In recent years, the rapid development of cross-border e-commerce and comprehensive foreign trade service providers (hereinafter referred to as “CFTSPs”) has positioned these entities as crucial intermediaries in declaration filing, foreign exchange settlement, and customs clearance. However, this intermediary role has also exposed them to increasing legal risk under the “dual liability” mechanism (commonly referred to as the “dual penalty” regime), whereby both the importer/exporter and the service provider may be held liable for customs violations under the frameworks of the Customs Law of the People’s Republic of China, the Administrative Penalty Law, and related regulations.
This article examines, from a legal practice perspective, the statutory basis, enforcement logic, and risk boundaries of the dual liability system as it applies to CFTSPs, and provides practical compliance recommendations.
I. Legal Basis for the “Dual Liability” Regime #
The “dual liability” system refers to an enforcement mechanism in the field of customs supervision whereby, in addition to holding the actual actor (e.g., the importer or exporter) liable for violations, administrative penalties may also be imposed on third parties such as customs brokers or CFTSPs who assist, participate in, or fail to conduct reasonable due diligence.
(1) Customs Law of the People’s Republic of China (2021 Amendment) #
- Article 10:
“Where a customs broker handles customs declaration in its own name on behalf of an importer/exporter, it shall bear the same legal responsibility as the consignor or consignee… Customs brokers shall reasonably examine the authenticity of the information provided by the client.” - Article 45:
“Within three years after the release of import or export goods, or during and within three years after the supervision period for bonded or duty-exempted goods, the customs may conduct post-clearance audits on enterprises or entities directly involved.” - Article 86:
“Where import/export goods or transit goods are falsely declared to customs, administrative penalties including fines and confiscation of illegal income may be imposed.”
(2) Implementation Regulations on Administrative Penalties under the Customs Law (2022 Revision) #
- Article 15:
Sets forth specific penalties for misdeclarations or omissions in key customs declaration elements such as classification, quantity, value, origin, destination, etc. - Article 16:
Provides that where the importer/exporter fails to provide accurate information to the customs broker, resulting in a violation under Article 15, the principal (client) shall be penalized. - Article 17:
Provides that where the customs broker fails to conduct reasonable due diligence, or is negligent in work leading to misdeclaration under Article 15, the broker may be fined up to 10% of the goods’ value and may be suspended from declaration activities for up to six months, or permanently disqualified in serious cases.
Conclusion: Even in the absence of intent, a CFTSP may be penalized alongside the client if it fails to fulfill its duty of reasonable review—thus triggering the dual liability mechanism.
II. Role Characteristics and Legal Exposure of CFTSPs #
In practice, CFTSPs often undertake the following:
- Collecting client information for customs declarations;
- Preparing and submitting customs documents;
- Acting as declarants or intermediaries;
- Assisting in foreign exchange settlement and tax rebate documentation.
Although they are not the legal owners of the goods, CFTSPs function as de facto customs agents and are thus deemed independent regulatory subjects under customs law.
If a CFTSP accepts falsified documents without verification or continues service despite knowing of client noncompliance, it may be deemed to have failed in its duty of reasonable examination and thereby be subject to joint administrative penalties.
III. Attribution of Legal Responsibility #
(1) The “Should Have Known” and “Gross Negligence” Standard #
In regulatory practice, liability often hinges on:
- Whether the CFTSP has established internal compliance and review mechanisms;
- Whether it retains records of the declaration process and client communication;
- Whether it took proactive measures to warn clients or suspend services.
If customs determines that a service provider “should have known” about the client’s violation but failed to act, such omission may be classified as gross negligence, triggering dual penalties.
(2) Possibility of Exemption or Mitigation #
CFTSPs may seek exemption or mitigation of penalties under the following conditions:
- The client used high-quality forged documents, and the CFTSP performed a reasonable review;
- The service provider has a documented and robust compliance system, including risk control and audit trail mechanisms;
- The provider reported the irregularity to customs in a timely manner and cooperated with investigations.
IV. Compliance Recommendations: Mitigating Exposure to “Dual Liability” Risk #
CFTSPs should recognize themselves as quasi-obligated parties and proactively develop a compliance framework, focusing on the following:
- Client Due Diligence and Risk Rating
Assess business licenses, customs clearance history, and credit standing. - Document Verification and Manual Review
Conduct consistency and plausibility checks on invoices, contracts, and customs documentation. - Digital Audit Trail and Documentation Retention
Maintain review logs and digital records to demonstrate compliance during investigations. - Internal Training and External Legal Advisory
Ensure staff are updated on customs, export control, and cross-border taxation laws. - Client Risk Handling Protocols
Establish mechanisms for issuing alerts, blacklisting clients, and suspending services where appropriate.
This article is for informational purposes only and does not constitute legal advice. For case-specific consultation, please contact us. Read our full Legal Disclaimer, which also includes information on translation accuracy.
