On April 26, 2024, the Standing Committee of the National People’s Congress promulgated the Law of the People’s Republic of China on Customs Duties under Presidential Decree No. 23. This new law, which will come into force on December 1, 2024, signifies a major overhaul of China’s customs duty framework, replacing the Regulations of the People’s Republic of China on Import and Export Duties (Revised in 2017). This article aims to highlight the key features of the new law and compare them with the existing regulations, providing a comprehensive understanding of the changes and their implications for international trade and customs administration in China.
Background and Legislative Purpose
The new law was enacted to standardize the collection and payment of customs duties, safeguard import and export order, promote foreign trade, and support high-quality development. It emphasizes the role of customs duties in protecting national sovereignty, interests, and the legitimate rights of duty payers. These objectives align with China’s broader economic policies aimed at achieving high-level openness and sustainable development.
The 2017 regulations were also designed to facilitate foreign trade and economic cooperation. However, the new law reflects an evolution in China’s trade policy, incorporating more detailed provisions for modern trade practices, enhanced compliance, and streamlined procedures.
Key Features of the New Law
Comprehensive Framework for Customs Duties
The new law introduces a more structured and detailed framework for customs duties, encompassing general provisions, duty items and rates, calculation of duty payable, tax incentives, and special circumstances. This comprehensive approach ensures clarity and consistency in the application of customs duties.
Duty Items and Rates
The law specifies that duty items, rates, and their application must comply with the Import and Export Tariff of the People’s Republic of China. It categorizes tariff rates into most-favored-nation (MFN) rates, conventional rates, preferential rates, and general rates, etc., similar to the 2017 regulations. However, it introduces more precise rules for applying these rates based on the origin of goods and international agreements.
Provisional and Quota Tariff Rates
The new law retains the concept of provisional and quota tariff rates but provides clearer guidelines on their application. Provisional rates may apply to imports and exports within specific timeframes, and quota rates are set for goods subject to tariff quotas. This ensures flexibility in responding to changing trade conditions and protecting domestic industries.
Calculation of Tax Amount Payable
Customs duties are calculated based on taxable value, quantity of the goods, or a combination. The taxable value is primarily based on the transaction price and related expenses such as transportation and insurance, which criteria are provided by the new law, ensuring clarity and fairness in customs assessments.
Tax Incentives and Special Cases Tariffs
The law specifies that duty-free items include goods within the exemption limit set by the State Council, advertising materials and samples without commercial value, and items damaged or lost before customs clearance, etc. The law provides for tariff reductions in cases such as goods damaged before customs clearance, international treaty provisions, or statutory exemptions. Additionally, the State Council may formulate preferential tariff policies based on national interests and other needs. Goods eligible for reduction or exemption from duties must undergo relevant procedures as required by law.
Confidentiality and Compliance
The new law mandates strict confidentiality for trade secrets and personal information accessed by customs authorities. It also emphasises compliance with customs regulations, including penalties for violations. This reinforces trust in the customs system and encourages compliance among traders.
Enhanced Role of the Customs Tariff Commission
The Customs Tariff Commission is given expanded responsibilities, including reviewing important duty policies, proposing adjustments to the tariff, and interpreting duty items and rates. This centralizes decision-making and ensures a coordinated approach to customs duties.
Importers’ and Exporters’ Compliance Responsibilities
The new law imposes higher compliance requirements on importers and exporters. Businesses must accurately determine the origin of their goods and provide legal proof to avoid higher tariff rates. Failure to comply with these requirements can result in significant financial penalties and increased scrutiny from customs authorities.
Practical Implications for Traders
Emphasis on Accurate Origin Certification for Imported Goods
One of the crucial elements emphasized by experts is the need for precise determination and documentation of the origin of imported goods. According to Article 19 of the new law, goods subject to special duties such as anti-dumping, countervailing, safeguard, and retaliatory duties require verified origin documentation. If importers fail to provide sufficient proof or customs cannot verify the origin with the provided documentation, the highest applicable tariff rate will be imposed. This necessitates that importers meticulously verify and document the origin of their goods to avoid higher customs duties.
Compliance and Regularization of Import and Export Operations
The new law places a greater emphasis on the need for importers and exporters to maintain consistent and compliant operations. The introduction of the “tax amount confirmation” system allows customs authorities to confirm and retroactively collect duties within three years, even in the absence of initial violations. Consequently, businesses must enhance their compliance standards and maintain comprehensive records of customs documents for at least three years to facilitate potential future audits or tax confirmations.
Mandatory Reporting for Corporate Changes
Companies undergoing mergers, divisions, asset restructurings, dissolutions, or bankruptcies must report these changes to customs, particularly if they involve unpaid taxes or customs-supervised bonded goods. Failure to report such changes could result in penalties. This requirement ensures that customs authorities can keep track of changes affecting the tax and duty status of goods under their supervision.
Timely Fulfillment of Tax and Withholding Obligations
The new law underscores the importance of timely tax payments and discourages practices such as transferring or hiding assets to evade customs duties. Violations will lead to substantial penalties, including fines ranging from 50% to 500% of the unpaid tax amount. Withholding agents are also obligated to fulfill their responsibilities, with penalties ranging from 50% to 300%of the uncollected or under-collected tax amount. Additionally, customs authorities will publicly announce companies with unpaid taxes, and such companies or their legal representatives may face travel restrictions.
