New Guidelines on Promoting the Development of Special Customs Supervision Areas

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1 New Guidelines on Promoting the Development of Special Customs Supervision Areas China Customs and Trade News

2 In late October 2012, the State Council has promulgated the Guidelines of the State Council on Promoting the Development in Special Customs Supervision Areas (hereinafter referred to as Guofa [2012] No.58 ), which sets out core trends in the development of special customs supervision areas in China in the future. PwC 1

Background Special Customs Supervision Areas in China Catering to the needs of Reform & Opening-up since the 1990s, China Customs has designed and established various types of special customs

Zone (IBZ). Different customs supervision areas were initially designed with emphasis on certain operations, e.g. EPZ focused on exportoriented processing, BLP focused on development of logistics, etc.

3 Background Special Customs Supervision Areas in China Catering to the needs of Reform & Opening-up since the 1990s, China Customs has designed and established various types of special customs supervision areas in China, namely the Free Trade Zone (FTZ), Export Processing Zone (EPZ), Bonded Logistics Park (BLP), Bonded Logistics Centre (BLC), Bonded Port Area (BPA) and Integrated Bonded Zone (IBZ). Different customs supervision areas were initially designed with emphasis on certain operations, e.g. EPZ focused on exportoriented processing, BLP focused on development of logistics, etc. PwC Survey: Usage of Special Customs Supervision Areas Last year, PwC conducted a survey of over 200 customs and trade specialists from various industrial sectors. With regard to the usage of special customs supervision areas, we have summarised the findings as follows: Question: What type of special customs supervision areas are you using? Bonded Logistics Park (BLP) Free Trade Zone (FTZ) Integrated Bonded Zone (IBZ) Export Processing Zone (EPZ) Bonded Logistics Centre (BLC) Bonded Port Area(BPA) None I don t know Most respondents are using BLP, FTZ and IBZ in China for bonded business in China. Regardless, usage of special customs supervision areas is on an increase and we expect this trend to continue. Due to the large number of different types of special customs supervision areas in China, we expect to see a convergence in the future to reduce the administrative burden and streamline operations. PwC 2

4 Salient Points of Guofa [2012] No.58 The key guidelines promulgated in the regulation mainly include the following: Integration of Existing Types of Special Customs Supervision Areas Optimize Policies and Functions Enhance Supervision and Control The existing types of special customs supervision areas may gradually be integrated / upgraded into IBZ, considered as the highest level of customs supervision area currently. Unify the name of newly established special customs supervision areas as 'IBZ'. To optimize bonded functions, standardize taxation policies and enhance supervision on goods transfer. Explore new business activities (e.g. to encourage high-tech & high value-added repairing business) Diversified development in bonded manufacturing, logistics and service. To make full use of information technology and management system, and to strengthen goods supervision. Tighten verification of enterprise registration and avoid attracting investments with blindness. PwC 3

PwC Observations The promulgation of the guidelines is expected to deliver a positive impact on business planning and daily operations for enterprises.

5 PwC Observations The promulgation of the guidelines is expected to deliver a positive impact on business planning and daily operations for enterprises. Upon the functional optimization and upgrading, some currently restricted operations due to the functional limitation of certain special customs supervision areas may become permitted in the future; Variances that exist today may be mitigated in the future by unifying local customs formalities in different special customs supervision areas. This may help enterprises to spend less effort to deal with the complicated local practices and avoid confusion. Certain industrial sectors (e.g. high-tech business, high value-added repairing business, bonded services, bonded logistics, etc.) are deemed as encouraged business to be developed within special customs supervision areas, which may enjoy convenient customs clearance and other incentives for daily operations. Detailed incentives/policies may be released separately in the years to come. Enterprises outside special customs supervision areas may also benefit from the upgrading and unifying the tax treatment, e.g. export VAT refund. Meanwhile, the upgrading of special customs supervision areas could also be a major consideration in the business planning for new entity establishment. Under the above trends in the development of special customs supervision areas in China, customs supervision areas may become more friendly to enterprises, supporting supply-chain optimization, mitigation of tax costs, etc. PwC 4

6 Summary Guofa [2012] No.58 set out the basic principle for the development trends of special customs supervision areas in China. It is foreseeable that the current administration measures on various special customs supervision areas are likely to be modified in the days to come. In particular, per our insights with China Customs, to cope with the guidelines set, a new regulation is to be released to supercede the prevailing administrative regulation on IBZ/BPA. It is expected that more specific rules and measures will be included in the new regulation. PwC 5

Contacts For further assistance about PwC s customs and international trade services please contact: Colbert Lam Partner +852 2289 3323 colbert.ky.lam@hk.pwc.

7 Contacts For further assistance about PwC s customs and international trade services please contact: Colbert Lam Partner colbert.ky.lam@hk.pwc.com Damon Paling Partner +86 (21) damon.ross.paling@cn.pwc.com Susan Ju Partner +86 (10) susan.ju@cn.pwc.com Min an Qian Director +86 (21) minan.qian@cn.pwc.com For more information, please also visit: PwC Customs & International Trade Practice Customs and international trade in China is complex. However, a planned and structured approach with the right resources assigned results in cost savings, higher levels of compliance and fewer unwanted surprises during an audit. PwC specialists within our Greater China customs and international trade practice provide a wide range of advice and services related to creating value, ensuring compliance, and managing risk in relation to the movement of goods into and out of China. PwC 6

8 This publication has been prepared for general guidance on matters of interest only, and does not constitute professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this publication, and, to the extent permitted by law, PwC Worldtrade Management Services (Shanghai) Co., Ltd, its members, employees and agents do not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it PwC Worldtrade Management Services (Shanghai) Co., Ltd. All rights reserved. In this document, PwC refers to PwC Worldtrade Management Services (Shanghai) Co., Ltd. Which is a member firm of PricewaterhouseCoopers International Limited ( 普华永道国际有限公司 ), each member firm of which is a separate legal entity.

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