A. Import Tariffs and Custom Regulations

The most comprehensive guide to Chinese Customs regulation is The Practical Handbook on Import & Export Tax of the Customs of the PRC, compiled by the General Customs Administration. This guide contains the tariff schedule and national customs rules and regulations. It may be obtained for 220 RMB plus shipping and handling from:

Xing Sheng Zhong Hai Fa Xing Zhong Xing Company.
#6 JianNei DaJie
Dong Cheng Qu, Beijing 100730.
Phone: (8610) 6519-5923 Fax: (8610) 6519-5616.

Tariff Rates: The Customs General Administration (CGA) assesses and collects tariffs. In addition, it collects a value-added-tax (VAT), generally equal to 17%, on imported items. Import tariff rates are divided into two categories: the general tariff and the minimum (most-favored-nation) tariff. Imports from the United States are assessed at the minimum tariff rate, since the U.S. has concluded an agreement with China containing reciprocal preferential tariff clauses. The five Special Economic Zones, open cities, and foreign trade zones may offer preferential duty reduction or exemption. Companies doing business in these areas should consult the relevant regulations.

Customs Valuation. According to Chinese Customs regulations, the dutiable value of an imported good is its c.i.f. price, which includes the normal transaction price of the good, plus the cost of packing, freight, insurance, and seller's commission. In practice, Chinese customs valuation remains non-transparent and arbitrary. Customs officials have discretionary authority to ignore the invoice or transaction price as the principal basis for valuation.

B. Trade Barriers

China administers a complex system of non-tariff trade barriers. The U.S.-China market access Memorandum of Understanding (MOU) signed in 1992 commits China to curtail most of these barriers by 1997. The MOU also confirms that only barriers that are imposed by the central authorities will be enforceable. This provision is significant because it precludes replacement of central control by local controls.

Some of the current trade barriers that U.S. firms face are:

Import Licensing: While China is in the process of eliminating a great number of import licensing requirements, licenses will continue to be required after the MOU is implemented for certain items including rubber products, wool, grains, oilseeds and oilseeds products, cotton, cotton passenger vehicles, and hauling trucks.

Quotas: After implementation of the MOU, some 42 categories of commodities will remain affected by quotas, including watches, automobiles, grains, edible oils, cotton, and motorcycles. Import quotas for machinery and electronic items, as well as carbonated beverages, are set by the State Economic and Trade Commission under the State Council, while the State Development and Planning Commission administers quotas for a variety of general commodities. Quota allocation largely remains non-transparent to outsiders.

Administrative Controls: Certain designated commodities must go through an automatic registration process and secure a "Certificate of Registration for the Import of Special Commodities" prior to importation. The certificate is valid for six months.

Thirty-one categories of goods which were previously controlled through the administrative import approval process but not subject to import license requirements, including certain machinery production lines, electronic equipment, and construction materials and equipment, had controls removed under the MOU.

Transparency: The MOU commits China to publish all relevant laws, rules, regulations, administrative guidance and policies governing foreign trade that are not currently published. In conjunction with this commitment, China designated the MOFTEC Gazette (Wengao) as the official register for publication of all laws and regulations relating to international trade. To ensure that unpublished internal regulations are non-enforceable, only published laws and regulations should be implemented. However, transparency still remains a problem. The website of the Ministry of Foreign Trade and Economic Relations (MOFTEC) at www.moftec.gov.cn is a good first source of information on Chinese Foreign Trade Law.

Anti-Competitive Practices: China's first law on unfair competition went into effect at the beginning of December 1993. It forbids the use of money and materials or other means as bribes to sell goods but allows discounts or commissions openly offered and properly recorded. U.S. suppliers have complained that such practices in China put them at a competitive disadvantage.

C. Import Documentation

Normally, the Chinese importer (agent, distributor or joint-venture partner) handles documentation requirements. Necessary documents include the bill of landing, invoice, shipping list, sales contract, an import quota certificate for general commodities (where applicable), import license (where applicable), inspection certificate issued by the State Administration for Entry & Exit Quarantine and Inspection Bureau (SAIQ) or its local bureau (where applicable), insurance policy, and customs declaration form.

D. U.S. Export Controls

As result of the findings presented in the Cox Report released by Congress in June of 1999, The U.S. Administration is currently under enormous pressure from Congress to stringently enforce all U.S. Dept. of Commerce Export Administration regulations on high tech trade with China, and it is attempting to deter the passage of new laws by Congress which will further tighten U.S. Government regulations covering high technology trade with China.

