Non-tariff Measures on Foreign Commodity Trade in China
The Chinese government exercises legal jurisdictions over the foreign trade in the following aspects: goods moving across the Chinese border, containers, packing materials for the goods, and the transportation means; the persons engaged in foreign trades including the consignor, the consignee, the transportation company and the declaration agent; the flow of funds arising from the cross-border settlement for trading in goods.
Classifications of commodities
The administrative supervision over the goods moving across the Chinese border can be classified according to different legal definitions:
1. Goods are classified under the prohibited, restricted, and freely traded categories.
2. Goods are either classified into electrical and electronic goods, or classified into non electrical-and-electronic goods (the general goods).
3. Goods can be classified as state trading goods or goods subject to designated trading, and general goods according to the legal capacity of the foreign traders.
4. Certain specific goods under the joint supervision and control of the customs and the administrative bodies other than the Ministry of Commerce.
5. Goods can be classified as general goods, bonded goods, goods exempted from duty and internal taxes, goods subject to reduction in internal taxes, and temporarily imported goods. We deal with them under the topic of tariff measures in a separate article.
Goods of the prohibited category
The MOC together with other ministries drafts, revises and announces periodically the Catalogs for Prohibited Goods and Restricted Goods. The MOC has so far announced 5 batches of import goods belonging to the prohibited category, and 2 batches of export goods belonging to the prohibited category. Goods falling into the prohibited categories also include the goods banned from importation under the PRC Law for the Prevention of Environmental Pollution by Solid Wates, the animals, plants and their products under the PRC Law for the Quarantine of Animals and Plants, the goods under the PRC Administration Law for Pharmaceutical Products. In addition, the Chinese customs imposes ban on import and export goods that infringe on IP rights.
The consignee shall not waive its right to claim the imported wastes that are banned from import, nor shall they waive the right to goods that cause pollution to the environment. In case that the shipment cannot be returned, the Chinese customs or relevant governing administrative departments shall supervision the destruction or proper handling of the said goods. The consignee is required to bear the costs of destruction or handling. If the information of the consignee is incorrect, the carrier shall bear the costs.
Goods of the restricted category
Restricted goods are subject to non-tariff measures of quotas and licensing requirement. Quotas apply to goods that are subject to quantity restrictions while licenses apply to goods that are not subject to quantity restriction. Every year the Ministry of Commerce announces the official “Catalogs of goods subject to the administration of import and export licenses” respectively that apply in the following year. In 2005, imported goods for which import licenses are required under the restrictive category include the following 3 categories with 83 HS commodity coding under the 8-digit heading (5 categories with 123 HS commodity coding under the 8-digit heading in 2004): chemicals subject to state supervision and control, chemicals for drug-making, and halogenated derivatives of acrylic hydrocarbons.
Goods subject to export license under the “Catalog of goods subject to administration of export licenses” consist of some 47 classes, subject to the export quota licensing, quota bidding, and export license administration. In accordance with the “Catalog of Goods Subject to Export Licensing Administered under Multi-level Issuing Bodies”, the Quota Lisensing Department of the MOC, the Local Special Offices of the MOC, and the issuing bodies at the provincial-level government (including the municipalities directly under the State Council, the provincial capitals, and cities with independent development plans) issue the export license for goods under their respective juridictions.
The importation of motor vehicles and accessories required quota licenses. As from 1st January 2005, the Chinese government has removed the quota requirement for motor vehicles and accessories, and reclassified these products from the restricted category into freely traded category, to which the automatic import licensing system applies.
Goods under the freely traded category
Goods not included in those 2 categories are traded freely and are not listed specifically. Goods under the freely traded category are not subject to any administrative restrictions except that the importer needs to comply with the automatic licensing requirement for purpose of statistic compilation. The administrative body should issue the import license to the applicant within a maximum of 10 days. As from 1st January 2005, the Department of mechanical and electrical products of the MOC is vested with the authority to issue the automatic import licenses for automobile and accessories.
In applying for an automatic import license, the importer should provide a completed import license application form, the purchase contract, and a copy of the business license showing the relevant scope of business activities. Automatic import licenses are valid for 6 months. In caset that the imported goods are not within the scope of business of the consignee, the Chinese government shall not issue the “automatic import license”. In the absence of such licenses, the consignee cannot proceed with statutory requirement for foreign exchange verification and the customs do not release the goods.
Goods exempted from import licensing
Samples, advertising materials, equipment as capital contribution to foreign investment enterprise, and temporarily imported goods are exempted from the import license requirement.
Temporaritly imported goods are exempted from import license after the Chinese customs receives security deposit or approved guarantee equal to the amount of import duty and taxes. The scope of temporarily imported goods includes the materials and equipment that are used in China for film shooting, sports event, artistic performance, construction projects, academic exchange, delivery of lectures and so on. However, the organizer should separately obtain administrative approval for the importation of wireless equipment, certificate of quarantine for animals and plants, certificate of examination for pharmaceutical products, and health inspection certificate for foods.
The bonded goods imported under processing agreements should be exported after undergoing processing in China. Therefore, the provisions for import license administration should not apply. If there arises any need for the sale of those goods in the domestic market due to some legitimate reasons, the importer need to apply to different departments in the Ministry of Commerce for two licenses: one from local office of the MOC for automatic import licenses for those goods; the other from provincial-level MOC for the “approval certificate for the sale of bonded goods in domestic markets”.
Goods of the restricted category shipped between free trade zones (FTZ) and other countries (regions), between export processing zones (EPZ) and other countries (regions), are exempted from the licensing and quota requirement. When goods are delivered between FTZ and non-FTZ entities, between EPZ and non-EPZ entities within China, the parties concerned are required to follow the quota and licensing procedures for imports and exports.
The exemption shall not apply to the following goods irrespective of the mode they are imported: Chemicals for drug essence, chemicals subject to administrative supervision and control, ozone layer consuming substance.
Goods exempted from export licensing
The following goods are exempted from export licenses, except for Chemicals for drug essence, chemicals subject to administrative supervision and control, chemicals for chemical weapons, essence of chemical weapons, basic ingredient for chemical weapons, substance that consumes the ozone layer.
1. Exhibits imported into China after being shipped out for exhibitions;
2. Sample goods or goods for experimental testing the value of which does not exceed RMB30,000 for each batch;
3. Bulk cargoes with less than 5% discharge or loading margin;
4. Temporarily exported goods;
5. Goods shipped between the free trade zone and other countries, between the export processing zones and other countries.
Mechanical and electronics products
Import goods can also be divided into electro-mechanical products, and non electro-mechanical products. The latter is also considered to be general goods. The scope of mechanical electronics products includes machinery and equipment, electricity equipment, transport equipment, electronics products, electrical products, electrical instruments and tools, the parts and components. Electro-mechanical products are classified into prohibited, restricted and automatically imported category. According to “Administrative Measures for the Importation of Electro-mechanical Products”, the MOC announces the catalogs of the electro-mechanical products for the prohibited category, the restricted category, and the automatic imported category respectively.
Importation of the electro-mechanical products belonging to the restricted category will be subject to quota requirement if there is any quantity restriction, and license requirement if there is none. Products falling into automatic import category are administered under an automatic import license system.
The “Administrative measures” shall apply under the following circumstances: (1) the goods or products are on the lists for the electro-mechanical product catalogs; and (2) these goods are imported for sales or for use in the manufacture of goods to be sold in the Chinese domestic market. Goods imported for own use by foreign investment enterprises or for use in the manufacture of export goods under import or contract processing arrangements fall outside the scope of the Measures.