regulatory perspective. With the new emphasis on real-name reporting and the identification of the actual production and sales entity, this model is no longer sustainable [1].

Following the policy announcement, some logistics intermediaries have already ceased accepting shipments from individual sellers due to heightened compliance risks. This forces e-commerce sellers to re-evaluate their operational models. Those utilizing “overseas warehouse + B2B2C” models must now meticulously track the timing of foreign exchange receipts and ensure they precisely match their export declarations to maintain eligibility for tax rebates. Furthermore, STA Announcement No. 15 (2025), which requires platforms to report seller income, orders, and commissions, ushers in an era of unprecedented transparency. The entire financial ecosystem of cross-border e-commerce—including income, cost, and profit data—will be subject to full regulatory scrutiny, fundamentally altering how these businesses operate [1].

The implications extend beyond tax compliance. The need for manufacturers to formally purchase components and for products to be made in a “formal way” means that informal dropshipping practices will also be curtailed. Only products that have undergone the formal manufacturing and tax payment process will be eligible for dropshipping after October 1, 2025 [2]. This necessitates a complete overhaul of sourcing and logistics strategies for many e-commerce businesses, pushing them towards more formalized and transparent supply chains.

Implications for Exporters and Importers

The new regulatory framework introduces significant operational and financial implications for both Chinese exporters and their international counterparts.

For Chinese Exporters

Chinese export enterprises, particularly manufacturers, must now prioritize establishing robust internal compliance systems. The traditional model of “export through buying third-party export documents” is no longer viable, compelling businesses to transition to compliant export structures, either through self-operated exports or meticulously documented entrusted arrangements [1]. This requires a significant upgrade in internal systems and processes to manage the seamless flow of goods, documents, and funds, ensuring that invoice records, customs declarations, and foreign exchange receipts are fully aligned. Manufacturers and production-based exporters must build a comprehensive customs and tax compliance framework, ensuring consistency across accounting books, customs filings, and payment records [1].

Furthermore, when engaging with freight forwarders or logistics companies, Chinese exporters must conduct thorough due diligence, auditing their qualifications and clearly defining declaration responsibilities within contracts. Failure to do so could result in the exporter being held liable for agent misconduct [1]. The potential lengthening of export tax rebate cycles due to stricter documentation and real-name reporting also necessitates careful financial planning and cash flow management.

For International Importers

Overseas buyers, who have long benefited from the flexibility of China’s export ecosystem, are also directly impacted. Many have purchased goods from Chinese factories that previously relied on non-compliant export methods. With the new regulations, some customs brokers and logistics firms have ceased offering such services, while others have substantially increased fees to mitigate their own tax risks. In certain scenarios, overseas buyers may now be required to provide detailed information about the actual Chinese exporter, adding a layer of complexity to their procurement processes [1].

To adapt, international importers have several strategic options. They can collaborate closely with their Chinese suppliers to ensure goods are exported under the supplier’s name using compliant methods. Alternatively, they can engage a third-party export agent, ensuring that the Chinese supplier is correctly listed as the entrusting party. For larger buyers with significant and ongoing trade volumes, establishing a local entity in China may emerge as a strategic imperative. This allows them to purchase goods domestically and export directly under their own name, gaining greater control and ensuring compliance [1].

New Licensing Rules for Dual-Use Items: A Broader Regulatory Net

Beyond the immediate tax and customs compliance reforms, China is also tightening its grip on the export of dual-use items and technologies. On September 16, 2025, the Ministry of Commerce (MOFCOM) published a draft of the “New Measures for the Administration of Export Licenses for Dual-Use Items” for public comment, with the consultation period closing on October 16, 2025 [4]. This draft, intended to replace the 2005 text, is a direct response to China’s comprehensive Export Control Law (2020) and the Regulations on the Export Control of Dual-Use Items (2024), aiming to streamline and strengthen the licensing process for sensitive goods.

