China to Adjust Export Tax Rebate Policy on 2831 Commodities
The Ministry of Finance and State Administration of Taxation of China jointly issued a circular (Caishui  No. 90) to remove or reduce export-tax rebate on a wide range of commodities. The new tax rebates will be effective on July 1, 2007.
The tax changes are aiming to suppress overheated export growth and ease frictions between China and its trade partners. China will also abolish export-tax rebates on highly polluting or energy intensive products such as cement and liquefied petroleum gas. The affected products are categorized according to the Customs Harmonized Commodity Description and Coding System. The new tax rebate system will have five levels, namely 17 percent, 13 percent, 11 percent, 9 percent, and 5 percent.
The export-tax rebate for all steel products, except for that on pipes for oilfield use which will be maintained at 13 percent, will be reduced to 5 percent from the current 13 percent.
The export-tax rebates on some nickel, lead, zinc and tin products will be cut to 5 percent from the current 8 percent or 13 percent, while the rebate on some aluminum products will be removed.
The tax rebates for most chemical products, cement, and fertilizer will be also removed.
The rebates for textile products will be cut to 11 percent from the current 13 percent, while rebates on diesel engines, coke ovens, golf carts, and motorcycles will be cut to 9 percent.
The rebates on for toys and watches will be down to 11 percent.
The cost of producing the affected products would increase as a result of the tax changes. It is advisable for foreign companies to review its outsourcing plan and prepare for the corresponding price increase in the future.