The Enhanced Proliferation Control Initiative (EPCI), has led the U.S. to require closer scrutiny of end-users of U.S. exports of all kinds. This regulation requires a Validated License application if the exporter has "reason to know" that the end-users might be involved in missile, nuclear or chemical weapons proliferation.

A new law passed by Congress in late 1997 requires that the US Government do post shipment verifications on all High Performance Computers(HPC) shipped to one of 50 countries including China. An HPC is defined as any computer over 2000 MTOPS of performance. This includes workstations with two Pentium III microprocessors, and will cover some new single processor laptops that will be released for sale early in 2000. This regulation is causing longer order booking to shipping date delays in HPC computer sales that HPC vendors had not experienced before in making sales to China. One bottleneck in the process is the requirement that a MOFTEC issued EUC must be obtained before the computer is shipped to China. Due to the large numbers of such certificates needed and due to the fact the issuing department only has five employees, this single procedure can take weeks to months.

In addition the Tiananmen Sanctions of 1990 are still in effect and curtail the sale of crime control equipment to the police of China and the sale of defense electronics to the Chinese military.

U.S. Export Applications: A USDOC dual-use export license application that does not present to the USDOC reviewers serious Chinese end-user concerns is usually approved by the USDOC in about one week. In the past only 15 to 20 USDOC export license applications a year will require a Pre-License Check (PLC). In the case of a PLC, the Department of Commerce requests MOFTEC permission for an FCS officer from the Embassy to visit the site of an end-user to determine the bona-fides of the end-user for the actual end-use of the product. This must be done before Commerce will act further on the export license application. Again a PLC requirement is not normally invoked. But when it is U.S. Government inter-agency coordination in Washington and coordination between the Commercial Service and MOFTEC in China can lead to time delays of two to three months. If in the end no PLC can be affected the license may not be issued at all.

As of June 1999,in reaction to the accidental May 1999 NATO bombing of the Chinese Embassy in Belgrade, Serbia, MOFTEC has temporarily postponed responding to all U.S. Government end-use visit requests. It is not clear when these visits will resume. This situation will make it less likely that an export license will be issued were a PLC is required.

For more information on U.S. export controls, exporters should view the BXA website at www.bxa.doc.gov or contact:

BXA Exporter Services Division
Washington, D.C. Tel: 202-482-4811
Fax: 202-482-3322
Newport Beach, CA Tel: 714-660-0144
Fax: 714-660-9347
Santa Clara, CA Tel: 408-748-7450 Fax: 408-748-7470
Fax: 408-748-7470
U.S. Embassy-Beijing, Commercial Section:
Mark Bayuk BXA-CS Officer Tel: 86-10-6532-6924
Fax: 86-10-6532-3297

In mid 1999 Satellite and related technology licensing authority was transferred from the Dept of Commerce to the Dept. of State. For information on State Department export licensing procedures see the relevant State Dept website of the Office of Defense Trade Controls at http://www.pmdtc.org. The point of contact for State Department Licensing matters at U.S. Embassy Beijing is the Economic Section Tel: 86-10-6532-3431, Fax 86-10-6532-6422.

E. Chinese Export Controls

Prohibited Exports. China maintains export bans and restrictive licensing procedures on certain items. Products banned from export include musk, copper, platinum, specified chemical compounds, and products whose export is banned under international treaties. Products subject to strict licensing controls include dual-use chemicals, chemical precursors, heavy water, and exports of fish, fresh vegetables and fruits to Hong Kong and Macao. Foreign-invested enterprises are restricted to exporting out of China only the products they manufacture.

The export licensing system is administered by MOFTEC and designated local offices. An export tendering system for a limited but growing number of products has also been introduced. Most licenses are valid for a single use within three months after issuance. For certain items, including 26 categories of agricultural and petroleum products, licenses are granted for six months with multiple use up to 12 times.

Other items that may not leave China include all items that are prohibited from being imported. (See next paragraph) In addition, manuscripts, printed matter, magnetic media, photographs, films or other articles, which involve state secrets; valuable cultural relics; and endangered animals and plants may not be exported.

On June 10, 1998 China promulgated Regulations on the Administration of the export of dual-use(military and civil) Nuclear Facilities and related technologies of the People's Republic of China. The export licenses required under these regulations are issued by MOFTEC.

