Agap conference 2012 importing goods into china - caroline berube, hjm asia law llc Alliott Group

Importing Goods into China

Alliott Asia Pacific Conference – Bali 2012

Caroline Berube
Managing Partner

1
Guangzhou Shanghai Singapore www.hjmasialaw.com

CHINA

• China is trying to restructure its economy to be one driven more by imports
rather than predominately exports.

• To do so they are adopting a “buy more but not sell less” tactic.

• China‟s rapidly expanding consumer base make it an attractive new market for
foreign enterprises to sell their products and services.

06-10 avg. 2011 2012 2013
• Import growth 38.6% 26.6% 11.7% 13.1%

• Main imports E&E equipment (24%) & Industrial M&E (21%)

2

REGISTRATIONS

• Companies seeking to engage in import trade in China need to register with the
Ministry of Commerce (MOFCOM) or its authorized local offices.

• The importation of some goods requires an import license as listed in the Catalogue
of Goods subject to Import Licenses.

• For certain goods the purpose of the license is to track imports more accurately and
the license is issued automatically e.g. machinery and electrical goods.

• Non-automatic licenses apply to dangerous goods and goods subject to tariff
quotas.

3

TAXES AND DUTIES

• VAT Applicable to imports

 Import VAT is levied on almost all goods.

 A rate of 13% applies to grains, edible vegetable oils, tap water, heating, air
conditioning, hot water, coal gas, liquefied petroleum gas, natural gas, methane
gas, coal/charcoal products for household use, books, newspapers, magazines,
feeds, chemical fertilizer, agricultural chemicals, agricultural machinery, plastic
film for farming purposes, and other goods prescribed by the State Council.

 Remaining products are usually subject to a rate of 17%.

4

TAXES AND DUTIES

• Import duties applicable

 Regulations of the PRC on Import and Export Duties

 Article 2 - Customs shall collect import duties on all goods permitted by the PRC
to be imported into the Customs territory and all inward articles, unless otherwise
provided for in law.

 China uses the Harmonizes Commodity Coding System (HD code) to determine
tariffs, taxes and other regulatory measures in imports.

 The General Administration of Customs of China publishes an annual tariff schedule.

 Customs duties are generally assessed on the CIF (cost, insurance and freight) value.

5

TAXES AND DUTIES

• When is Income tax applicable?

 Corporate Income Tax (CIT) usually applies to foreign investors in the following
circumstances:
 Foreign Invested Enterprises (FIEs) in China eg. WOFE, JV
 Foreign entities that have a „permanent residence‟ in China (usually requires
a physical presence in China)
 Foreign entities without a „permanent residence‟ in China but who import into
China through a business agent arrangement are generally seen as an
equivalent to „permanent resident‟ and therefore subject to CIT

• Other taxes and duties

 Import consumption taxes are charged on a limited number of consumer goods
(„luxury goods‟) such as: tobacco, liquor, cosmetics, rubber tyres, jewellery,
automobiles, high-end watches, and golf clubs and balls.

 The rate varies from 1% to 40%.

6

CUSTOMS REQUIREMENTS

• Customs Law the PRC

 Article 24 - The importer must make an accurate declaration within 14 days of the
declaration of the arrival of the means of transport and submit the import
licensing documents and relevant papers to Customs for examination.

 Article 28 - All imports are subject to Customs examination. While the
examination is being carried out, the importer (or agent) must be present and
responsible for moving the goods and opening and restoring the package.
Customs is entitled to examine or re-examine the goods or take samples from
them without the presence of the importer whenever it considers this necessary.
Goods may be exempt from examination if an application has been made by the
importer and approved by the Customs General Administration.

 Article 29 - Unless specially approved by Customs, imported goods will be
released upon Customs endorsement only after the payment of duties and taxes
or the provision of security by the importer.

7


• Article 56 - Duty reduction or exemption shall be granted to the following imported
goods and inward articles:
 advertising items and trade samples of no commercial value;
 materials presented free of charge by foreign governments and international
organizations;
 goods to which damage or loss has occurred prior to Customs release;
 articles of a quantity or value within the fixed limit;
 other goods and articles specified by law as items subject to duty reduction or
exemption; and
 goods and articles specified as items for duty reduction or exemption by
international treaties to which China is either a contracting party or an acceding
party.

• Article 57 - Duty reduction or exemption may be granted to imported goods of
specific areas, specific enterprises or for specific purposes. The State Council shall
define the scope and formulate the rules for such reduction and exemption. E.g.
Free Trade Zones

8


• The Certification and Accreditation Administration of China (CNCA) requires certain goods to
be inspected and certified to ensure compliance with compulsory standards. Once a quality
certificate is issued, a safety label can be affixed.
• China Compulsory Certification (CCC) is a compulsory product certification system covering
over 150 types of products in the following categories:

 electrical wires and cables  motor vehicles and safety parts
 switches for circuits, protective installation &  motor vehicle tires
connective devices  safety glasses
 low-voltage electrical equipment  agricultural machinery
 small power motors  latex products
 electric tools; welding machines  medical devices
 household and similar electrical appliances  fire-fighting equipment
 audio and video equipment (excluding acoustics  safety precaution products
equipment for broadcasting service)  wireless LAN (local area network)
 information technology equipment products
 lighting electrical appliances  decoration and fitting products
 telecommunication terminal equipment  toys

9


• There are 5 key steps when applying for the CCC mark:

1. Submission of an application and supporting materials;

2. Type testing - A CNCA-designated test laboratory in China will test product
samples;

3. Initial factory inspection - A CNCA-designated certification body will send
representatives to inspect the manufacturing facilities;

4. Evaluation of certification results and approval (or failure or retesting); and

5. Follow-up factory inspection - The certification body will re-inspect the product and
the manufacturing facilities on a regular basis. The frequency of follow-up
inspection depends on the security level and quality stability of the product and the
record of the manufacturer.

