Announcement of Haikou Customs District P.R. China

([2021] No.2)

The Interim Measures for the Collection and Administration by the Customs of the Taxes on the Domestic Sales of Goods with Added Value from Processing in the Yangpu Bonded Port Area formulated in accordance with the Circular of the General Administration of Customs on Issuing the Interim Measures of the Customs for the Collection and Administration of the Taxes on the Domestic Sales of Goods with Added Value from Processing in the Yangpu Bonded Port Area (Shu Shui Han [2021] No.131) in order to implement the Overall Plan for the Construction of Hainan Free Trade Port and give full play to the pilot role of the Yangpu Bonded Port Area are hereby promulgated.

The Announcement is hereby given.

Haikou Customs District P.R. China

July 13, 2021

Interim Measures for the Collection and Administration by the Customs of the Taxes on the Domestic Sales of Goods with Added Value from Processing in the Yangpu Bonded Port Area

Article 1 The Measures are formulated in accordance with the Customs Law of the People's Republic of China, the Measures of the Customs of the People's Republic of China for Supervision of the Yangpu Bonded Port Area, the Interim Measures of the Customs for the Collection and Administration of the Taxes on the Domestic Sales of Goods with Added Value from Processing in the Yangpu Bonded Port Area (Shu Shui Han [2021] No.131) and other relevant laws, regulations and rules in order to implement the Overall Plan for the Construction of Hainan Free Trade Port, give full play to the pilot role of the Yangpu Bonded Port Area, and regulate the administration over the collection and administration by the customs of the taxes on the domestic sales of goods with added value from processing in the Yangpu Bonded Port Area.

Article 2 Before the whole island of Hainan enters into independent customs operations, if the goods produced by enterprises engaged in encouraged industries that do not contain imported materials and parts or contain imported materials and parts and have the added value from processing in the Yangpu Bonded Port Area of more than 30% (inclusive, the same below) enter other domestic regions outside the bonded area through the Yangpu Bonded Port Area, import tariffs will be exempt, while import value-added taxes and consumption taxes will be levied in accordance with provisions (hereinafter referred to as the "policy for exemption of tariffs on added value from processing"), subject to the Measures.

Article 3 To enjoy the policy for exemption of tariffs on added value from processing, enterprises engaged in encouraged industries shall meet the following conditions:

1. registering in the Yangpu Bonded Port Area and having independent legal personality;

2. taking the industrial items specified in the catalog of encouraged industries of Hainan Free Trade Port as main business, with the main business income accounting for more than 60% (inclusive) of the total enterprise income;

3. filing with the Yangpu Economic Development Zone Administrative Committee; and

4. submitting production data of enterprises to the "Yangpu Public Information Service Platform" (hereinafter referred to as the "Yangpu Public Service Platform") as per the methods and data standards approved by the customs; information and data submitted should be authentic, accurate, effective and traceable, and meet the requirements of the customs on tax collection and administration and follow-up regulation.

Article 4 The Yangpu Economic Development Zone Administrative Committee shall file on record enterprises engaged in encouraged industries in the Yangpu Bonded Port Area and implement the management system of "one account for one enterprise". The filing information shall include enterprise profile, specific items to which its main business falls under the catalog of encouraged industries, product names and descriptions (such as overview of main materials and parts, and processing technology). The filing information shall be pushed to the customs through the Yangpu Public Service Platform of China (Hainan) International Trade Single Window.

Article 5 For domestically sold goods that contain imported materials and parts and enjoy the policy for exemption of tariffs on added value from processing, the added value from processing shall be more than 30% (inclusive). The specific calculation formula (hereinafter referred to as the "formula") is as follows:

[(price of goods sold outside the bonded area but within the territory of China – Σ price of materials and parts imported from abroad – Σ price of materials and parts purchased from outside the bonded area but within the territory of China) / (Σ price of materials and parts imported from abroad + Σ price of materials and parts purchased from outside the bonded area but within the territory of China)] × 100% ≥ 30%

The relevant prices in the calculation formula shall be determined in accordance with the Measures for Assessing and Determining the Duty-paid Value of Bonded Goods Sold in the Domestic Market (Order of the General Administration of Customs No.211) and the Measures for Assessing and Determining the Duty-paid Value of Imported and Exported Goods (Order of the General Administration of Customs No.213). Specifically:

