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Trade Regulations of China

China became a World Trade Organization (WTO) Member on 11 December 2001 and China has continued to reduce administrative barriers to trade. China has gradually liberalised its foreign trading system. According to China’s amended Foreign Trade Law which went into effect from July 2004, all types of enterprises, including private enterprises, can register for the trading right. Individual Chinese are also allowed to conduct foreign trade under the amended Foreign Trade Law.

Import duties and taxes related to foreign trade and business

According to WTO, China's average applied most favoured nation (MFN) tariff rate was 9.9% in 2015, progressively down from 15.3% in 2001. The average tariff was higher for agricultural products at 15.6% while the average tariff for non-agricultural products was 9.0%.

Since expanding domestic consumer demand is an important move in achieving stable economic growth and economic restructuring, it was decided at the State Council Executive Meeting held on 28 April 2015 that steps would be taken to improve policies on the import and export of consumer goods. Import tariffs on certain foreign daily consumer goods which are in great demand on the mainland will be lowered on a pilot basis, while steps will be taken to gradually expand the scope of products eligible for lower tariffs. Starting from 1 June 2015, the import tariff rates on daily consumer products including certain garments, footwear, skincare products, and paper diapers are slashed, at a rate averaging 50%. In this round of adjustment, the import tariff on suits and furskin apparels is lowered from 14-23% to 7-10%; import tariff on short boots and sports shoes goes down from 22-24% to 12%; import tariff on paper diapers will drop from 7.5% to 2%; while that on skincare products from 5% to 2%.

Online search on China import tariff rates on all categories of Harmonized System Commodity codes is available at HKTDC portal.

Anti-dumping and countervailing duties may be imposed on imported goods that pose a threat to Chinese national industries. Imported agricultural products subject to tariff rate quotas include wheat, corn, rice, soybean oil, rapeseed oil, palm oil, sugar, cotton and wool.

VAT on imported goods at basic rate of 17% for general goods and at a lower rate of 13% for some foodstuffs, grains and edible vegetable oils, gas and other energy products for domestic use, books and newspapers, magazines, feedstuffs and fertilisers, etc. Foreign-invested export processing enterprises are required to pay VAT on imported raw materials, parts and components. Upon exports, the paid VAT will offset the VAT payable for the part of domestic sale goods. Excess will be rebated.

Consumption tax is applied to imports of cigarettes and tobacco, alcoholic drinks, high-end cosmetics, skin and hair care products, jewellery and precious stones, motor cycles, motor cars, gasoline and diesel oil, golf clubs and equipment, high-end watches, yachts, disposable wooden chopsticks and wood floor panels.

With effect from 1 October 2016, China’s consumption tax policy has been adjusted, and the tax item “cosmetics” has been renamed “high-end cosmetics”. In this adjustment, cosmetics of the high-end beauty and cosmetic category and skin care category are defined as having a dutiable price of RMB10/ml (g) or RMB15/piece (sheet) and above. The import consumption tax rate has been lowered to 15% from 30%.

Business tax is a kind of turnover tax levied on the revenue generated from the provision of taxable services. From 2012, China began to implement business tax to VAT conversion pilot programme. With effect from 1 May 2016, the VAT conversion pilot programme had been extended to cover the fields of real estate and construction, finance and consumer services. Currently, the programme covers both goods and services with the VAT rate of 3-17%.

Corporate income tax is lowered to 25% (from 30%) for both domestic and foreign-invested enterprises from January 2008. Individual income tax for foreign nationals working in China is charged at progressive rates from 3% to 45%.

Quota and licensing control

Quota and licensing requirements have been removed on the majority of imports starting from 2005, and only a limited number of products are now subject to import licensing control. In 2017, only two categories of commodities, namely ozone depleting substances and key used mechanical and electronic products, totalling 139 items under the 10-digit tariff code, are subject to import licensing control.

The Ministry of Commerce (MOFCOM) together with other related State Council departments are responsible for formulating, amending and publishing a catalogue of mechanical and electronic products the imports of which are subject to restriction or prohibition, thereby exercising quota and licensing control on the restricted products.

For purposes of import monitor and analysis, China implements a system of automatic import licensing for certain mechanical and electronic products which can be imported freely. To import mechanical and electronic products subject to automatic import licensing, the import unit should apply to MOFCOM or its authorised agencies for an Automatic Import Licence before completing the customs formalities.

Customs and Quarantine system

China adopted the practice of “quarantine inspection before customs declaration” in customs clearance. Import Goods Clearance Slips and Export Goods Clearance Slips stamped with the special seal of inspection and quarantine authorities are issued to goods subject to entry-exit inspection and quarantine. The Customs will examine and release the goods against the Import Goods Clearance Slip or Export Goods Clearance Slip issued by the entry-exit inspection and quarantine authorities at the place of customs declaration.