10

PROHIBITED AND RESTRICTED GOODS

• According to the “Catalogue of Commodities Which are Restricted or Prohibited
from Importing for Use in the Processing Trade” goods are classified into 3
categories:

1. Prohibited goods
e.g. used garments; used publications with licentious content; radioactive
or harmful industrial waste; arms, ammunition, and explosives of all kinds;
counterfeit currencies and counterfeit negotiable securities; printed matter,
magnetic media, films, or photographs which are deemed to be
detrimental to the political, economic, cultural and moral interests of
China.

2. Restricted goods (licenses required or certain quotas may apply)
e.g. raw materials for plastics, polyester sections, raw materials for
chemical fibers, cotton, cotton yarn, cotton cloth, and some steel products.

3. Freely traded goods
Those not categorised as prohibited or restricted

11

QUARANTINE REQUIREMENTS

• Law of the PRC on the Entry and Exit Animal and Plant Quarantine

 Article 10 - Whoever imports animals, animal products, plant seeds, seedlings
or other propagating materials must submit an application in advance and go
through the formalities for examination and approval of quarantine inspection.

 Article 12 - Application must be made to the port animal and plant quarantine
office at the port of entry for quarantine inspection of the animals and plants,
their products or other quarantine objects, before or on entry, on the strength
of documents such as the quarantine certificates issued by the exporting
country or region and the trade contracts.

12

QUARANTINE REQUIREMENTS

• Regulations on Implementation of the Law of the PRC on Entry and Exit Animal and
Plant Quarantine

 Article 2 - provides that the following objects are subject to quarantine
inspection:
1. Animals and plants, their products or other quarantine objects;
2. Container, packages and bedding used for carrying animals and plants,
their products or other quarantine objects;
3. Means of transport from animal or plant epidemic or infected areas;
4. Old and disused vessels entering China for disassembling purposes; or
5. Other goods or objects in accordance with relevant laws, int. treaties etc.

 Article 10 - provides that import permits will only be issued if the following
requirements are met:
1. Export country is free from serious animal or plant epidemic;
2. To be in conformity with Chinese laws, regulations on animal/plant
quarantine; and
3. To be in conformity with relevant bilateral quarantine agreements

13

LABELLING

• Generally, all products must be labelled in Chinese before they enter China, and for some
products both Chinese and English is required.
• The Chinese label must be printed or fixed on the package prior to arrival in China.
 Food and beverages – label should be affixed to the packaging and include list of
ingredients, exact volume of each ingredient, net weight and volume, name and
address of manufacturer and local agent or distributor and quality grade.
 Cosmetic products – label can be affixed to the packaging or included in a separate
booklet and must include name and address of manufacturer, sales agent and
ingredients list. All cosmetics imported into China are required to obtain pre-market
approval or notification from the Chinese State Food and Drug Administration (SFDA).
 Electronic appliances – generally subject to CCC certification requirements as well as
energy label and Chinese RoHS labelling requirements.

14

LABELLING

• The Chinese energy efficiency label is a mandatory requirement
applying to home appliances, office equipment's, lighting,
consumer electronics and other industrial equipment, and is
based on self-declaration by the manufacturer/importer.

• China RoHS is a measure Restricting the use of Hazardous
Substances (RoHS) in electronic information products. The
Chinese Ministry of Industry and Information Technology (MIIT)
maintains a catalogue of products subject to the China RoHS
label containing more than 1800 products, ranging from
household electronic products to industrial components, circuits,
batteries, etc.

15

LABELLING

• Pre-approval and pre-examination is generally not required.

• Upon arrival at a Chinese port, the Chinese Entry-Exit Quarantine and Inspection
(CIQ) bureau will verify compliance with the labelling requirements as part of the
quarantine inspection.

• If there is no Chinese label, or the label does not meet the requirements, the
shipment will be demarcated as unqualified and sent to a warehouse under the
supervision of General Administration of Quality Supervision, Inspections and
Quarantine of PRC (AQSIQ) for correction.

16

ASSISTANCE FOR IMPORTERS

• Numerous international and Chinese consultants and agents who assist
companies in importing goods

• Local Consulates , Chamber of Commerce and Trade Commissioners

• Chinese Importers Databank - This search engine will guide you through over
60000 active Chinese buyers of a variety of products.
http://win.mofcom.gov.cn/en/sell/importers/

17

WHERE TO FIND MORE INFORMATION

• http://english.mofcom.gov.cn/
• http://www.cnca.gov.cn/
• http://en.cnis.gov.cn/zyyhj/nxbs/
• http://en.ciqcid.com/Laws/Administrative/zjxzfg/45951.htm
• http://english.customs.gov.cn/publish/portal191/
http://www.fmprc.gov.cn/eng/wjb/zzjg/jks/jkxw/t208625.htm
• http://www.sac.gov.cn/sac_en/
• http://guangzhou.customs.gov.cn/publish/portal31/tab5944/module16826/info27042.
htm
• http://www.asianlii.org/cn/legis/cen/laws/motaoailog634/

18

Question and Answers Session
-------
Thanks for your attention

June 25, 2012

HJM Asia Law & Co LLC

Caroline Berube
46, Office 104, Shamian Main Street,
LiWan District,Guangzhou
China 510075

Tel: +8620 8121 6605 ext. 808
DID: +8620 8121 6418
Fax: +8620 8121 6505
Cell: +86 135 000 278 60
cberube@hjmasialaw.com
www.hjmasialaw.com

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