As China continues to grow, development is creating improved infrastructure and increased efficiencies that benefit suppliers, while higher disposable incomes across the country represent a potential boon for those targeting the consumer.
In 2012, China’s foreign trade totaled US$3.87 trillion, with exports and imports splitting that almost down the middle; surpassing the United States as the world’s largest trading nation.
To maintain long-term sustainable development, China is shifting away from an export-led economy toward domestic demand and consumption. Currently, private consumption in China only accounts for 35 percent of the country’s overall GDP, the lowest among major Asian economies. To spur on domestic spending, the country aims to double the 2010 per capita incomes of its urban and rural residents by 2020. This goal, if realized, will release RMB64 trillion (US$10 trillion) of purchasing capacity onto the China market. At the same time, this development will create immense opportunities for foreign investors looking to sell in the country.
For those who wish to trade with China, an understanding of the country’s import and export regulatory framework is crucial. Entities intending to engage in the import and export of goods in China must first register with the Ministry of Commerce (MOFCOM).
Goods Import System
Permitted Goods Most imported goods fall under the permitted category, and MOFCOM has implemented an automatic licensing system to monitor the importation of such goods. They and the General Administration of Customs (GAC) jointly issue an annual catalog of goods subject to automatic licensing. An automatic license needs to be applied for, and the goods import contract is one of the required documents.
Certain goods are exempt from licenses (e.g. goods imported for processing trade and re- export; and goods imported by an FIE for its own production use within its total investment amount). Note that if goods are imported for re-export and are not, a license must be applied for retrospectively.
Each automatic import license is valid for six calendar months and, each license should only be used for one batch of goods. However, multiple licenses can be obtained under one import contract and, for certain goods, one license can be used for as many as six batches.
Restricted Goods Restricted goods are monitored via quotas or licenses. The reasons this include maintaining state security or public welfare, and protecting exhaustible natural resources.
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Import Goods Requiring Licenses The MOFCOM, GAC and GAQSIQ jointly issue a catalog of import goods requiring licenses on an annual basis. For 2013, imported goods requiring annual licenses fall under two categories:
- Used mechanical and electronic products
- Substances that deplete the ozone layer Import Goods under Tariff Rate Quota Wheat, corn, rice, sugar, cotton, wool and wool tops fall under the tariff rate quota (TRQ) administration. Goods within the quota are subject to a lower rate, and goods beyond are subject to higher rates.
Prohibited Goods Goods such as certain wastes and toxins are banned from import into China. The Ministry of Foreign Trade and Economic Cooperation (MOFTEC, the predecessor of MOFCOM) and the GAC have jointly issued with other state organs several catalogs of goods that are prohibited from import into China.
Goods Export System
For goods subject to export restrictions, China implements an export licensing administration system. For 2013, there are 48 categories of goods subject to export licensing administration falling under three categories
- Export quota license (e.g. wheat, corn, cotton, crude oil)
- Export quota tender (e.g. magnesia)
- Export license (e.g. beef, pork, chicken)
In general, each export license can only be used for one batch of goods. However, the license can be used for multiple batches (no more than 12) under certain circumstances, including for goods of FIEs that are subject to export license administration.
The longest valid period of an export license is six months and must be used within the year of issuance. If an export license is not used during that period, the operator can apply for an extension and a new export license can be issued.
The Chinese government places complex inspection and certification requirements on the imports. Some need to be inspected upon arrival or accompanied by certification.
The GAQSIQ is the administrative department directly under the State Council which is in charge of quality supervision, inspection, animal and plant quarantine, and food safety for all goods transported across the Chinese border.
The China Compulsory Certificate (CCC) is a certificate or mark required by the Chinese government for many goods (including imported goods) sold on the domestic market since May 2002. The product catalog subject to CCC requirement is approved and released jointly by the AQSIQ and the CAA. If goods listed in the CCC catalog fail to obtain the CCC mark, they cannot be imported, sold or used at any business or service sites in China.
Dezan Shira & Associates is a specialist foreign direct investment practice, providing corporate establishment, business advisory, tax advisory and compliance, accounting, payroll, due diligence and financial review services to multinationals investing in emerging Asia. Since its establishment in 1992, the firm has grown into one of Asia’s most versatile full-service consultancies with operational offices across China, Hong Kong, India, Singapore and Vietnam as well as liaison offices in Italy and the United States.
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