Tax & Accounting Blog

China’s GAC: Interim Advanced Ruling on New Region

Blog, Global Trade, ONESOURCE March 23, 2018

On the 26th of December 2017, China’s General Administration of Customs (GAC) published GAC Decree No. 236 related to the interim administrative measures for customs advanced rulings of the People’s Republic of China. This Decree came into effect on February 1, 2018, at which time it published Bulletin 14 on 31st January 2018, which contains guidance for implementation of the new customs advance ruling regime.

According to GAC Decree No. 236, the intent of advanced rulings is to promote trade facilitation, improve the trade environment and provide more certainty to businesses engaged in import and export activities.

The scope of advanced rulings covers 3 major global trade challenges: tariff classification, origin determination and customs valuation (including royalties, commissions, freight and issuance and special relationships between parties’ definition).

The current feedback from importers and exporters and their response to this new regime is positive. Decree 236 is considered a milestone for China Customs by promoting global trade facilitation and the transformation of China Customs from a focus on regulations to one that also partners with importers and exporters through services. The benefit to importers and exporters is in their ability to facilitate an accurate and compliant declaration, improve their operational efficiencies, provide predictability in their duties, control their compliance risks, and fully enjoy free trade preferences.

How to apply for advanced ruling:

  • The applicant needs to be the consignee of imports or the consignor of exports.
  • Applications need to be submitted 3 months prior to the scheduled time for the import or export.
  • The application package must be submitted through the electronic customs system (QP system) or “Internet + Customs”.
    • There are 3 different application forms for specific subject for ruling purposes: tariff classification, origin determination and customs valuation.
  • Customs will feedback an acceptance or rejection letter within 10 days though the final advanced ruling decision will be released within 60 days.

The advanced ruling decision is valid for 3 years with no retroactivity. The applicant needs to provide the assigned ruling decision information on the customs declaration form during the import/export clearance process. The advanced ruling decision has the same effect on goods in the same situation for all transactions.

Same situation:

  • Tariff classification —- Same item: will have the same effect for the same items’ import and export for 3 years
  • Customs valuation —- Same item under the same contract will be provided the benefit for the valuation ruling in one contract
  • Origin determination —- The product made by same manufacturer and using the same raw material will receive the benefit by one vendor under the same BOM and the same physical material consumption

China’s GAC will publish ruling decisions on its website, though will not provide confidential information of the applicant. The published ruling decisions should be a useful reference for Chinese companies, however each decision is only valid for the original applicant. To fully enjoy the benefit of advanced ruling decisions, importers and exporters should apply for the privileges offered in the program and determine the benefits to their company.

As a recommendation, companies should have a good strategy in place in advance of their shipment schedule (at least 60 days). The plan should include all details of the item they need the advanced ruling for. It is also recommended that as they organize the application materials, that they include the supporting documents, samples and any clarifying technical elements accompany the application. This will eliminate delays, provide them a buffer for time respond to inquiries from the customs authority and meet the response deadlines.

The advanced rulings program is great step from the GAC and is expected to improve the efficiency of customs clearances. A side benefit in this new program is that importers and exporters will gain a greater understanding of the tariff policies and tax-related factors in advance of their shipments arrival or departure. This should effectively help them evaluate their costs, reduce their compliance risks, and further enhance the predictability of their import and export activities.

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