Background. Summary of the Administrative Measures

Transcription

1 China Tax Alert Issue 1, January 2018 China Customs Issued the Interim Administrative Measures on Advance Ruling Regulations discussed in this issue: Interim Administrative Measures on Advance Ruling (General Administration of Customs Order No.236) Background On 26 December 2017, the General Administration of Customs ( GAC ) issued the Interim Administrative Measures on Advance Ruling (General Administration of Customs Order No.236, the Administrative Measures ), which will come into effect on 1 February Summary of the Administrative Measures Eligibility for advance ruling applications Applicants shall be foreign trade operators registered with China Customs. In addition, applicants shall only apply for advance ruling on customs affairs in relation to their own foreign trade activities. Customs affairs on which an application for advance ruling can be made Classification of goods imported or exported; Place of origins or qualifications as original products; Relevant factors of dutiable value and valuation methods for imported goods; and Other customs affairs prescribed by the GAC. Time limit and in-charge customs office An applicant shall apply to the customs office directly under the GAC at the place where it is registered for advance rulings three months before the scheduled importation and exportation. Under exceptional circumstances, an applicant that has valid reasons may apply for advance rulings within three months before the scheduled importation or exportation.

2 Advance ruling decision After the submission of an application for advance ruling, the in-charge customs shall review and make a decision on whether or not to accept the application within 10 days. Once the application is accepted, an advance ruling decision shall be issued within 60 days. Except for those involving business secrets, the customs office reserves the right to publish the rulings letters. An advance ruling decision is valid for three years. In case of any changes to the relevant provisions of the laws, administrative regulations, customs regulations and announcements of the GAC on which the advance ruling decision is based, which affects the effectiveness thereof, the advance ruling decision shall be null and void automatically. Advance ruling decisions have no retroactive effect on goods imported or exported before these decisions come into force. Any applicant that has objections to an advance ruling decision may apply to the GAC for administrative review, and may further institute administrative proceedings with the people's court in accordance with the law if it still has objections to the review decision. KPMG observations The disagreement between the customs authorities and enterprises on valuation, classification, place of origin, etc. is a key factor that hinders the improvement of customs clearance efficiency and also triggers customs audits, duty repayments and administrative penalties. In practice, enterprises tend to seek for the customs authorities verbal opinion in advance in order to mitigate compliance risks. However, due to the fact that the verbal opinions of customs officials are not legally effective and different customs officials may hold quite different opinions even on the same issue, this is not an effective approach to improving the predictability of import and export operations. In July 2015, the GAC launched the pilot program of administrative rulings on the classification of goods in Shanghai Free Trade Zone. Nevertheless, due to restrictions on the place of registration, product category etc. only a limited number of administrative rulings on classification have been issued by the GAC, which makes it difficult to meet the needs of importers and exporters. With the Administrative Measures coming into force, the customs authorities, by means of advance ruling, can review the classification, place of origin, elements of dutiable value and valuation methodology prior to the import and export of goods, so as to reduce disagreement between enterprises and the customs authorities at the time of or after declaration, and improve the efficiency of customs clearance. In addition, since all customs offices directly under the GAC will be empowered to make advance ruling decisions under the advance ruing system whereas presently only the Classification Center under the GAC has the authority to make administrative rulings on classification of goods, more resources will be allocated to do the job and the applications made by enterprises will have a greater possibility of being accepted.

