What Is Actually Happening
China's standard VAT rate is 13% for most manufactured goods, with reduced rates of 9% and 6% for specific categories — published by China's State Taxation Administration (chinatax.gov.cn). Exports are zero-rated under China's VAT system, which means a registered exporter can either charge VAT and reclaim it later as an export refund, or sell at a VAT-exclusive price and claim the refund directly. The export VAT refund rate varies by HS code and ranges from 0% to 13% depending on policy, set jointly by China's Ministry of Finance and the State Taxation Administration — the specific refund rate for a given HS code should be cross-checked against the current STA refund-rate schedule.
Three structural cases produce three different quote shapes:
- Case A — Supplier is a licensed exporter with the relevant HS code on its export-license scope. The supplier may quote a VAT-exclusive export price and handle the export-refund process on its side. The buyer typically pays the quoted price and gets a commercial invoice; no separate VAT line.
- Case B — Supplier is a manufacturer without an export license and uses an export agent (代理出口) to handle the export declaration. The agent may handle the export-refund process on the supplier-or-agent side. The buyer often sees the same VAT-exclusive quote as Case A, but the supplier may price in an agent fee (seller-reported range, typically a small percentage of FOB value) that is sometimes labeled "export service fee."
- Case C — Supplier is a small workshop or trading company that may be unable to issue the VAT documents or use the export-refund process cleanly. The supplier prices in the unrefunded VAT, which inflates the FOB quote by up to the relevant HS code's VAT rate. The buyer pays a higher price than Case A or B and has no clean way to recover the difference.
What to Check Now: The Octo Export-VAT Quote Screen
| Question | What to ask the supplier | Failure signal |
|---|---|---|
| 1. Does the FOB / EXW price include VAT? | "Is this quote VAT-inclusive (含税) or VAT-exclusive (不含税)?" | Supplier cannot answer; says "we will discuss after order"; raises the question only after negotiation is closed |
| 2. Is the supplier itself the exporter on record? | "Will the export declaration (报关单) list your company name, or an export agent?" | Supplier dodges; says "we use a partner"; cannot give a clear answer about who is on the export declaration |
| 3. What is the export VAT refund rate for this HS code? | "What is the export tax refund rate (出口退税率) for this HS code?" Cross-check against the State Taxation Administration's published refund rate schedule for the HS code | Supplier does not know the HS code or refund rate; quotes a refund rate that does not match the published schedule |
| 4. Who issues the VAT invoice? | "Will I receive a VAT special invoice (增值税专用发票) or a regular commercial invoice?" Foreign buyers typically need only the commercial invoice for customs and bookkeeping; the VAT special invoice matters for the supplier's refund claim, not the buyer's import documentation | Supplier cannot explain who will issue the VAT invoice or export documents; supplier promises a VAT special invoice but cannot identify the issuing entity |
Why FOB and EXW Quotes Behave Differently
FOB (Free On Board) and EXW (Ex Works) are both sourced from the supplier's side, but the export declaration responsibility differs. FOB places the export declaration on the supplier (or its export agent), so the supplier needs export-license scope and the VAT refund mechanic applies as described above. Under EXW, the buyer takes more responsibility for arranging pickup and export handling. In practice, most foreign buyers still need a Chinese forwarder, export agent, or sourcing partner to manage the China-side export declaration — an EXW quote that is "VAT-exclusive" from a non-exporter supplier often assumes the buyer will arrange that China-side export step.
Red Flags
- The supplier raises VAT only after the price is "agreed" and now wants to add a VAT line on top of the quoted FOB number
- The supplier cannot name its own export-license scope or refund rate for the HS code
- The supplier insists on a personal bank account or Hong Kong account for payment (a frequent indicator that the entity cannot operate the export-refund mechanic at all)
- The quote is materially below comparable supplier quotes for the same FOB lane and product — sometimes a sign of an unrefunded-VAT case priced as a discount
- The supplier cannot explain who will issue the VAT invoice or export documents
What Octo Periscope Would Do
Periscope monitors export VAT refund-rate changes by HS code and flags supplier quotes that should be checked before pricing is locked. SAM verifies the supplier's export-license scope through SAMR business scope checks (生产 manufacturing scope, plus 进出口 import-export scope) as a screen before pricing is locked in. The four questions in the Export-VAT Quote Screen are run as part of the supplier brief, not after the quote is accepted.
Need a sourcing or regulatory partner that runs the Octo Export-VAT Quote Screen before the price is locked? See how Periscope tracks export VAT policy →