Prohibited Imports. The following items are prohibited from entering China: counterfeit currencies and counterfeit negotiable securities; printed matter, magnetic media, films, or photographs which are deemed to be detrimental to the political, economic, cultural and moral interests of China; lethal poisons; illicit drugs; disease-carrying animals and plants; foods, medicines, and other articles coming from disease-stricken areas; old/used garments; and RMB. Food items containing certain food colorings and additives deemed harmful to human health by the Ministry of Health are also barred entry.

F. Inspection Standards

Import Commodity Inspection: Chinese law provides that all goods included on a published Inspection List, or subject to inspection pursuant to other laws and regulations, or subject to the terms of the foreign trade contract, must be inspected prior to importation, sale, or use in China. In addition, safety license and other regulations also apply to importation of medicines, foodstuffs, animal and plant products, and mechanical and electronic products.

Chinese buyers or their purchase agents must register for inspection at the port of arrival. The scope of inspection undertaken by local commodity-inspection authorities entails product quality, technical specifications, quantity, weight, packaging, and safety requirements. The standard of inspection is based upon compulsory Chinese national standards, domestic trade standards or, in their absence, the standards stipulated in the purchase or sale contract.

To meet the arrival inspection requirements, it is advisable that Chinese quality certification be obtained from Chinese authorities prior to shipment of goods to China. The quality
and safety certification process appears to require extensive investigation and may be time-consuming. If your products are required to have this certification, contact the State Administration for Entry & Exit Quarantine and Inspection (SAIQ) at 15 Fangcaodi Xijie, Chaoyang District, Beijing 100020 China; tel: (86-10) 6599-4328 or fax: (86-10) 6599-4306.

SAIQ has established a non government office in the United States to facilitate U.S. exporters in the quality certification and marking process, but this is NOT the address to mail a product certification application.

CCIC (China National Import & Export Commodities Inspection Corporation) North American Inc.

Mailing address: Office Address:
917 Sago Palm 1509 W. Cameron AV. Suite 252
West Covina, CA 97190 West Covina, CA 91790
Tel: 626-813-0011
Fax: 626-813-9181

The National Institute of Standards (NIST) did a workshop on Chinese standards in Beijing March 10-12, 1999. The summary of the workshop results can be viewed at the following NIST website;
http://ts.nist.gov/ts/htdocs/210/216/chinafile/brochure.htm.

A point-of-contact in the USDOC on standards is Ms. Lauren Brosler-Saadat at Tel: 202-482-4431 Fax: 202-482-0975.The point-of-contact at FCS-Beijing is Mark Bayuk at Tel: 86-10-6532-6924 or Fax:86-10-6532-3297.

Security Software Certification: Hardware and software used for data security or encryption require special security software certification before they can be sold in China. This is separate from the SACI quality assurance procedures. FCS has done a International Marketing Insight(IMI) on this matter and it was published in June of 1999 under the title "Security Software Certification"
The office that does this certification is the:

China National Information Security Testing Evaluation and Certification Center (CNISTEC).
No. 36 Xinjiang Gongmen
Hai Dian District, Beijing 100091
Tel: 86-10-6879-6484 Fax: 86-10-6288-0411

Quarantine Inspection: A 1992 quarantine law provides the legal basis for the quarantine inspection of animals, plants and their products, as well as the containers and packaging materials used for transporting these items. The law also establishes the Chinese Animal and Plant Quarantine Administration (CAPQ), since replaced by the State Administration for Entry and Exit Quarantine and Inspection Bureau (SAIQ), which is under the administrative control of China Customs. SAIQ has the responsibility to carry out import and export inspections.

The importer must submit an application in advance and the products must undergo the required inspections upon arrival in China. Contracts must specify the requirements for inspection under China's law, as well as indicate the necessary quarantine certificates to be issued by the appropriate agency in the exporting country. Catalogues of the Class A and B infectious or parasitic diseases of animals and the catalogues of the diseases, pests and weeds dangerous to plants are determined and announced by the SAIQ. The U.S. Department of Agriculture maintains an office of the Animal and Plant Health Inspection Service (APHIS) in Beijing. The office is able to answer questions about Chinese quarantine laws and is the equivalent of the SAIQ. Contact Dale Maki, Tel: 86-10-6505-4575, Fax: 86-10-6505-4574. The APHIS website is http://wwww.aphis.usda.gov.

G. Labeling and Marking Requirements

Under Chinese law governing safety and product-quality standards, certain imported commodities must be inspected and certified to be in compliance with compulsory national, domestic trade or contractually stipulated standards (see Section I). Once a quality certificate for a product is issued, a safety label can be affixed.