3 The advance ruling regime established by the Administrative Measures is another important initiative following the customs enterprise credit management system, new customs audit regime and national integrated clearance reform. It also represents a significant measure taken by the GAC to fulfil the Trade Facilitation Agreement entered into with the World Trade Organisation and a trailblazing regulation in the context of China s legal system in which statute laws predominate. Given that these are only interim administrative measures, the customs authorities are expected to issue more detailed provisions regarding the following aspects to facilitate adoption by enterprises:- 1. Responsible department Though it is provided in the Administrative Measures that the customs office directly under the GAC at the location where the applicant is registered is responsible for making advance rulings, it has not been made clear which department of the local customs office will accept and review the application. Since customs affairs subject to advance ruling, e.g. the classification of goods, place of origin, relevant elements of dutiable value and valuation methods, will involve different departments of the local customers office, the exact responsible department needs to be clarified. 2. Application materials The Administrative Measures have not specified the materials required in an application for advance ruling. As a result, different requirements may be made by different customs offices. To facilitate the preparation of application materials by applicants and to promote transparency and consistency in advance ruling procedures, it is necessary that detailed provisions be issued regarding applications, import and export documents and other materials. 3. Acceptance of applications According to the Administrative Measures, a customs office shall make a decision whether an application for advance ruling will be accepted within 10 days following the acceptance of the application. The Administrative Measures have specified three cases where applications shall not be accepted. However, it is not clearly defined in the Administrative Measures whether applications can be rejected in other cases. 4. Exceptional circumstances It is provided in the Administrative Measures that under exceptional circumstances, an applicant that has valid reasons may apply for advance rulings within three months before the scheduled importation and exportation. However, the term exceptional circumstances is not defined in the Administrative Measures.

4 5. Relationship between the advance ruling regime and similar regimes Besides the administrative ruling regime, other existing regimes that are similar to advance ruling in relation to pre-clearance review include customs pre-classification, customs pre-valuation, pre-determination of place of origin. The relationship between these regimes and the advance ruling regime, as well as the validity of relevant decisions made need to be further clarified. Besides, enterprises are reminded to pay attention to the following aspects of the Administrative Measures:- 1. Eligibility of applicants In the case that a customs clearance agent is engaged by an enterprise to perform customs declaration, the enterprise is eligible for submitting an application for advance ruling, while the agent is not. 2. Foreseeability of imports or exports When an applicant applies for advance ruling, the customs authorities may require the applicant to provide copies of commercial contracts or letters of intent, the name of vessel, flight number and other materials and information as proofs that that goods are scheduled to be imported or exported after three months. 3. Advance ruling on the relevant elements of dutiable value and the valuation method for import of goods An advance ruling decision is not a decision on the dutiable value itself but on the related to pre-clearance review. Therefore, an enterprise can apply for advance ruling on affairs such as the dutiability of royalties and the impact of a special relationship between the buyer and the seller on the transaction price. The amount of dutiable value is not within the scope of advance ruling. Enterprises can assess their own customs affairs including classification, place of origin, relevant elements of dutiable value and the valuation methods for import of goods and may consider applying for advance ruling to reduce compliance risks. For instance, an enterprise that has a large amount of related party transactions and royalty payments can consider applying for advance ruling on the relevant elements of dutiable value and the valuation method, while importers of novel types of goods of which the classification is unclear may apply for advance ruling on classification. KPMG will keep a close eye on the follow-up rules and regulations regarding advance ruling that may be issued by the GAC and the customs offices directly under it to better advise and serve import and export enterprises.

