International Business and Trade Regulation Client Advisory

April 2006

TARIFF CLASSIFACTION RULES IN CHINA

Tariff classification is an act of determining tariff numbers so that the Customs House can apply the corresponding tariff rate and other trade measures such as quotas to imported & exported goods.  China is a contracting party to the Harmonized Commodity Description and Coding System (“Harmonized System” or simply the “HS”) Convention and currently adopting internationally acknowledged ten-digit numbering scheme for its customs tariff.

Governing Authorities

The Customs Tariff Commission of the State Council is responsible for revisions to the Customs tariff and duty rates.  The General Administration of Customs (GAC) enforces regulations on import & export duties and its Department of Tariff Collection and Management specifically governs tariff classification.

Pre-entry Classification Ruling

Pre-entry Classification Ruling is issued by the Customs House located in provincial capitals before the goods are actually imported or exported.  The pre-entry classification ruling will benefit companies importing or exporting high volume of complex products as it can expedite the process of customs clearance.  The pre-entry Customs Ruling is only valid within the district of the Customs House which issued the ruling for a time period of 1 year since the date of issuance.  The GAC Order No. 80 of 2000 titled “Temporary Measure of the China Customs on Pre-entry Classification of Imported and Exported Goods” sets forth relevant procedure to submit application for the Pre-entry Classification Ruling.  The application should include following information:

  1. Applicant’s name, address, enterprise registration number, contact information
  2. Chinese and English name of the product for pre-entry classification
  3. Detailed description (e.g. specification, model, structure, performance index, function, utility, composition, processing method, and analytical method) of the product for pre-entry classification
  4. Expected import and export date and port
  5. Other supporting documentation required by the Customs House

Recovery or Refund of Customs Duty Caused by Incorrect Classification

According to the GAC Circular No. 40 of 2003, Customs may recover or refund Customs duty and other import-related taxes caused by incorrect classification.  In the event of under-payment caused by incorrect classification, where the importer or its agent is at fault, the Customs House shall recover duty and taxes from the importer for a time period of up to 3 years from the date of duty payment or the date of release of the goods.  In all other cases, the time limit for Customs to recover duty and taxes is 1 year from the date of duty payment or the date of release of the goods.

On the other hand, in the event of over-payment caused by incorrect classification, the importer can get refund of duty and taxes from the Customs House for a time period of up to 1 year.

If the GAC amends a classification ruling previously issued and results in a different tariff rate, no adjustment should be made on the original duty paid on the goods.  If special circumstances warrant an adjustment of duty payment, prior approval shall be obtained from the GAC.

Tariff Classification and Export VAT Refund

Export of domestically manufactured goods from China is eligible for refund of value added taxes (VAT) incurred during the manufacturing of the goods.  The VAT refund rates range from 0% to 17% for different products.  The Customs House will issue the Customs Export Declaration Certificate (also known as Export Tax Refund Certificate) as supporting document for exporters to claim refund and refund rate is determined by the tariff rate declared therein. 

Please contact Dillon Shi (dshi@fbtlaw.com or 859.244.7554) in our international services group to discuss your business’ needs in China.

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