Key proposed changes in the draft include [4]:

• “One License, One Use” Principle: This new principle cancels the previous “One License, More Uses” mechanism, meaning each export license for dual-use items can now only be used for a single customs clearance. This significantly increases the administrative burden for frequent exporters of such items.
• Extended Scope: The export license requirements will now apply to dual-use items transported out of China via postal services, carried abroad in personal luggage, or re-exported, broadening the regulatory net considerably.
• Defining “Unauthorized Export”: The draft explicitly defines “unauthorized export” as any discrepancy between the dual-use items export license and critical elements of the actual export, such as the controlled items, destination, end-user, or end-use. This leaves little room for interpretation and emphasizes strict adherence to license parameters.
• Non-Critical vs. Critical Changes: The new measures distinguish between minor changes (e.g., to non-critical elements) and major changes (e.g., to end-user or destination). Major changes will necessitate a new license and temporary suspension of exports, highlighting the need for meticulous planning and execution.
• Digital Administration: The process for issuing, collecting, and using licenses will transition to a paperless system, aiming for greater efficiency but also requiring digital readiness from businesses.
• Extension and Validity: Licenses can now be extended once, and the arbitrary annual expiration on March 31 for 12-month licenses has been removed, offering greater flexibility.
• Transactions Subject to Prior Approval: A non-exhaustive list of cross-border transactions requiring prior approval before a dual-use import or export license can be applied for is introduced. This includes the import and export of monitored chemicals, import of commercial cryptographic products, export of nuclear materials, and import of radioactive isotopes.

These proposed changes underscore China’s commitment to strengthening its export control framework, particularly for technologies and items with potential military or strategic applications. Multinational companies, especially those in sensitive sectors or dealing with dual-use items, must closely monitor these developments and proactively adapt their compliance strategies to avoid unexpected restrictions and ensure smooth cross-border operations [4].

Supply Chain Disruptions and the Urgency of Adaptation

The immediate consequence of these stringent new regulations is the potential for significant disruptions across global supply chains. The transition from informal “grey” clearance practices to a fully formalized, transparent system is not without its challenges. The requirement for manufacturers to purchase components themselves in a “formal way,” ensuring alignment of material flows, goods, and tax invoices, represents a fundamental shift in operational paradigms [2]. This means that products not manufactured or components not purchased in the formal way should ideally be moved out of mainland China before October 1, 2025, to avoid potential complications.

This impending deadline could trigger a rush on shipping in the weeks leading up to October 1st, potentially leading to port congestion, increased freight costs, and delays. The combination of the new regulations with China’s national holidays around this period (such as the National Day holiday and potentially the Mid-Autumn Festival) could exacerbate these logistical challenges, creating a bottleneck for shipments attempting to exit China [2].

Furthermore, the increased scrutiny and documentation requirements will inevitably lead to longer processing times at customs. Ex-Works (EXW) and Free Carrier (FCA) shipments, where the buyer assumes responsibility for transport early in the supply chain, may face additional risks if shippers are not fully cognizant of their new document obligations. Non-compliance risks are severe, ranging from fines and rejected shipments to potential legal penalties imposed by Chinese authorities [3]. These disruptions are not merely temporary inconveniences; they signal a permanent shift in the operational dynamics of sourcing from China, demanding proactive adaptation from all parties involved.

Expert Analysis and Strategic Recommendations

The new regulatory environment in China necessitates a fundamental re-evaluation of business strategies for all entities engaged in cross-border trade. Experts agree that a proactive and comprehensive approach to compliance is no longer optional but a critical imperative for sustained operations.

