Hainan Free Trade Port Import Tax Exemptions Explained

From 18 December 2025, China’s trade and customs framework will enter a new phase with the full implementation of the import tax exemption regime at the Hainan Free Trade Port.

Under this framework, goods imported directly from overseas into Hainan — crossing the so-called “first line” — will, in most cases, be exempt from import tariffs, import-stage VAT, and consumption tax.

This is not a pilot or a limited incentive. It represents a structural shift in how China facilitates international trade, supply chains, and market entry.

This article explains how the system works, who can benefit, and what foreign businesses need to consider before acting.

What the “first line” exemption actually covers

The first line refers to the customs boundary between overseas markets and Hainan Island.

Goods imported across this boundary will generally qualify for exemption from:

• Import customs duties

• Import-stage VAT

• Consumption tax

The exemption applies provided the goods are not listed in the Hainan FTP Import Taxation Catalogue, a published negative list covering controlled or restricted items.

In practice, this creates a default position of tax-free importation unless an item is specifically excluded.

Who can benefit from the regime

The preferential treatment is available to businesses that are:

• Lawfully established within the Hainan FTP

• Recognised by Hainan provincial authorities as eligible entities

• Operating within permitted business scopes

This includes foreign-invested enterprises setting up:

• Regional headquarters

• Trading and distribution platforms

• Manufacturing or processing operations

• R&D or innovation-focused entities

Eligibility is not automatic. Registration, substance, and alignment with Hainan’s policy objectives are all assessed.

The second line and access to mainland China

Hainan’s system is designed around two distinct customs boundaries.

• First line: between Hainan and overseas markets

• Second line: between Hainan and mainland China

While goods remain within Hainan, they benefit from liberalised trade rules. Once they cross the second line into the mainland, standard import procedures apply.

That said, the process is structured, transparent, and predictable. With correct planning, businesses can manage duties, VAT exposure, and compliance requirements efficiently.

This is where supply chain design matters.

Why this matters for international businesses

The regime allows foreign companies to:

• Lower upfront tax costs on imported goods

• Hold inventory in China under more flexible conditions

• Test products or market demand before full mainland entry

• Build regional hubs with reduced trade friction

It is particularly relevant for businesses in manufacturing, consumer goods, technology, life sciences, and international trading.

Compliance still matters

Although the framework is liberalised, it operates fully within China’s national legal system.

Businesses must still meet requirements around:

• Customs declarations

• Record-keeping and reporting

• Transfer pricing and related-party transactions

• Corporate, tax, and foreign investment compliance

  
  

Authorities expect consistency, transparency, and alignment between commercial reality and filings.

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