All products sold in China must be marked -- in the Chinese language -- with the relevant information. The National Health and Quarantine Administration requires imported (but not domestic) food items such as candy, wine, nuts, canned food and cheese to be affixed with a laser sticker evidencing the product's safety. Importers are charged US$ five to seven cents per sticker, and the stickers must be affixed under State Administration.

Food Labeling Law: As of October 1, 1995 a national Chinese regulation was put into effect for the implementation of food label standards. This Chinese law requires that all packaged food products (except bulk) must have Chinese labels clearly stating the type of food, brand name, trademark, manufacturer's name and address, country of origin, ingredients, date of production and sell-by date. This law applies to imported as well as locally-packaged products. English-language versions of the new regulations and other rules about food additives, such as Food Laws, Labeling Requirements, Food Additives Regulations, Pesticides and other Contaminants, Organic "Green" Food Standards, and Copyright/Trademark, will be obtained in the Food & Agricultural Import Regulations & Standards Report (FAIRS). This report can be accessed by going to http://www.fas.usda.gov, report number CH9010. Please contact Audrey Talley, USDA/Foreign Agricultural Service, tel: (202) 720-9408; fax: (202) 690-0677.

H. Special Import Provisions

Firms seeking the following exemptions should consult with Customs authorities for information on the procedures and to obtain copies of appropriate forms.
Representative Offices: Resident offices must submit a written application to Customs if they intend to import any personal effects or vehicles. Approval by Customs waives any relevant import license requirements and allows the office to import the equipment in reasonable amounts for office-use only.

Foreign-Invested Enterprises (FIEs): China permits four types of FIEs -- equity joint ventures (EJVs), cooperative (contractual) joint ventures (CJVs), wholly foreign-owned enterprises (WFOEs), and foreign-invested joint stock companies. A complicated set of rules exempts selected FIEs from some Customs duties and VAT. Companies should consult the relevant regulations.

Processing Materials and Parts: Raw materials, components, spare parts, auxiliary materials, and packaging materials imported by FIEs for the production of goods which will be exported are exempt from customs duty and VAT. The materials and components must be processed into products and exported within one year from the date of importation. Bonded warehouses may be established within the FIE and are subject to supervision by Customs.

Warehouses: Goods that are allowed to be stored at a bonded warehouse, for up to one or two years, are limited to:
(a) materials and components to be used for domestic processing subject to re-exportation (b)goods imported under special Customs approval on terms of suspending the payment of import duties and VAT (c)goods in transit (d)spare parts for free maintenance of foreign products within the period of warranty.

At the end of the two-year period, the goods must be imported for processing and re-exported, licensed for import, or disposed of by Customs. Customs duties and VAT may be assessed depending upon the degree of processing done in China. Goods imported under normal import contracts are not allowed to be stored in bonded warehouses.

For more information on agricultural trade policy, go to http://www.fas.usda.gov to access the 1999 China Annual Trade Policy Report.

I. Prohibited and Restricted Imports

The following items are prohibited from entering China: arms, ammunition, and explosives of all kinds; counterfeit currencies and counterfeit negotiable securities; printed matter, magnetic media, films, or photographs which are deemed to be detrimental to the political, economic, cultural and moral interests of China; lethal poisons; illicit drugs; disease-carrying animals and plants; foods, medicines, and other articles coming from disease-stricken areas; old/used garments; and RMB. Food items containing certain food colorings and additives deemed harmful to human health by the Ministry of Health are also barred entry.

In addition, new rules went into effect in June 1999 which further restrict or prohibit the importation of certain commodities related to the processing trade. Jointly issued by MOFTEC and the State Economic and Trade Commission, the "Catalogue of Commodities Which are Restricted or Prohibited from Importing for Use in the Processing Trade" is designed to shift the direction of china's processing trade toward handling commodities with higher technological content and greater value-added potential.

The catalogue identifies the following "prohibited commodities:" used garments; used publications with licentious content; radioactive or harmful industrial waste; junk cars, used automobiles or components; seeds, seedlings, fertilizers, feed, additives, or antibiotics used in the cultivation or breeding of any export commodity. The catalogue lists seven general types of "restricted commodities:" raw materials for plastics, polyester sections, raw materials for chemical fibers, cotton, cotton yarn, cotton cloth, and some steel products. U.S. firms should contact the China General Administration of Customs for guidance regarding the import of any of these types of products.