Major updates in China customs

Tariff exemption on the domestic sale of imported materials processed in Hainan

On 8 July 2021, China’s General Administration of Customs (GAC) specified the tariff exemption measure in the Hainan Yangpu Bonded Zone (the Zone). Goods containing imported materials with over 30% value-added processing in the Zone are exempt from customs duty when they are sold to other areas in China (domestic sales). Import VAT and consumption tax will still have to be paid. The said preferential measure applies to enterprises listed in ”encouraged sectors” – which means their income from ”encouraged sectors” businesses should account for at least 60% of their total income.

Procedures on handling the customs administrative penalty

GAC has revised the procedures for handling the administrative penalty, effective from 15 July 2021. The major revisions to the procedures are as follows:

• Administrative penalty will not be imposed on any offence that took place over two years ago. The above period should be extended to five years for cases that have an impact on human life and health, financial security, or potentially leading to harmful consequences.
• Administrative penalties should be exempt for minor offences without any significant consequences and timely correction and might be exempt for first-time offences with minor consequences and timely correction.
• No administrative penalties will be imposed on offences for objective reasons (evidenced by proof).
   

Policies to boost Shanghai’s Pudong

A new guideline was released on 15 July 2021 to support a high-level reform of the Pudong New Area in Shanghai. The guideline has outlined 27 measures for future policy roadmaps to meet the area’s development target. Along with these incentive measures, the guideline has provided a high-level view of relevant customs-related policies to be issued:

• Import taxes (import VAT and customs duty, where applicable) would be exempt for drugs to be used in clinical research.
• R&D institutions would be exempt from the import taxes for self-use equipment and would enjoy a tax refund for the self-use equipment which is sourced in China.
• Policies of the Yangshan Special Comprehensive Bonded Zone would be extended to Pudong’s customs supervision areas.
• Some officially shortlisted companies outside the customs supervision areas are encouraged to carry out high value-added, high-tech, and environment-friendly repairing business for the offshore market.
   

New rules of formula pricing

The new rules of formula pricing took effect from 1 September 2021. The new rules expanded the application of formula pricing to a broad extent. Under the new rules, imported goods with a price contingent on the content percentage or import quantity are included in the scope of formula pricing. In addition, bonded goods whose price cannot be determined during domestic sales are also included in the scope of formula pricing.

For the customs declaration, importers are required to complete the new added columns of “formula pricing confirmation” and “provision price confirmation” in the customs declaration form

Read the WTS Global Customs Newsletter here.