China practises a system of pre-shipment inspection for wastes imported as raw materials. Wastes to be imported must measure up to China’s environmental protection standards and must be inspected and approved by inspection organisations recognised by the General Administration of Quality Supervision, Inspection and Quarantine (AQSIQ) before shipment.

The Customs is the authority to interpret the customs tariff, to decide tariff classifications and to assess the duty paying values of goods entering the customs border. The dutiable value of an imported good is its CIF value, which includes the normal transaction price of goods, plus the cost of packing, freight, insurance and commission.

Product standards

Inspection is required for all import and export goods listed in the Catalogue of Import and Export Commodities Subject to Inspection and Quarantine (click for the catalogue updates) by Entry-Exit Inspection and Quarantine Authorities, or subject to inspection pursuant to other laws and regulations. Safety licence and other regulatory requirements apply to imports of medicines, foodstuffs, animal and plant products, and mechanical and electronic products. Click for detailed information provided by China Certification and Accreditation Administration on quality standards.

China implemented its new system of compulsory product certification on 1 May 2002. Under the new system, a unified catalogue, standard, mark and fee schedule are in place and the CCC (China Compulsory Certification) mark has replaced the Great Wall CCEE and CCIB marks used in the old system. The CCC mark is the certification mark for products which are allowed to be imported, sold or used in China. Catalogues of products requiring CCC mark have been drawn up and promulgated through public notice.

The CCC catalogues cover the major product categories of electrical wires and cables, circuit switches and electric devices for protection or connection, low voltage electrical apparatus, small power motors, electric tools, welding machines, household appliances and appliances for similar uses, audio and video apparatus, information technology equipment, lighting apparatus, motor vehicles and safety parts, motor vehicle tyres, safety glass, agricultural machinery, firefighting equipment, preventive safety technology products, telecommunications terminal equipment and wireless LAN products. Details can be found on the CNCA website.

Apart from CCC certification, some products may have to meet other requirements as well, e.g. telecom and internet equipment (China Ministry of Industry and Information Technology); motorcycle engines, refrigerators, air conditioner compressors, televisions and other electrical household appliances (for safety licence requirements).

China has a complex system of governing the standards and hygienic conditions of food and agricultural products, wines and cosmetics imported into the mainland. The public health administration of the State Council has also established regulations governing the use of GM food and food ingredients in food manufacturing to ensure good quality and safety.

Trade description and labelling requirements

All goods sold in China must be labelled in Chinese language with true description of their contents, grades and specifications as to quantities where applicable, production date and expiration date (in particular for food related items and pre-packaged foods), explanatory warnings as to potential hazard associated with the products, etc.

China adopts a labelling system for the management of GM agricultural bioproducts and publishes a catalogue accordingly. All GM agricultural bioproducts listed in the catalogue must be properly labelled if they are to be sold in the China market.

Free Trade Agreements with China

Currently, China has signed and implemented 14 free trade agreements (FTAs) and another 9 FTAs are under negotiation.

Besides the Closer Economic and Partnership Agreements with Hong Kong and Macau, China has FTAs in force with regions and countries such as ASEAN, New Zealand, Singapore, Switzerland, Korea and Australia. It is currently negotiating FTAs with regions and countries such as Regional Comprehensive Economic Partnership (RCEP), the Gulf Cooperation Council (GCC) countries, Norway, Japan-Korea, Sri Lanka, and Maldives. For details, please refer to China FTA Network website under the MOFCOM.

Reduced import tariff rates may be applied to certain commodities imported from FTA countries into China.

Under the Closer Economic Partnership Arrangement (CEPA), zero tariff rates are applied to imported commodities fulfilling origin requirements from Hong Kong and Macao SARs. Hong Kong service suppliers enjoy preferential treatment in entering into the mainland market in various service areas. The Agreement on Achieving Basic Liberalization of Trade in Services in Guangdong (the Guangdong Agreement) was implemented on 1 March 2015. The Guangdong Agreement adopts a hybrid approach of positive and negative lists to set out the liberalisation measures in the Guangdong province applying to Hong Kong. On the basis of the Guangdong Agreement, the Agreement on Trade in Services was signed on 27 November 2015 and implemented on 1 June 2016, extending the geographical coverage to the whole Mainland for basic liberation of trade in services. For the details of the Guangdong Agreement, please refer to the Hong Kong Trade and Industry Department website.

Content provided by Picture: HKTDC Research