1. The price of goods sold outside the bonded area but within the territory of China shall be determined based on the transaction price when the filed enterprise sells the goods obtained from manufacturing and processing that contain imported materials and parts outside the bonded area but within the territory of China;

2. The price of materials and parts imported from abroad shall be determined based on the transaction price of such materials and parts imported by the filed enterprise from abroad, including expenses for transportation of such materials and parts to the domestic destination before unloading and related expenses and insurance premiums;

3. The price of materials and parts purchased from outside the bonded area but within the territory of China shall be determined based on the transaction price of such materials and parts purchased by the filed enterprise from outside the bonded area but within the territory of China, including expenses for transportation of such materials and parts to the Yangpu Bonded Port Area and related expenses and insurance premiums;

4. The Measures shall apply to the domestic sales of goods with total added value from transfer for deep processing in the Yangpu Bonded Port Area that is more than 30% (inclusive).

In the calculation formula, the price of materials and parts imported from abroad is the sum of prices of materials and parts imported from abroad that are invested by processing enterprises in the bonded area; the price of materials and parts purchased from outside the bonded area but within the territory of China is the sum of prices of materials and parts purchased from outside the bonded area but within the territory of China that are invested by processing enterprises in the bonded area.

The processing enterprises in the bonded area shall be the enterprises engaged in encouraged industries in the Yangpu Bonded Port Area that are on file with the Yangpu Economic Development Zone Administrative Committee.

Article 6 The domestic sales of goods that contain imported materials and parts and have the added value from processing more than 30% (inclusive) outside the area will not be exempt from import tariffs if:

1. materials and parts imported from abroad are commodities subject to tariff quota management;

2. the goods only undergo one or more kinds of micro processing or treatment such as blending, change of packaging, splitting, combined packaging, sharpening, simple grinding or simple cutting; or

3. other circumstances under which import tariffs shall be levied in accordance with the relevant provisions occur.

Article 7 The goods that do not contain imported materials and parts and are sold to other domestic regions outside the bonded area through the Yangpu Bonded Port Area after processing will enjoy the policy for exemption of tariffs on added value from processing without meeting the condition that the added value from processing is more than 30% (inclusive).

Article 8 When the relevant finished products that meet the conditions under the policy for exemption of tariffs on added value from processing are sold domestically, the enterprises in the bonded area shall initiate a filing application for exemption of import tariffs on domestic sales of goods with added value from processing to the "Auxiliary System for Customs Regulation" of the Public Information Service Platform of the Yangpu Bonded Port Area (hereinafter referred to as the "Auxiliary System for Customs Regulation") via the module of "Special Application for Hainan" of the China (Hainan) International Trade Single Window.

If an enterprise applies for exemption of import tariffs on goods with added value from processing, it shall accurately calculate and truthfully declare the price of goods to be sold domestically outside the bonded area, and the price of imported materials and parts and price of materials and parts purchased from outside the bonded area but within the territory of China that are calculated at the proportion of unit consumption.

Article 9 After receiving filing applications, the Auxiliary System for Customs Regulation shall examine the data submitted by enterprises with the set logic to determine whether the conditions for added value from processing are met. For an eligible filing application, the system will automatically generate the confirmation number for exemption of import tariffs on domestic sales of related goods with added value from processing (hereinafter referred to as the "confirmation number"), and feed back the filing number to the enterprise terminal of the China (Hainan) International Trade Single Window; for an ineligible filing application, the system will return the filing application to the enterprise terminal of the China (Hainan) International Trade Single Window, together with the determination receipt.

For the goods with added value from processing under different contracts and batches of a filed enterprise that have no changes in the price of goods sold outside the bonded area but within the territory of China, price of materials and parts imported from abroad, and price of materials and parts purchased from outside the bonded area but within the territory of China, the confirmation number can be reused; if any one of the above three elements changes, the confirmation number shall be reapplied for.

