To liberalize trade, China has continued to reduce administrative trade barriers and switch to the use of tariff and exchange rates adjustments. The Chinese Government has also gradually abolished the state monopoly of foreign trade and liberalize its foreign trade system. According to Foreign Trade Law all types of enterprises including private enterprises can register for trading right.
Import licensing administration
China maintains an import licensing system applicable to some AV laser discs and electronics products, chemicals that are used for military weapons, toxicant or drugs as well as ozone depleting materials.
China imposes restrictions or prohibitions on imported waste materials of plastic and metal, used machinery and electrical products except special approval from relevant authority.
Automatic import licensing
All quantitative restrictions on imported goods were removed and transferred to the category of free import or automatic import licensing for monitoring, e.g. poultry, vegetable oils, wine, tobacco, asbestos, copper ore and concentrates, coal, plastic raw materials, natural rubber, waste paper, copper, aluminum, iron and steel billet, mechanical and electrical products, iron ore, crude oil, processed oil, alumina, chemical fertilizers, pesticides etc. For products under automatic import licensing, so long as the content and format of the application are correct, the issuing entity should grant the license immediately or within a few days.
Import duties and taxes related to foreign trade and business
Since its WTO accession China has fulfilled its tariff reduction commitment. The overall level of import tariffs has dropped to an average of 9.8%, with agricultural products at 15.2%, and industrial goods at 8.95%. To encourage imports, lower provisional tariffs have been applied to 209 types of imported products w.e.f. June 2007. China as member of WTO Information Technology Agreement grants duty free import on all information technology products such as computers, parts and components.
On line search on China import tariff rates on all categories of Harmonized System Commodity codes are available by checking here (text in Chinese).
Export tax of 142 types of products was increased, including 80 types of iron and steel products up by 5% to 10%, steel billets, steel ingots and pig iron export tax rates up from 10% to 15% from 1 June 2007.
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 fertilizers, 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.
China's Ministry of Finance, along with State Administration of Taxation, National Development and Planning Commission, Ministry of Commerce and the General Administration of Customs jointly released the official plan for the adjustment of export rebate policy on June 19 2007. Tax refund for 553 highly energy consuming, high polluting and resource intensive products are eliminated, while the VAT refund rates of 2,268 products described as 'easy to trigger trade frictions' are to be reduced. The new rate was adopted as per July 1, 2007.
Consumption tax is applied to imports of cigarettes and tobacco, alcoholic drinks, cosmetics, skin and hair care products, jewellery and precious stones, motor cycles, motor cars and tyres, gasoline and diesel oil, golf clubs and equipment, high price watches, pleasure crafts, chopsticks and wood floorings.
Business tax of 3% to 20% is applied in the sectors of transportation, post and telecommunications, finance and insurance, construction, transfer of tangible assets and sale of immovable property in China. Business Tax of 10-15% is applied to entertainment sector.
Corporate income tax will be lowered to 25% (from 30%) for both domestic and foreign-invested enterprises from January 2008. Tax concessions are still available for enterprises in advanced technology and infrastructural building in new areas.
Individual income tax for foreign nationals working in China is charged at progressive rates from 5% to 45%.
Free Trade Agreements with China
China has concluded free trade agreements with many countries e.g. Pakistan, Chile, Jordan, Thailand and other ASEAN members to be fully effective by 2010 - 2015. China's Free Trade Agreements with Australia, New Zealand and India are being negotiated or proposed. Reduced import tariff rates may be applied to certain commodities imported from FTA countries into China.
China had in 2002 introduced lower tariff rates for more than 700 items originated from members of the Bangkok Agreement e.g. Republic of Korea, Sri Lanka and Bangladesh.
Under the Closer Economic Partnership Arrangement (CEPA), zero tariff rates are applied to imported commodities fulfilling origin requirements from Hong Kong and Macao SARs.
Before clearing customs and lodging declaration most goods are subject to mandatory inspection and quarantine under the Catalogue of Import-Export Commodities Subject to Compulsory Inspection and Quarantine.
Pre-shipment inspection is required for importing wastes such as metal, plastic, wood and textiles as raw materials to ensure shipments of wastes measure up to China environmental protection standards and must be inspected and approved by the General Administration for Quality Supervision, Inspection and Quarantine (AQSIQ).
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.
Commercial Invoice stating shipper's and consignee's names and contact details, place and date of shipment, description of goods, HS code, FOB value and currency used, country of origin, quantity and weight, freight and insurance as applicable. Pro forma Invoice is permissible for customs clearance.
Bill of Lading/Air Waybill stating shipper's and consignee's names and contact details, description of goods, HS code, CIF value, quantity and packages, and port of loading and discharge.
Packing List stating place and date of shipment, order number, description and type of packaging, weight, marks and numbers on the packages;
Certificate of Origin is required upon request.
Import commodity inspection is required for all goods in the published Inspection List, 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 here for detailed information provided by China Accreditation Administration on quality standards.
The China Compulsory Certification (CCC) mark is the compulsory Safety & Quality mark effective on 1 May 2002. The CCC mark is administered by China Government agency Certification and Accreditation Administration. The application for the CCC marks generally requires testing at accredited laboratories. There are currently 19 categories and 132 types of goods sold on the Chinese market subject to CCC marks, including electrical and electronics goods, motor vehicles, agriculture machinery, medical devices etc. Detailed list of goods subject to CCC mark with corresponding HS codes can be checked here. Compulsory certification marking for toys and playthings became effective from 1 July 2007.
Apart from CCC certification, some products may have to meet other requirements as well, e.g. telecom and internet equipment (China Ministry of Information Industry); 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.
To protect consumers and environment, the new China 'RoHS' Law (w.e.f. 1 March 2007) would restrict and control the use of hazardous and toxic substance in the manufacturing of 'electronic information products'.
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.
Effective from March 2002, imports of genetically modified organisms (GMO) must be labelled according to China's Measures for Agricultural GMO marking.
China foreign trade relations
Hong Kong is the most important entrepot of the China, accounting for more than 60% of re-exports of mainland origin goods and 50% of re-export goods destined for the mainland market (transshipment goods included).
In November 2005, China and the US signed a bilateral agreement on textiles and clothing trade to re-impose quotas from 1 January 2006 through 31 December 2008 covering a total of 21 groups involving 34 categories of textiles and clothing products.
In June 2005, the EU imposed safeguard quotas on 10 categories of Chinese textile products for the period of 2005 to 2007, with a provision for a smooth transition to liberalization of the textile trade during 2008.
China remains a beneficiary of the EU Generalized Preference Scheme 2006 - 2008, and benefits from reduction of tariff rates for sensitive products and zero rate for non-sensitive products. But some popular China export items are excluded from the EU GSP, e.g. consumer electronics, watches, jewellery, clothing, furniture and toys. Hong Kong had already been fully excluded from the EU scheme since May 1988.
Under CEPA IV, the Mainland and Hong Kong have agreed on a package of further liberalization measures to be effective from 1 January 2008 covering both goods and services, as well as other cooperative measures. Key measures agreed include convention and exhibition, banking, securities, tourism, cultural, medical and dental under the existing services areas; public utility, services for the elderly, computer and related services, market research, management consultant in the new services areas. Virtually all goods exports to China are now eligible for zero duty if their origin criteria are fulfilled