For foreign companies exporting from China, choosing the right customs declaration model is not a technical footnote—it directly affects your cost structure, compliance exposure, and speed to market. Among the many regimes available, two models frequently surface in advisory discussions: the Consolidated Tax Exemption Model (Code 1039) and the Normal Tax Rebate Model (Code 0110). Each serves a distinct purpose, and understanding their differences is essential before committing to a supply chain structure.
Rheaura Group, founded in 1994, has guided more than 2,000 foreign-invested enterprises through the complexities of cross-border trade and regulatory compliance in China. In this article, we break down how these two export modes work, where the real advantages diverge, and what foreign exporters should weigh when making their decision.
What Is the 1039 Export Model (Consolidated Tax Exemption)?
The 1039 model—officially known as the “Market Procurement Trade” (MPT) customs code—was introduced to simplify export procedures for small-volume, high-frequency traders, particularly those operating in designated market procurement trade zones such as Yiwu. Under this regime, eligible goods can be exported without triggering VAT and consumption tax invoices, which means suppliers do not need to issue formal tax-fapiao documents for each shipment.
Key characteristics of the 1039 model include:
- Streamlined customs clearance with lower documentation requirements
- No VAT or consumption tax is levied at the point of export
- Suitable for goods sourced from multiple small suppliers in designated markets
- Requires registration within an approved MPT pilot zone
- Aggregates multiple small orders into a single consolidated shipment for customs purposes
What Is the 0110 Export Model (Normal Tax Rebate)?
The 0110 model represents the conventional export pathway used by manufacturers and trading companies that hold proper tax-fapiao documentation. Under this model, exporters apply for VAT refund (tax rebate) on eligible goods after they clear customs. The rebate rate varies by product category and is governed by the national tax classification system. While this model provides a financial return through the rebate, it requires full invoicing, strict record-keeping, and compliance with export documentation standards.
Key characteristics of the 0110 model include:
- Formal VAT invoice (fapiao) required for each transaction
- Eligible for VAT refund (tax rebate) upon export confirmation
- Full customs documentation and inspection protocols apply
- Higher compliance standards and record-keeping obligations
- Rebate rates vary by product HS code and current national policy
Tax Implications: Where the Models Diverge Most
The most frequently cited advantage of the 1039 model is tax exemption at the export stage. Because no VAT fapiao is issued, there is no VAT to reclaim and no consumption tax to account for. For goods with low or zero rebate rates under the 0110 regime, this can effectively eliminate a cost that would otherwise reduce net export proceeds. However, it is important to note that the 1039 model does not generate a tax credit that can be passed down the supply chain—so if your buyers or logistics partners require formal invoicing, this model may create friction downstream.
The 0110 model, by contrast, preserves the full tax credit chain. Exporters with high rebate-rate products—particularly in machinery, electronics, or certain chemicals—often find that the rebate substantially offsets their domestic VAT burden. The effective net cost can be lower under 0110 for certain product categories, despite the apparent complexity. Foreign companies should always model the after-rebate cost for their specific HS codes before concluding that 1039 is universally cheaper.
Process Simplicity: Documentation and Compliance
When it comes to day-to-day operational burden, the 1039 model holds a clear advantage. Customs declarations under 1039 can be consolidated, reducing the number of individual entries required. This is particularly valuable for foreign buyers sourcing mixed product lines from Chinese market clusters, where individual supplier fapiao collection would be impractical. The compliance threshold is lower, and the risk of documentation errors triggering customs holds is reduced.
The 0110 model demands rigorous documentation: commercial invoices, packing lists, contracts, and tax-fapiao records must all be consistent and retained for the statutory period. Any discrepancy between the fapiao and the actual shipment can delay clearance or trigger a tax audit. For foreign companies without a dedicated China-based finance or compliance team, managing this level of detail can be resource-intensive.
Regulatory Compliance and Legitimacy
A common misconception is that the 1039 model’s lighter documentation requirements make it less “official.” In practice, both 1039 and 0110 are fully recognized customs regimes under Chinese law. The 1039 model operates within a licensed framework—exporters must be registered in an approved MPT pilot zone and their goods must meet the zone’s eligibility criteria. Operating outside these conditions and routing goods through the 1039 code without qualification is a compliance violation, not a loophole.
Rheaura Group has observed cases where foreign companies attempted to apply the 1039 model to product categories or sourcing arrangements that fell outside the pilot framework. The result was delayed shipments, customs penalties, and in some cases, the loss of export privileges. Proper eligibility assessment before implementation is not optional—it is the foundation of a sound export strategy.
Which Model Should You Choose?
There is no universally correct answer. The right model depends on your product category, rebate eligibility, sourcing structure, and downstream buyer requirements. The 1039 model is particularly well-suited for foreign buyers sourcing from China’s market trade zones, mixed-SKU orders, or product lines with low or no VAT rebate. The 0110 model is the stronger choice when rebate rates are meaningful, formal invoicing is required by your buyers, or your supply chain involves direct manufacturing relationships with full fapiao compliance.
Many foreign companies find that a hybrid approach—using 1039 for eligible product lines and 0110 for others—delivers the best outcome. This requires careful customs classification, zone eligibility verification, and ongoing compliance monitoring.
Navigating the nuances between these two export models requires both regulatory knowledge and practical supply chain experience. Rheaura Group’s team has supported more than 2,000 foreign companies in structuring compliant and cost-effective export operations across China since 1994. If you are planning your export strategy or evaluating whether the 1039 model fits your business, we welcome the opportunity to discuss your specific situation. Contact Rheaura Group today to speak with a trade compliance specialist.