China's General Administration of Customs will implement April 1 new regulations that will make it easier and less costly to import goods into and export goods from China for companies that have good trade compliance programs and records. These regulations are intended to encourage informed trade compliance, improve the customs-trade partnership, continue China Customs' modernization efforts and bring its policies and practices concerning trade compliance and facilitation and supply chain security more into line with those embodied by the World Customs Organization's Framework of Standards to Secure and Facilitate Global Trade and the authorized economic operator programs being developed around the world based on that framework. China Customs is now working on the rules, standards, systems and processes that will be used to implement the new regulations, including an importer compliance assessment system and internal control standards that incorporate best practices from the Importer Self-Assessment program used by the U.S. and the AEO programs of other countries.
The major feature of the new regulations is the provision of specific trade facilitation benefits for importers/exporters (referred to herein as importers of record, or IORs) that meet certain criteria. Based on their compliance records, internal controls, business performance and other information, IORs will be classified by China Customs into one of the following categories: AA, A, B, C and D. IORs in class B will continue to experience routine inspections and audits and slow customs release of their goods, while those in classes C and D will be subject to increased inspections and audits. IORs classified in classes A or AA, however, will receive the following benefits.
Class A. Class A IORs will be eligible for (a) inter-district remote filing and goods release at the port of entry, (b) Customs inspection at the IOR facility if necessary, (c) privileged rapid inspection and release, (d) advance customs entry and release before the goods arrive at the port of entry, (e) 24/7 urgent customs clearance and (f) waiver of customs bond or cash deposit requirement for processing trade operations. Eligibility requirements include an annual import and export volume greater than $500,000, a customs entry error rate lower than 3 percent, operating as a Class B IOR for at least a year, and a clean record over the past 12 months concerning customs, trade and other relevant laws and regulations.
Class AA. Class AA IORs will receive all of the Class A benefits, plus (a) rapid customs release for trusted clients, (b) a Customs account manager to answer customs and trade questions, (c) direct customs release after the entry passes electronic review, and (d) no cargo inspections under normal circumstances. Qualifications for Class AA include an annual import and export volume greater than $30 million, passing a customs audit and verification, meeting internal control, trade compliance and trade security requirements, submitting biannual import/export business reports and operating as a Class A IOR for at least a year.
Customs brokers will also be classified according to the new system. Importers are advised to be very careful in selecting a broker and to avoid hiring one classified under category C or D.
Benefits Available for Active IORs with Good Trade Compliance Programs
The new regulations are expected to reduce the costs and burdens associated with importing into and exporting from China for IORs with good trade compliance programs. As a result, multinational companies doing business in China are advised to act as IORs and to centralize their trade activities in that country if possible in order to more effectively and efficiently deal with China Customs and other trade-related Chinese government agencies. Although foreign-invested companies have been allowed to conduct international trade activities in China since it joined the WTO in 2001, many still hire local trading companies to act as IORs to avoid technical issues and compliance problems, which can increase the cost of doing business. In addition, by acting only as consignees for import shipments, these companies increase their potential customs and trade compliance risk and lose out on the benefits of government trade compliance and facilitation programs, which only IORs can legally participate in.
Sandler, Travis & Rosenberg, P.A., which has a longstanding partnership with China Customs under the three-phase United Nations Development Program project for China Customs modernization, has worked with industry interests to promote and pursue these regulations and is well-positioned to help you take advantage of them. For additional information, please contact Zhaokang Jiang at +86 (10) 6505-9900 in Beijing or (202) 216-9307 in Washington, D.C., Larry T. Ordet at (305) 267-9200 or Jeremy Ross Page at (312) 641-0000.
Sandler, Travis & Rosenberg, P.A., is a customs and international trade law firm concentrating in assisting clients with the global movement of goods, ideas and personnel and the setting of global trade policy. Our affiliated consulting company, Sandler & Travis Trade Advisory Services Inc., is a leading provider of trade-related management and consulting services to government and industry. For more information about ST&R and STTAS, please visit our Web site.
World Trade/Interactive
