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China custom duties vary – Foreign companies can apply for preferential treatment and rates

To promote a higher level of openness and domestic consumption, China implemented a series of regulations to reduce import-export taxes and duties. Current rates, including customs duty, Most Favored Nation (MFN), provisional tariff rates and relevant regulatory conditions can be found on the Ministry of Commerce (MOFCOM) website or the General Administration of Customs (GAC) website. 

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Companies that import and export taxable goods and services from China should understand the general principles of this intricate system. Value-added tax (VAT), consumption tax (CT), and customs duties are the three types of taxes applicable to these companies. 


Import tariff rates are divided into six categories: general rates, MFN rates, agreement rates, preferential rates, tariff rate quota rates, and provisional rates. Since China is a member of the WTO, imports from the United States are assessed at the MFN rate. 


Exemption for low-value shipments 


The Circular on Tax Policy for Cross-Border E- commerce Retail Imports and Circular on Improving Tax Policies for Cross-border E-commerce Retail Imports provide that the threshold for a single transaction of imported goods retailed through cross-border e-commerce is RMB 5,000 (US$ 700) per transaction. 


The threshold for individual annual transactions is RMB 26,000 (US$ 3,600). The tariff for imported commodities whose transaction amount is within these thresholds is fixed at 0% temporarily.  


The exemption for import VAT and consumption duties are cancelled and import VAT and consumption tax are temporarily levied at 70% of the statutory tax payable. 


Special rates and preferential treatment 


According to China’s Regulations on Import and Export Duties, the current implementation of the import tariff rates consists of MFN rates, the conventional tariff rate, the preferential tariff, and the general tariff rate.  


The five Special Economic Zones, open cities, and foreign trade zones within cities offer preferential duty reductions or exemptions. Companies doing business in these areas should consult the relevant regulations. 


China may apply tariff rates significantly lower than the published MFN rate for goods that the government has identified as necessary to the development of critical industries. For example, GAC has occasionally announced preferential tariff rates for items in the automotive, steel, and chemical sectors. 

Since 2018, China has imposed additional tariffs on certain U.S. goods to retaliate against U.S. tariffs imposed on China. 


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China excluded some U.S. products from those additional tariffs for a set period of time regardless of the importer.  It also launched another tariff exclusion process focused on individual importers.  Through this process importers could apply for exclusions on specific consignments of U.S. products.   


These exclusions exempt only the retaliatory tariffs for the products and are valid for one year from the date of approval but must be requested on a month-by-month basis.  Importers may also apply for tariff exclusions for products outside the eligible product list that was included in the announcement.  



GSP treatment  


There is no formal Generalized Scheme of Preference (GSP) in China and, according to GAC, goods exported from China to 32 countries (including EU member states, Canada, Liechtenstein, Turkey, Ukraine, and the United Kingdom) will no longer enjoy preferential GSP treatment.  


Based on letters exchanged between the Chinese government and the governments of the countries concerned, from March 1, 2023, zero tariffs will be applied on 98% of imported products originating from the three least developed countries: Burundi, Ethiopia, and Niger. 


Duty suspension  


The following imported products approved by GAC may be temporarily exempted from China custom duties: 


  • goods exhibited or used in exhibitions, trade fairs, meetings and other similar activities; 

  • articles used in performances or competitions in cultural or sports exchange activities; 

  • devices, equipment or articles used in news reporting or the producing of films or TV programs; 

  • devices, equipment or articles used in scientific research, education or medical activities; 

  • means of transport and special vehicles used in activities listed above; 

  • samples of goods; 

  • instruments and tools used in installing, debugging and testing equipment; 

  • containers for holding goods; and 

  • other goods not used for commercial purposes. 


Goods must meet the following criteria to qualify for China custom duty suspension: 

  • being re-exported within six months of being imported into China (or applying for an extension prior to the original deadline); 

  • a security deposit paid by the importer; and 

  • approval by GAC. 

Customs Valuation 

The dutiable value of an imported good is its cost, insurance, and freight (CIF) price, which includes the normal transaction price of the good, plus the cost of packing, freight, insurance, and seller’s commission.

China Customs is tasked with assigning a fair value to all imports. 


To assess a dutiable value, customs officers have access to a database that lists appropriate valuations for various imports based on international market prices, foreign market prices, and domestic prices. Officers check the price reported by the importer against this database.  


Normally, customs officers will accept the importer’s price. However, if the declared value is too far out of line with the database, they will estimate the value of the goods based on methods listed in Article 6 of China’s Administrative Regulation on Examination and Determination of the Dutiable Value of Imported and Exported Goods. 


For agricultural products, customs information does not reflect seasonal changes in pricing or the effects of quality/grade on pricing. In general, China Customs will charge against the highest price reflected in its database.  


Challenge 


Customs decisions can be challenged through administrative reconsiderations or administrative litigations. 


Interested parties may apply for administrative reconsiderations within 60 days from the acknowledgement that the specific customs action was taken, and, in general, the customs authority decides within 60 days.  


A lawsuit may be filed within 15 days of receipt of the written administrative reconsideration decision, or directly within six months from the acknowledgement that the specific customs action was taken. 

A company must first apply for reconsideration before a lawsuit can be filed. 


Taxes 


On top of normal tariff duties, both foreign and domestic enterprises are required to pay value-added taxes (VAT). VAT is assessed on sales and importation of goods and processing, repairs, and replacement services.  

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VAT is assessed after tariffs and incorporates the value of the tariff. China is bound by WTO rules to offer identical tax treatment for domestic and imported products. VAT is collected regularly on imports at the border.  


VAT rebates up to 17% (a full rebate) are available for certain goods. 


The Chinese government frequently adjusts VAT rebate levels to fulfill industrial policy goals. Exporters complain that it takes months to obtain the rebates, and amounts are often miscalculated. Also, local budgets limit rebates, and coastal provincial authorities often run out of funds for rebates well before the end of the year.  



The applicable rebate method varies according to the date the enterprise was established. 



 

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