Strategic Recommendations for Businesses:

1. Conduct a Comprehensive Compliance Audit: Businesses must immediately undertake a thorough audit of their current export operations, identifying any practices that may fall under the newly prohibited “grey clearance” methods. This includes scrutinizing existing relationships with agents, freight forwarders, and logistics providers to ensure full transparency and compliance with real-name reporting requirements.
2. Formalize Export Structures: Manufacturers without direct export licenses must transition to fully compliant export structures. This could involve amending their registered business scope to include import/export, registering via China’s Single Window System, and completing registration with local tax authorities for export rebate verification [3]. For international buyers, establishing a local entity in China to handle procurement and direct export may be a viable long-term strategy [1].
3. Strengthen Documentation and Data Alignment: The emphasis on data-driven tax supervision means that consistency across all documentation—invoice records, customs declarations, foreign exchange receipts, and internal accounting—is paramount. Investing in robust Enterprise Resource Planning (ERP) systems and digital solutions that can integrate and align these data points will be crucial to avoid discrepancies that could trigger penalties or delays in tax rebates [1].
4. Enhance Due Diligence on Partners: Both Chinese exporters and international importers must exercise heightened due diligence when selecting and managing their supply chain partners. Formal agreements should explicitly outline responsibilities for compliance, data disclosure, and tax obligations. Regular audits of partners’ compliance practices will be essential to mitigate risks [1].
5. Monitor Dual-Use Item Regulations Closely: Companies dealing with sensitive technologies or dual-use items must pay particular attention to the evolving licensing rules. The “One License, One Use” principle and expanded scope of control for dual-use items demand meticulous planning for each shipment. Staying informed about updates to control lists and application procedures is vital to prevent unexpected export restrictions [4].
6. Proactive Communication and Training: Internal teams, particularly those involved in sales, logistics, finance, and legal, must be thoroughly trained on the new regulations. Open and continuous communication with Chinese suppliers, agents, and logistics providers is also critical to ensure a shared understanding of the new compliance landscape and to collaboratively develop solutions [3].
7. Contingency Planning for Supply Chain Resilience: Given the potential for initial disruptions, businesses should develop contingency plans. This might include diversifying sourcing options, pre-shipping inventory where feasible, and building buffer stock to absorb potential delays. Engaging with customs brokers and legal experts who specialize in Chinese trade law can provide invaluable guidance during this transition period.

These recommendations underscore a shift from a reactive to a proactive compliance posture. The new rules are not merely administrative hurdles but a fundamental restructuring of China’s approach to international trade, demanding strategic foresight and operational agility from all global players.

Conclusion: A New Era of Transparency and Compliance

China’s new export compliance regulations, effective October 1, 2025, represent a landmark shift in the country’s approach to international trade. The era of informal “grey” clearance practices, particularly the use of third-party export documents, has definitively ended. The introduction of Announcement No. 8 and Announcement No. 17 of 2025 mandates unprecedented levels of transparency, real-name tax reporting, and a direct, verifiable link between the manufacturer and the exported goods. This comprehensive overhaul aims to eliminate tax evasion loopholes, enhance regulatory oversight, and align China’s export framework with its domestic tax rules.

The implications for global supply chains are profound and far-reaching. Chinese exporters must formalize their operations, invest in robust compliance systems, and meticulously align their documentation. International importers, in turn, must adapt their procurement strategies, engage in enhanced due diligence with their Chinese partners, and consider establishing a direct presence in China for greater control. The additional layer of scrutiny on dual-use items, with the proposed “One License, One Use” principle, further underscores China’s commitment to a more controlled and regulated export environment.

While the transition may bring initial disruptions, including potential shipping delays and increased administrative burdens, these changes are ultimately designed to foster a more legitimate and sustainable trading ecosystem. Businesses that proactively embrace these reforms, prioritize transparency, and invest in robust compliance mechanisms will be best positioned to navigate the new realities of China’s export landscape and maintain their competitive edge in the global marketplace. The message is clear: compliance is no longer a mere formality but a strategic imperative for anyone engaged in trade with China.

References

[1] How China’s 2025 New Tax Filing Rules Will Affect Export Compliance

[2] China Export Process: Stricter Compliance Requirements Coming Oct 1st ’25

[3] New Chinese Export Compliance Regulations Effective 1 October 2025

[4] China Strengthens Export Controls and Proposes New Licensing Rules