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New Import Measures in China to Benefit African, Southeast Asian Exporters

Exporters from the least developing countries (LDCs) in Africa and Southeast Asia can benefit from China’s new measures for special preferential tariff treatment. In order to be entitled to preferential tariff treatment, a beneficiary country needs to register with China’s customs the national source of the export product, showing the product is indeed originating from that country.

The Administrative Measures of the PRC Customs on Rules of Origin of Imported Goods from the Least Developed Countries Entitled to Special Preferential Tariff Treatment (“the new measures”), which became effective April 1, is the latest action taken by the General Administration of Customs of China (GACC) to improve the administration of the origin of the import goods. China began granting preferential tariff treatments to LDCs that have diplomatic relations with China in 2002.

The GACC made two major changes in the new measures:

  • They expanded the criteria that determine the national source of a product, allowing more products to be regarded as originating from a beneficiary country; and,
  • They streamlined the consignment process, making the export process more efficient than before.

LDC exporters should seek to understand the benefits of the new measures, which contain both incentives and compliance requirements.

The old rule of origin for imported goods from LDCs

As is common for rules of origin internationally, China uses the rule of origin to determine the national source of a product for purposes of international trade. Generally, the GACC assesses the country of origin for a product as determined by the following two rules:

  • If a product is wholly obtained or produced completely within one country, then the product is regarded as having origin in that country;
  • If a product has been produced in more than one country and the last substantial transformation took place in a beneficiary country, then the product is also regarded as having origin in that country. (The change of tariff classification, a four-digit number, is a benchmark that shows a product has gone through the last substantial transformation.)

Many exporters find this rule of origin too rigid to operate in real practice. In a world where global trade has become more complicated and highly interdependent, it is difficult to produce a product that is purely relied on originating materials in one single country. In response to address the operational obstacles, the new measures adjusted the criteria that determines the country of origin through introducing several new rules, which are designed to allow exporters in LDC countries to compete.

The new rule of origin for LDC exporters

Rule of Cumulation

Under the Rule of Cumulation, beneficiary countries are allowed to use other countries’ originating materials under the following two circumstances:

  • The originating goods or materials were obtained from or produced in China;
  • The originating goods or materials were from other beneficiary countries within the same regional economic group as the subject beneficiary country is belong to.

Currently, GACC grants two regional economic groups special preferential tariffs treatment: The Association of Southeast Asian Nations (ASEAN) and the Economic Community of West African States (ECOWAS). Beneficiary countries within the same economic group can share the originating materials or goods for their own production.

If the exporter comes from a LDC beneficiary country in either ASEAN or ECOWAS that is recognized by the GACC, they can use the other member country’s originating materials to produce its own product, and the product can be counted as originating from the country that exports it.
For example, recognized beneficiary countries within ASEAN, Cambodia and Myanmar, can interchangeably use the other member country’s originating materials for its products. If Cambodia uses Myanmar’s originating materials, then its production is still considered as products purely originating from Cambodia.

Rule of De Minimis

In addition to the Rule of Cumulation, the new measures adopt the Rule of De Minimis to further lower the threshold for determining the origin of products. This means a beneficiary country is allowed to use other country’s imported goods or materials in the process of production, as long as:

  • The value of all non-originating materials used in the production of the good does not exceed 10 percent of the value of the good;
  • The good meets all other applicable provisions of the new measures.

Optimized consignment process

Under the new measures, the GACC will use an online data exchange system to administrate the imported goods’ consignment. Consignees or agents of imported goods no longer need to submit hard copies of the Certificate of Origin or Declaration of Origin to the GACC, as long as the export country has submitted those documents through the online data exchange system. Additionally, if the originating goods’ value does not exceed RMB 6,000 (US$872), consignees are exempt from presenting a Certificate of Origin or Declaration of Origin at the customs.

The new measures also extended the time for beneficiary country’s export goods to arrive in China. If an originating good of a beneficiary country transports through other countries or regions before arriving in China, the maximum duration of staying in the country or district has been extended from 3 months to 6 months.

In sum, the new measures cut red tape during the import clearance process for LDC beneficiaries, and allows exporters from those countries more flexibility for transportation.

Healthier trade prospects

China has been committed to facilitating trade and economic development in LDCs. In 2002, new ASEAN member states such as Cambodia and Myanmar were among the first batch of LDCs to enjoy the special preferential tariff treatment provided by China. Fifteen years later, the list of beneficiary countries has extended from South East Asian countries and African countries to more than 40 LDCs recognized by the UN.

In addition to expanding the number of beneficiary countries, the percentage of taxable item goods exported to China that were granted zero tariffs has witnessed a significant increase from 60 percent in 2010 to 97 percent in 2015.

