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More adjustments to China’s import and export tariffs apply as from 1 January 2010 as part of the country’s commitment to the World Trade Organization (“WTO”) and its efforts to encourage international trade. This newsletter summarizes the main changes, including adjustments to the duty rates and tariff codes.
Changes to Import and Export Duty Rates
Changes to the import and export duty rates are reflected in the Most Favored Nation (“MFN”) duty rates, interim duty rates and conventional duty rates.
1. MFN Duty Rates
Products originating from WTO member countries are eligible for the MFN rates. The MFN duty rates for following products are reduced in 2010 according to the tariff concession schedule agreed with the WTO:
- Strawberries: from 15.5% to 14%;
- Certain fruits and nuts: from 25.9% to 25%;
- Yellow wine and other fermented beverages: from 42.3% to 40%;
- Polyester fabrics: from 16.9% to 15%; and
- Wet-blue cow hide: from 7% to 6%.
By making these adjustments to the MFN duty rates, the Chinese government has fulfilled all of its commitments to the WTO with respect to tariff concessions and, therefore, China will not be obliged to make any further reductions in the MFN duty rates under the current WTO agreement.
2. Interim Import and Export Duty Rates
The Chinese government sets interim import and export duty rates on certain products to encourage imports or restrict exports. Hence, interim import duty rates are lower than MFN duty rates, while interim export duty rates are higher than any normal export duty rates that apply. The interim import and export duty rates are generally valid for one year, subject to an annual review by the government.
On the import side, there are total 619 tariff codes in the 2010 list of products with interim import duty rates, as compared to 673 tariff codes for 2009.
The following products have been added to the list:
· Advanced technology products, such as certain tools used for the manufacture of saloon cars, mechanisms for laser video compact disk players and LCD monitors used for automobile GPS devices, etc.; and
· Resource saving and environment-friendly products, such as spodumene, bromine, tellurium, plant acid oils, etc.
A number of products have been removed from the previous list, including phosphoric acid, refined oil, o-dichlorobenzene, nitro toluene, oriented silicon electrical steel wide plate, stainless steel seamless boiler tubes, drive shafts for ships, thermal print heads, contact image sensor and wind power generation equipment, etc. As a result, the MFN import duty rates will apply to these products as from 2010. Products are removed from the list once China has a sufficient domestic supply and there is no longer a need to encourage the import of the products by imposing lower duty rates.
On the export side, the government still imposes interim export duty rates to restrict the export of high-energy-consuming, polluting and resource-intensive products, such as certain raw oil and steel products.
3. Conventional Duty Rates
Conventional duty rates are applicable to products originating from counties that have concluded a Free Trade Agreement ("FTA") with China.
No new FTAs came into effect in 2009,[1] but more products will enjoy conventional duty rates under existing effective FTAs[2] in 2010, according to the duty concession schedule set by the FTAs. For example, 2,753 products enjoy conventional duty rates under the China-Singapore FTA in 2010, compared to 2,739 products in 2009.
In addition, according to the Closer Economic Partnership Arrangement for the Mainland and Hong Kong and Macau, eight more products (including certain fruit, mechanical equipment such as track-mounted excavators) originating from Hong Kong and 46 products originating from Macau (including certain food, marble carvings, etc.) enjoy a 0% duty rate on the import into Mainland China beginning in 2010.
Revisions to Import and Export Tariff Codes
To enable the classification of a product to be as precise as possible, the number of import and export tariff codes increases from 7,868 to 7,923 in 2010. The changes are ultimately aimed at identifying products that will require tighter export controls or differentiating products that are eligible for preferential duty rates.
These changes mainly affect certain agricultural products, textile products, chemical products, and mechanical and electrical products. For example, solar water heaters are added separately under non-electric storage water heaters, and the inverter is introduced under the item, electrical transformer.
Our Recommendations
· Companies should review any changes to the tariff codes of their products and the applicable duty rates and VAT refund rates to ensure compliance with customs and to identify any tax saving opportunities;
· Companies should determine whether their import and export products are affected by the adjustments in interim import and export duty rates;
· Companies should be up to date on new FTAs, review and plan their supply chains and logistics models accordingly to maximize benefits from the favorable conventional duty rates for products covered under FTAs.
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