Article 10 If the goods that contain imported materials and parts and have added value from processing more than 30% (inclusive) are sold domestically outside the bonded area, the domestic importing enterprise outside the bonded area shall, with the confirmation number, go through the declaration procedures for the import from the bonded area of goods for domestic sales through the China (Hainan) International Trade Single Window as per the actual inspection state of such goods; the import declaration form shall be filled out in accordance with the following requirements

The column "customs at the place of declaration" is filled in with "Yangpu Port Customs (Code 6408)";

The column "import customs" is filled in with "Yangpu Port Customs (Code 6408)";

The column "related filling number" is filled in with the confirmation number for exemption of import tariffs on domestic sales of goods with added value from processing. The rule on confirmation numbering is as follows: A + 4-digit customs district code + last two digits of year + 5-digit serial number (including numbers and letters);

The column "nature of exemption" is filled in with 496 ("goods with added value from processing that contain imported materials and parts");

The column "regulation method" is filled in with "general trade" (code: 0110);

The column "tax reduction and exemption method" is filled in with "special case" (code: 4);

The filling specifications and import regulation requirements for other items shall be subject to the current relevant provisions.

Article 11 If the goods that contain imported materials and parts but have added value from processing less than 30% are sold domestically outside the bonded area, the current policies for selective imposition of tariffs on domestic sales in comprehensive bonded areas apply; the enterprise may apply for imposition of tariffs based on the corresponding imported materials and parts or the actual inspection status; and import value-added taxes and consumption taxes will be levied in accordance with provisions. If the imposition of tariffs based on imported materials and parts is selected, the interest on deferred tariff payment shall be levied together; if the corresponding imported materials and parts comply with the provisions on origin of the General Administration of Customs, the application of agreed tax rate or preferential tax rate may be applied for. The relevant declaration requirements and regulatory requirements shall be subject to the current provisions.

Article 12 If the goods that are produced in the Yangpu Bonded Port Area by the enterprise engaged in encouraged industries that is on file with the Yangpu Economic Development Zone Administrative Committee and do not contain imported materials and parts are sold domestically outside the bonded area:

If the enterprise declares the domestic sales outside the bonded area as per the actual inspection state, import tariffs will be exempt, but import value-added taxes and consumption taxes will be levied in accordance with the provisions. The domestic enterprise outside the bonded area shall go through the declaration procedures for import from the area of goods for domestic sales through the China (Hainan) International Trade Single Window; the import declaration form shall be filled in as per the following requirements:

The column "customs at the place of declaration" is filled in with "Yangpu Port Customs (Code 6408)";

The column "import customs" is filled in with "Yangpu Port Customs (Code 6408)";

The column "related filling number" is filled in with the confirmation number for exemption of import tariffs on domestic sales of goods with added value from processing. The rule on confirmation numbering is as follows: B + 4-digit customs district code + last two digits of year + 5-digit serial number (including numbers and letters);

The column "nature of exemption" is filled in with 497 ("goods with added value from processing that do not contain imported materials and parts");

The column "regulation method" is filled in with "general trade" (code: 0110);

The column "tax reduction and exemption method" is filled in with "special case" (code: 4).

The filling specifications and import regulation requirements for other items shall be subject to the current relevant provisions.

Article 13 If the import of domestically sold goods involves other matters related to tax collection and administration, the current provisions shall apply.

Article 14 Enterprises shall properly keep the data on production and materials and parts consumption, and submit the same data to the Yangpu Public Service Platform in a complete and true manner. The customs shall, based on risk analysis, inspect and examine the ratio of added value from processing, price, classification, origin and other tax-related elements declared by enterprises.

Article 15 Any act that constitutes a smuggling act or violates customs regulation provisions shall be punished by the customs in accordance with the Customs Law of the People's Republic of China, the Law of the People's Republic of China on Administrative Penalties and the Implementing Regulations of the Customs of the People's Republic of China on Administrative Penalties; if a crime is constituted, criminal liability shall be investigated in accordance with the law.

Article 16 The Measures shall be interpreted by the Haikou Customs District P.R. China.

Article 17 The Measures will come into force simultaneously with the launch of the Yangpu Public Information Service Platform and the information system of the Haikou Customs District P.R. China, and be abolished on December 31, 2024.