Tax & Accounting Blog

China Customs force “One Belt, One Road” Development

Blog, Global Trade, ONESOURCE November 13, 2015

In 2013, China proposed the strategic initiative of building “The New Silk Road Economic Belt” and “The 21st Century Maritime Silk Road.”, also known as “One Belt, One Road” (OBOR).  The initiative is intended to promote connectivity and cooperation among countries along these routes (primarily in Eurasia).  It is reflective of China’s efforts to take a larger role in global affairs and addresses countries often neglected in other regional or global trading blocks.  At the same time, it is also widely viewed as an opportunity for China to address issues of overcapacity in many of its production sectors.

‘Neither ‘The Belt nor The Road’ follows any clear line geographically speaking; they serve more as a roadmap for how China wants to further integrate itself into the world economy and strengthen its influence in these regions’[1].  ‘The Belt’ connects China with Central Asia, the Middle East, Southeast Europe and Western Europe.  Countries in East Asia, Southeast Asia, South Asia Sub-continent, Arabian Peninsula, and North Africa, are also linked by The Road at the same time.

One Belt, One Road brings new opportunities for cooperation among customs by enhancing customs cooperation through information exchange, mutual recognition of regulations, and mutual assistance in law enforcement.  This effort will contribute to bilateral and multilateral cooperation as well as the cross-border personnel, commodity and fund circulation.

May 29th 2015, China’s General Administration of Customs (the China Customs) published its “One Belt, One Road Plan”, indicating 16 strategies. The main idea of the strategies will be cited in the following:

Strengthen cross-border cooperation

  • Introduce new models of port management

Set up customs inspection sites at inland ports (Yunnan and Guangxi), international railways, and major inland river harbors to provide immediate inspection for imported and exported goods.

  • Form a cross-border transport corridor

Strengthen customs clearance cooperation between inland ports and ports in the coastal and border regions; apply a one-time declaration and inspection at destination (export) for multimodal transport) without disassembly at transfer stations.  This will be accomplished by setting up intermodal logistics control centers at terminals for water shipments, air, rail, and highways.

  • Introduce information exchange, mutual recognition of regulations, and mutual assistance in law enforcement

Create a Single Window System along the One Belt One Road corridors to normalize and simplify documents, data and systems together with a unified system, and to promote on-line checking of inspection and quarantine certifications. The Single Window System also promotes mutual recognition of AEOs and provides transparency throughout the customs clearance process.

  • Continuously improve regional integration of customs clearance

Remove customs territory boundaries, give priority to the rules of logistics, and let the business participant have choices about the ports for declaration, tax payment and inspection to simplify clearance in China.

Silk Road

(Source from: ChinaDaily)

Stimulate collaboration within The Economic Belt

  • Encourage Chinese companies going abroad

Improve the management mode of outbound processing with AEO companies at the lead. Open express duty free lines of customs clearance for infrastructure and manufacturing maintenance and repairs. Part of this effort will support property rights; something that is needed to create a market environment for fair competition and support to Chinese companies expanding their business overseas. Violations of infringement acts will face sanctions. The Authorized Economic Operator (AEO) certification and benefits recognition in the partner countries will also be effective supports for the companies chosen to participate.

  • Innovation of trading

Launch pilot e-commerce services for cross-border trade in selected cities along ‘The Belt’, and welcome e-commerce companies to set-up their overseas distribution centers within bonded areas to take advantage of free trade zones.

  • Build up free trade zone with countries along ‘The Belt’

Focus on negotiations for efficient customs procedures and preferential tariffs, upgrade the Central America Free Trade Agreement (CAFTA) and Regional Comprehensive Economic Partnership (RCEP), and continually work on practical ways to expand deeper free trade relationships with countries along ‘The Belt’. Provide a database of Country of Origins (COO) and simplify procedures of customs clearance and COO determination to promote sourcing of materials from underdeveloped countries along ‘The Belt’

Improve cooperation among international customs

  • Broaden cooperation

Create leadership meetings, forums, and experts’ exchanges to promote regional learning and idea exchange.

  • Promote the policy advantages of customs special regions and bonded areas

Focus development of free trade zones including China-Vietnam, China-Lao, China-Mongolia, and other cross-borders’ economic agreements. Implent relaxed controls on cargo transiting countries within ‘The Belt’, enhanced controls for cargo entering ‘The Belt’, and free trade within special areas.

  • Create the project of promoting interoperability

Set up coordination mechanisms in terms of railway transport and port customs clearance for the China-Europe corridor, cultivate the brand of China-Europe freight trains and construct a cross-border transport corridor connecting the eastern, central and western regions.

Conclusions

One Belt, One Road is an interesting initiative, as it encompasses a group of diverse economies that had previously not been well-linked under previous economic cooperation or free trade agreements.  These countries stand to gain much from the funding that China is placing behind this initiative and in return, the initiative offers China an opportunity to exert its influence over a large region running across the Asian continent to Europe.  Given the various stages of development along the corridors and the industries targeted, however, the returns on investment may be far in the future because the infrastructure is indeed a huge amount of investment with an expected long payback period. Some reports estimate that the payback period of “One Belt One Way” will be 10 years at least.

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Reference List

Xiangyu, Yu, 2015. China Customs fully support “One Belts And One Road” development. Special Report, Journal for China Customs.

China Customs, 2015. 16 strategies of “One Belts And One Road”. General Administration of Customs of the People’s Republic of China. Available from: http://www.customs.gov.cn/publish/portal0/tab65602/info743890.htm [Accessed 15 OCT 2015].

http://thediplomat.com/2015/06/the-trouble-with-the-chinese-marshall-plan-strategy/ [Accessed 15 OCT 2015].

[1] http://en.xinfinance.com/html/OBAOR/