6 - Exporting
the Contents menu]
6.1 The tariff regime
6.2 Value Added Tax (VAT)
6.3 Non-tariff export barriers
6.5 Product labelling for exporters
6.6 Prohibited imports
6.7 Trading Rights
The tariff regime
Tariffs on exports to China
are monitored and collected by the Customs General Administration
(CGA), which publishes a comprehensive guide to rates across
all imported goods, along with details of China's national
customs rules and regulations.
The Practical Guide to Import and Export Tax of the Customs
of the PRC is available from:
Xing Sheng Zhong Hai Fa Xing Zhong Xing Company
No. 6 JianNei DaJie
Dong Cheng Dist, Beijing, 100730
Tariffs on goods exported into China vary between industries.
In sectors where China is trying to develop domestic firms,
they can be as high as 80% (for instance, on auto parts)
but in the case of goods, which the government have identified,
as necessary to develop key industries, tariffs may be very
much lower. WFOE's are allowed tariff reductions to bring
in goods they need for manufacturing. Special zones may
also offer tariff reductions as part of their location packages.
Full details of which tariffs apply where can be obtained
from the GCA or the relevant local authorities or government
Tariff rates across all industrial sectors now average around
15%. As part of its commitment to the WTO, China will reduce
these to an average of 9.4% by 2005. Some industries, including
hardware for IT (e.g. semiconductors) will fall to zero.
Tariffs on goods exported to China are charged at ‘Cost,
Insurance and Freight’ (CIF) price, which is the normal
transaction price of the good, plus the cost of packing,
freight, insurance, and seller's commission.
While China's tariff regime is comprehensive and wide ranging,
the category in which a particular import may be placed
is often subjected to administrative guidance, which the
exporter is not privy to. This often enables local customs
officials to "negotiate" duties on individual
consignments. The CGA launched a drive to standardise enforcement
of customs regulations throughout China in 1998. However,
a lot of flexibility remains in the system and can be expected
to do so for the foreseeable future.
Value Added Tax (VAT)
All enterprises in China
engaged in import-export, production, distribution or retailing
activities must pay VAT. This is charged at a standard rate
of 17%. Items defined as necessities - for instance, agricultural
implements - pay a reduced rate of 13%. Enterprises defined
as "small businesses" (i.e. with total wholesale
and retail sales of not more than 1.8 million RMB) pay 6%
VAT exemptions on certain categories of goods may be offered
as a means of attracting certain categories of imports or
foreign investment. Additionally, the central government
may take steps to raise or lower VAT rates at any time to
pursue general economic goals. In the late 1990's, for instance,
VAT on processed exports was reduced to encourage foreign
invested enterprises in China to raise production for export.
Non-tariff export barriers
Imports in over 40 categories of goods are limited to a
certain amount per year. These include automobiles, various
agricultural products and textiles. Quotas and other quantitative
restrictions are barred under WTO rules, and China is committed
to eliminating them over the next five years. Certain other
categories of goods are liable to Tariff Rate Quotas (TRQs),
where imports above a set level trigger the imposition of
extra duties. Under WTO rules, these TRQs are legal, but
China has committed to raising the level before which extra
In the past, many categories of goods required licenses
issued by MOFTEC (Ministry of Foreign Trade and Economic
Cooperation, which was replaced by Ministry of Commerce
since March, 2003) or the CGA on a case-by-case basis before
permission was granted for them to enter the country. These
have been gradually eliminated, a process that is likely
to accelerate post-WTO accession. Areas where they still
exist include the import of passenger vehicles, commercial
aircraft, cotton and iron and steel products. Applicants
for import licenses must prove that the products they want
to import are ‘necessary’ and that they have
the foreign currency to pay for them.
Certain designated commodities must go through an automatic
registration process and secure a "Certificate of Registration
for the Import of Special Commodities" prior to importation.
The certificate is valid for six months.
Import Substitution Policies:
China committed to eliminate all import substitution policies
and regulations back in 1992, but periodically continues
to issues such regulations. Recent examples-in the fields
of generic medicines, telecom equipment, power generation
and the automotive industry-have been the result of informal
directives that have not been publicly announced.
As China has liberalised its import regime, many local companies
have found themselves in direct competition with exporters,
often offering better goods at lower prices. In response,
some Chinese companies have responded by bringing anti-dumping
actions against importers.