5 Contact Us For any enquiries, please send to our public mailbox: or contact our partners/directors in each China/HK offices. Khoonming Ho KPMG Asia Pacific Tel. +86 (10) Lewis Lu KPMG China Tel. +86 (21) Beijing/Shenyang/Qingdao Vincent Pang Tel. +86 (532) Tianjin Eric Zhou Tel. +86 (10) Shanghai/Nanjing/Chengdu Anthony Chau Tel. +86 (21) Hangzhou John Wang Tel. +86 (571) Guangzhou Lilly Li Tel. +86 (20) Fuzhou/Xiamen Maria Mei Tel. +86 (592) Shenzhen Eileen Sun Tel. +86 (755) Hong Kong Karmen Yeung Tel kpmg.com/cn Northern China Vincent Pang Northern Region Tel. +86 (10) (532) Cheng Chi Tel. +86 (10) Conrad TURLEY Tel. +86 (10) Milano Fang Tel. +86 (532) Tony Feng Tel. +86 (10) Flora Fan John Gu Tel. +86 (10) Rachel Guan Tel. +86 (10) Helen Han Tel. +86 (10) Michael Wong Tel. +86 (10) Josephine Jiang Tel. +86 (10) Henry Kim Tel. +86 (10) David Ling Tel. +86 (10) Li Li Tel. +86 (10) Lisa Li Tel. +86 (10) Thomas Li Tel. +86 (10) Larry Li Tel. +86 (10) Lucia Liu Alan O Connor Tel. +86 (10) alan.oconnor@kpmg.com Shirley Shen Tel. +86 (10) yinghua.shen@kpmg.com Joseph Tam Tel. +86 (10) laiyiu.tam@kpmg.com Joyce Tan Tel. +86 (10) joyce.tan@kpmg.com Cynthia Xie Tel. +86 (10) cynthia.py.xie@kpmg.com Christopher Xing Tel. +86 (10) christopher.xing@kpmg.com Irene Yan Tel. +86 (10) irene.yan@kpmg.com Adams Yuan adams.yuan@kpmg.com Jessie Zhang Tel. +86 (10) jessie.j.zhang@kpmg.com Sheila Zhang Tel: +86 (10) sheila.zhang@kpmg.com Tiansheng Zhang Tel. +86 (10) tiansheng.zhang@kpmg.com Tracy Zhang Tel. +86 (10) tracy.h.zhang@kpmg.com Eric Zhou Tel. +86 (10) ec.zhou@kpmg.com Vivian Zhou Tel. +86 (10) v.zhou@kpmg.com Central China Anthony Chau Eastern & Western Region Tel. +86 (21) anthony.chau@kpmg.com Yasuhiko Otani Tel. +86 (21) yasuhiko.otani@kpmg.com Johnny Deng Tel. +86 (21) johnny.deng@kpmg.com Cheng Dong Tel. +86 (21) cheng.dong@kpmg.com Marianne Dong Tel. +86 (21) marianne.dong@kpmg.com Chris Ge Tel. +86 (21) chris.ge@kpmg.com Chris Ho Tel. +86 (21) chris.ho@kpmg.com Henry Wong Tel. +86 (21) henry.wong@kpmg.com Jason Jiang Tel. +86 (21) jason.jt.jiang@kpmg.com Flame Jin Tel. +86 (21) flame.jin@kpmg.com Sunny Leung Tel. +86 (21) sunny.leung@kpmg.com Michael Li Tel. +86 (21) michael.y.li@kpmg.com Karen Lin Tel. +86 (21) karen.w.lin@kpmg.com Benjamin Lu benjamin.lu@kpmg.com Christopher Mak Tel. +86 (21) christopher.mak@kpmg.com Henry Ngai Tel. +86 (21) henry.ngai@kpmg.com Naoko Hirasawa Tel. +86 (21) naoko.hirasawa@kpmg.com Ruqiang Pan Tel. +86 (21) ruqiang.pan@kpmg.com Amy Rao Tel. +86 (21) amy.rao@kpmg.com Wayne Tan Tel. +86 (28) wayne.tan@kpmg.com Tanya Tang Tel. +86 (25) tanya.tang@kpmg.com Rachel Tao Tel. +86 (21) rachel.tao@kpmg.com Janet Wang Tel. +86 (21) janet.z.wang@kpmg.com John Wang Tel. +86 (571) john.wang@kpmg.com Mimi Wang Tel. +86 (21) mimi.wang@kpmg.com Jennifer Weng Tel. +86 (21) jennifer.weng@kpmg.com Grace Xie Tel. +86 (21) grace.xie@kpmg.com Bruce Xu Tel. +86 (21) bruce.xu@kpmg.com Jie Xu Tel. +86 (21) jie.xu@kpmg.com Robert Xu Tel. +86 (21) robert.xu@kpmg.com Yang Yang Tel. +86 (21) yang.yang@kpmg.com Jason Yu jjm.yu@kpmg.com William Zhang Tel. +86 (21) william.zhang@kpmg.com Hanson Zhou Tel. +86 (21) hanson.zhou@kpmg.com Michelle Zhou Tel. +86 (21) michelle.b.zhou@kpmg.com Eric Zhang eric.z.zhang@kpmg.com Kevin Zhu kevin.x.zhu@kpmg.com Southern China Lilly Li Southern Region Tel. +86 (20) lilly.li@kpmg.com Penny Chen Tel. +1 (408) penny.chen@kpmg.com Vivian Chen Tel. +86 (755) vivian.w.chen@kpmg.com Nicole Cao nicole.cao@kpmg.com Sam Fan Tel. +86 (755) sam.kh.fan@kpmg.com Joe Fu Tel. +86 (755) joe.fu@kpmg.com Ricky Gu Tel. +86 (20) ricky.gu@kpmg.com Fiona He Tel. +86 (20) fiona.he@kpmg.com Angie Ho Tel. +86 (755) angie.ho@kpmg.com Aileen Jiang Tel. +86 (755) aileen.jiang@kpmg.com Cloris Li Tel. +86 (20) cloris.li@kpmg.com Jean Li Tel. +86 (755) jean.j.li@kpmg.com Sisi Li Tel. +86 (20) sisi.li@kpmg.com Mabel Li Tel. +86 (755) mabel.li@kpmg.com Kelly Liao Tel. +86 (20) kelly.liao@kpmg.com Patrick Lu Tel. +86 (755) patrick.c.lu@kpmg.com Grace Luo Tel. +86 (20) grace.luo@kpmg.com Ling Lin Tel. +86 (755) ling.lin@kpmg.com Maria Mei Tel. +86 (592) maria.mei@kpmg.com Chris Xiao chris.xiao@kpmg.com Eileen Sun Tel. +86 (755) eileen.gh.sun@kpmg.com Michelle Sun Tel. +86 (20) michelle.sun@kpmg.com Bin Yang Tel. +86 (20) bin.yang@kpmg.com Lixin Zeng Tel. +86 (20) lixin.zeng@kpmg.com Nicole Zhang nicole.ll.zhang@kpmg.com Hong Kong Curtis Ng Hong Kong Tel curtis.ng@kpmg.com Ayesha M. Lau Tel ayesha.lau@kpmg.com Chris Abbiss Tel chris.abbiss@kpmg.com Darren Bowdern Tel darren.bowdern@kpmg.com Yvette Chan Tel yvette.chan@kpmg.com Lu Chen Tel lu.l.chen@kpmg.com Wade Wagatsuma Tel wade.wagatsuma@kpmg.com Natalie To Tel natalie.to@kpmg.com Elizabeth DE LA CRUZ elizabeth.delacruz@kpmg.com Matthew Fenwick Tel matthew.fenwick@kpmg.com Sandy Fung Tel sandy.fung@kpmg.com Charles Kinsley Tel charles.kinsley@kpmg.com Stanley Ho Tel stanley.ho@kpmg.com Becky Wong Tel becky.wong@kpmg.com Barbara Forrest Tel barbara.forrest@kpmg.com John Kondos Tel john.kondos@kpmg.com Kate Lai Tel kate.lai@kpmg.com Travis Lee Tel travis.lee@kpmg.com Irene Lee Tel irene.lee@kpmg.com Alice Leung Tel alice.leung@kpmg.com Ivor Morris Tel ivor.morris@kpmg.com Benjamin Pong Tel benjamin.pong@kpmg.com Malcolm Prebble Tel malcolm.j.prebble@kpmg.com David Siew Tel david.siew@kpmg.com Murray Sarelius Tel murray.sarelius@kpmg.com John Timpany Tel john.timpany@kpmg.com Lachlan Wolfers Tel lachlan.wolfers@kpmg.com Steve Man Tel steve.man@kpmg.com Daniel Hui Tel daniel.hui@kpmg.com Karmen Yeung Tel karmen.yeung@kpmg.com Erica Chan Tel erica.chan@kpmg.com Adam Zhong Tel adam.zhong@kpmg.com Eva Chow eva.chow@kpmg.com Alexander ZEGERS zegers.alexander@kpmg.com The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.