According to China’s Millennium Development Goal White Paper, 26 beneficiary countries have exported originating goods worth at US$4.72 billion in total to China by tapping the preferential measures. Ethiopia, Bangladesh, and Tanzania are the top three beneficiaries.
As the administration and regulatory environment has been ameliorated, more and more LDCs will benefit from exporting goods to China under the special preferential tariff treatments.


This article was first published April 2017.
Since its establishment in 1992, Dezan Shira & Associates has been guiding foreign clients through Asia’s complex regulatory environment and assisting them with all aspects of legal, accounting, tax, internal control, HR, payroll and audit matters. As a full-service consultancy with operational offices across China, Hong Kong, India and emerging ASEAN, we are your reliable partner for business expansion in this region and beyond.

For inquiries, please email us at .(JavaScript must be enabled to view this email address). Further information about our firm can be found at: www.dezshira.com

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02Aug

South China Sea Arbitration Implications on ASEAN Investors: an Overview

In a landmark case, the Hague’s Permanent Court of Arbitration delivered a unanimous decision earlier this month supporting the Philippines in its territorial dispute with China over part of the South China Sea. The case brought by the Philippines was the first time the Chinese government had been brought...

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02Aug

Holding up Half the Sky? Assessing the Current State of Female Employment in China

Female employment in China used to be moving in a positive direction. In the late 1970s, almost ten years after Chairman Mao famously remarked that “women hold up half the sky”, about 90 percent of working-age women in cities were participating in the workforce. In 1980, China was one of the first...

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26Jul

India’s Goods and Services Tax Bill – A Critical Evaluation

The original blueprint of the Goods and Services Tax (GST) bill was first introduced in 2001. It aims to adopt a value added tax (VAT) model, and replace the current national-level central excise duty and state-level sales tax model. Heated debates in parliament has hindered the passage of the bill, which...

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26Jul

Understanding Vietnamese Mergers and Acquisitions

As Vietnam increasingly becomes a hub for foreign businesses, the government is streamlining the mergers and acquisitions (M&A) process to encourage investment in new sectors of the economy. While establishing a business in Vietnam may prove too cumbersome for some hopeful entrants, the M&A route provides...

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26Jul

China Introduces Wide-Sweeping New Transfer Pricing Rules

Administration of Related-party Transactions and Contemporaneous Documentation (SAT Announcement [2016] No. 42)”, which introduces a three-tiered documentation framework that will replace its current transfer pricing documentation rules. The Announcement was released following the opinion-seeking draft publicized by the tax bureau in September 2015, and is largely consistent with the BEPS (Base Erosion and...

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26Jul

ASEAN’s Sharing Economy: Understanding Opportunities and Navigating Regulations

As internet penetration rates continue to rise in Southeast Asia, ASEAN grows more interconnected by the day. Home to over 663 million inhabitants, the region is projected by many to be among the world’s most promising markets for a variety of internet based services. Chief among these are services involved...

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18Jul

Formosa’s US$500 Million Settlement Set to Usher in New Era for Environmental Enforcement

Dead fish washed ashore. Polluted water. Fishermen losing their economic livelihood and having their well-being threatened. A Taiwanese company implicated. This is not 2016; the year is 2008, and we are looking at the Thi Vai river in southern Vietnam’s Mekong Delta, with an MSG factory upstream owned by Vedan. This...

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18Jul

Opportunities in India’s Emerging Fintech Sector

India’s financial technology (fintech) sector may be young but is growing rapidly, fueled by a large market base, an innovation-driven startup landscape, and friendly government policies and regulations. Several startups populate this emerging and dynamic sector, while both traditional banking institutions and non-banking financial companies (NBFCs) are playing catch...

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18Jul

Inflicting Loss on Investors through Cooked Books: Assessing Accounting Fraud in China

Accounting fraud in China seldom made headlines until the U.S. Securities and Exchange Commission (SEC) recently began probing Chinese e-commerce giant Alibaba’s accounting practices. Although accounting fraud is a global issue, China’s investment climate presents higher risk because local companies often want to tank up capitals and...

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18Jul

A Guide to Trademarks in the Republic of Singapore

Singapore is ASEAN’s most developed economy and offers a wide range of investment opportunities for companies seeking to tap into the city state’s rich pool of talent and extensive global trade networks. These conditions have not been lost on foreign investors whose capital flows have propelled Singapore to...

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11Jul

India’s New Twilight Law: 24/7 Operations for Retailers

India’s Union cabinet recently approved a bill that will allow several commercial establishments to operate for 24 hours a day. The Model Shops and Establishments (Regulation of Employment and Conditions of Service) Act 2016 will permit malls, shops, restaurants, banks, and cinema halls to operate on a 24/7 basis. The bill is...