Legal under WTO agreements, anti-dumping rules are designed
to prevent the import of goods at prices below their normal
value and if this threatens the existence of an industry
in the importing country or impedes its development.
Hard-pressed State Owned Enterprises (SOEs) have been particularly
keen to use China’s own anti-dumping regulations to
ward off foreign competitors and have had a large degree
of success. Defendants in such cases are often not allowed
access to detailed information about the charge, or given
the ability to make representation to the adjudicating body,
usually Ministry of Commerce.
Under its’ WTO agreement, China is committed to making
the anti-dumping investigation process more transparent,
to offer foreign exporters more detailed explanation and
to provide a judicial review of its decisions, if necessary.
Exporters to China continue to struggle with disincentives
created by local protectionism, predatory pricing, preservation
of industry-wide monopolies, and monopolistic practices
designed to protect the state-owned sector. In some cases,
industrial conglomerates operating as monopolies or near
monopolies have been authorised to fix prices, allocate
contracts, and in other ways restrict competition among
domestic and foreign suppliers.
There are several existing competition and anti-monopoly
laws in place, and as China's reforms continue the business
environment for exporters will become more of a level playing
field in more areas. However, domestic companies facing
threatening competition can be expected to use whatever
opportunities are provided to them for rising administrative
or policy based barriers to exporters.
Under Chinese law, goods
included on a published Inspection List, subject to inspection
under other laws and regulations, or as provided for under
contract terms must be inspected prior to importation, sale,
or use in China. In addition, safety license and other regulations
also apply to importation of medicines, foodstuffs, animal
and plant products, and mechanical and electronic products.
Chinese buyers or their purchase agents must register for
inspection at the port of arrival. The scope of inspection
undertaken by local commodity-inspection authorities entails
product quality, technical specifications, quantity, weight,
packaging, and safety requirements. The standard of inspection
is based upon compulsory Chinese national standards, domestic
trade standards or, in their absence, the standards stipulated
in the purchase or sale contract.
To meet the arrival inspection requirements, it is advisable
that Chinese quality certification be obtained from Chinese
authorities prior to shipment of goods to China. The quality
and safety certification process appears to require extensive
investigation and may be time-consuming.
More details of this process, and of which goods require
inspection, can be obtained from the State General Administration
for Quality Supervision and Inspection and Quarantine (AQSIQ),
Product labelling for exporters
Products approved by the
above process must carry a safety label with the relevant
information in Chinese. The National Health and Quarantine
Administration also require imported food items such as
candy, wine, nuts, canned food and cheese to be affixed
with a laser sticker evidencing the product's safety.
Chinese regulations on food labelling standards additionally
state that all non bulk [packaged food products must have
Chinese labels clearly stating the type of food, brand name,
trademark, manufacturer's name and address, country of origin,
ingredients, date of production and sell-by date.
China bans the import of certain items,
most of which - illicit drugs, pornography and counterfeit
currency - are of no interest to legitimate businesspeople.
However, China also bans the import of printed matter, films,
photographs or magnetic media whose content is deemed to
be detrimental to the cultural, political or moral health
of China - a fluid category that could potentially be used
to apply to any published material. Additionally, certain
food additives and colourings are banned on health grounds.
The Chinese government has
moved to dismantle the near monopoly on import-export rights
previously enjoyed by a few state-owned firms. Liberalisation
of the trading system was given major impetus in early 1999
when MOFTEC announced new guidelines allowing a wide variety
of Chinese firms to register to conduct foreign trade and
giving exporters a much wider choice of potential partners.
The guidelines allow, for the first time, both manufacturing
and ‘non-production’ firms to register for trading
privileges. These guidelines were further loosened in 2001.
Some goods such as grains, cotton, vegetable oils, petroleum
and related products are imported principally through state
trading enterprises. Firms with trading rights must undergo
an annual qualifications test and certification process.
Wholly owned foreign enterprises and individuals are still
not permitted to directly engage in import activities, except
to bring in material and equipment necessary for production.
As part of its bilateral WTO accession agreement, China
committed to phase out many restrictions on trading rights.
To meet these commitments, the Ministry of Commerce is working
on guidelines to allow foreign companies, subject to certain
restrictions, to engage directly in trade.
Currently, the ability of foreign firms to distribute directly
their products in China is subject to strict limitations.
In general, foreign firms are only allowed to sell products
that they manufacture in China and must go through local
agents to distribute imported goods. China has agreed to
gradually eliminate distribution restrictions as part of
its WTO commitment.