China will implement further reductions (second-round of rate reductions) of import MFN (Most Favored Nation) tariffs on consumer goods, starting July 1, 2018. The Customs Tariff Commission of the State Council issued an announcement on lowering the import tariff on consumer goods. 1,449 tax items were involved, of which more than 70% of the HS codes were consumer goods. Because of the MFN rate adjustment, the provisional tariff rates of 210 items of most favored nations for imported goods are also to be reduced, and the provisional rates of most favored nations for other products will continue to be implemented.
The State Council and other authorities will further focus on strategic development trends for all industries, and beginning on July 1, 2018, China will also launch the third-round of the MFN rate reductions on IT products covered by the Information Technology Agreement. These actions are crucial for the implementation of China’s “13th Five-Year Plan,”[1].
Background
At the executive meeting of the State Council held on May 30th, the State Council decided on measures to actively and effectively utilize foreign capital, and to promote greater opportunities for importers while promoting the economy through reduced retail costs to Chinese consumers. Because of these discussions, the state Council decided to lower import tariffs on consumer goods of a large range, to better meet the diversified consumption needs of the masses; promoting Chinese products’ quality and industrial upgrading.
Upcoming Changes
Starting July 1st, the average duty rate on imports of clothing, shoes, hats, kitchen and sports fitness products will be reduced from 15.9% to 7.1%. There will also be a decrease in the average import duty rate of household appliances such as washing machines and refrigerators from 20.5% to 8%. In addition, there will be a reduction in the average import duty rate of processed foods such as aquaculture, fishing aquatic products and mineral water from 15.2% to 6.9%. The list of reductions also includes laundry products, cosmetics (skin care and hairdressing products), and some medical and health products from 8.4% to 2.9%.
After the sharp reduction of import tariffs, the price of relevant imported products decreases, which will help expand the consumer demand, enrich the optional products, and drive the middle and high-end consumption back to the domestic channels. At the same time, it also puts great competitive pressure on Chinese brands, forcing domestic brands and suppliers to transform and upgrade under the increasing competitive pressure.
Considering these, and the proposed changes, impacted companies should implement tax reduction measures to prevent local distributors from raising prices for profit. The goal of these initiatives is to benefit consumers and promote the competitiveness of domestic products. Being watchful of those attempting to take advantage of the decreased import fees, by not pushing the savings to consumers would impact the efforts of the State Council.
http://gss.mof.gov.cn/zhengwuxinxi/zhengcefabu/201805/t20180531_2914284.html
[1] China’s 13th Five-Year Plan. In Pursuit of a “Moderately Prosperous Society”; Michel Aglietta & Guo Bai; http://www.cepii.fr/PDF_PUB/pb/2016/pb2016-12.pdf