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11Jul

EVFTA to Open New Chapter in EU-Vietnam Trade Relations

In the last few years, Vietnam has risen above many of its neighbors in ASEAN by posting impressive trade volume growth with a variety of countries. Vietnam is leading the pack in ASEAN as the biggest exporter to the U.S. and only ranks second to Singapore in terms of...

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11Jul

Out of the Scrapyard: How Foreign Involvement Can Help Solve China’s e-Waste Crisis

Late last month, the United States Congress introduced a new bill aimed at stemming the country’s regular flow of electronic waste to China. The U.S. is one of many foreign countries that exports huge amounts of e-waste to the Middle Kingdom – albeit often unintentionally – contributing to the numerous...

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11Jul

ASEAN Briefing The Guide to Corporate Establishment in Cambodia

Cambodia has been one of Asia’s fastest growing developing countries since the late 1980s when it dropped its planned economy plan for the free market. Its annual growth averaged 7.5 percent over the last decade, driven by robust garment exports, services, real estate, and construction. It is largely expected that...

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06Jul

The United Kingdom Chooses ‘Brexit’, Will it Hurt India?

The U.K.’s decision to withdraw from the European Union (EU) on June 23 caused heavy turmoil for financial markets worldwide and a currency freefall for the Pound Sterling. It also opened up a period of great uncertainty for those doing business with the UK and Europe. While global markets...

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06Jul

Successfully Resolving Commercial Disputes: An Overview of Arbitration in ASEAN

International arbitration centers have become the preferred location for the resolution of corporate disputes in ASEAN. The use of these centers is preferred due to their affordability, speed, privacy, and neutrality. As investors ramp up investment in ASEAN or enter the region for the first time, understanding where international arbitration...

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06Jul

Up in Smoke: Why China has Banned Foreign Investment in the Tobacco Industry

China’s Ministry of Industry and Information Technology (MIIT) recently announced regulations barring foreign investment in the country’s enormous tobacco industry, blocking foreign invested enterprises and individual businesses from participating in tobacco wholesale, retail, and alternative forms of trading. These new restrictions come on the heels of various government...

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06Jul

Expat Employment in Vietnam: The Comprehensive Guide to Work Visas and Work Permits

In recent years, the number of expats coming to Vietnam has steadily increased. The majority of foreign workers that come to Vietnam are employees of foreign contractors, working for, or establishing foreign direct investment (FDI) projects. When hiring foreign staff in Vietnam, there are a number of procedures and legal...

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27Jun

Brexit Implications for ASEAN Based Investors

In a victory that stunned analysts around the world, the UK has voted to exit the European Union (EU) by a margin of 52 to 48 percent. In addition to producing significant implications for investors across Europe, the interconnected nature of the global economy leaves businesses across the world exposed. ASEAN is...

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27Jun

City Spotlight: Investment Opportunities in Da Nang

Many may know of Da Nang as a major U.S. air force base during the Vietnam War, but the modern-day city has few remnants of its war-ravaged history. Nowadays, Da Nang has developed into a major urban center— Vietnam’s third largest economic center with the highest growth rate...

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27Jun

India-Australia Deal to Avoid Double Social Security Contribution

India and Australia recently signed a pact to avoid double social contribution, aimed to help businesses in both countries. Social security payments are a critical component of a company’s expenses. An employer often has to structure social contribution payments in a manner that ensures regulatory compliance, while also taking...

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27Jun

Missing the Mark: The Importance of Trademark Registration in China

Apple has recently been involved in a few IP infringement cases in China that it has lost.  Earlier this month, there was a case where sales of all models in Apple’s iPhone 6 series were to be suspended by the Beijing Municipal Bureau of Intellectual Properties due to alleged...

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21Jun

Rooting Out Slave Labor: An Introduction to Sustainable Manufacturing in ASEAN

Though more companies than ever are making strides to manage and improve the image of their operations, the constant appetite for cost reduction exposes supply chains to the reputational risk of worker exploitation. With some of the world’s most cost competitive hubs, ASEAN and its regional competitors offer a...

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21Jun

Laying Foundations for Growth: The Future of Vietnamese Infrastructure

With the signing of several free trade agreements, Vietnam is expected to see significant uptakes in trade with nations around the globe. In addition to presenting opportunities for investors and promising to increase wealth for Vietnam’s growing middle class, the ramping up of global interconnections is likely to increase...

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21Jun

India and U.S. Sign Agreement on Renewable Energy

A Memorandum of Understanding (MoU) between India and the U.S. was signed in New Delhi on June 2 to enhance cooperation in energy security, clean energy, and climate change. It will most likely forge a US$ 1 billion partnership for the Indian renewable energy sector, boosting global investor interest. Prime Minister...

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