(All information in the documents are authentic in Chinese and their English versions are provided for reference only. In case of any discrepancy, the Chinese versions shall prevail.)

Announcement on Issuing the Implementing Measures of the Customs for the "Zero Tariff" Policy for the Production Equipment for Self-use Purposes in Hainan Free Trade Port (for Trial Implementation) 

Announcement of General Administration of Customs [2021] No.23

The Announcement is hereby given that, in order to implement the Overall Plan for the Construction of Hainan Free Trade Port, the Implementing Measures of the Customs for the "Zero Tariff" Policy for the Production Equipment for Self-use Purposes in Hainan Free Trade Port (for Trial Implementation) (see attached) are hereby formulated and issued according to the Circular of the Ministry of Finance, the General Administration of Customs and the State Taxation Administration on "Zero Tariff" Policy for the Production Equipment for Self-use Purposes in Hainan Free Trade Port (Cai Guan Shui [2021] No.7).

Appendix: The Implementing Measures of the Customs for the "Zero Tariff" Policy for the Production Equipment for Self-use Purposes in Hainan Free Trade Port (for Trial Implementation) 

General Administration of Customs

March 4, 2021

Appendix

Implementing Measures of the Customs for the "Zero Tariff" Policy for the Production Equipment for Self-use Purposes in Hainan Free Trade Port(for Trial Implementation)

Article 1 In order to implement the Overall Plan for the Construction of Hainan Free Trade Port, the Implementing Measures of the Customs for the "Zero Tariff" Policy for the Production Equipment for Self-use Purposes in the Hainan Free Trade Port (for Trial Implementation) (the “Measures”) are hereby formulated and issued according to the related laws, administrative regulations and the Circular of the Ministry of Finance, the General Administration of Customs and the State Taxation Administration on "Zero-Tariff" Policy of Hainan Free Trade Port for Production Equipment for Own Use (Cai Guan Shui [2021] No.7, the “Circular”).

Article 2 Before the independent customs operations throughout Hainan Island, the production equipment imported for own use by enterprises registered in Hainan Free Trade Port and having independent legal personality is exempt from duties, import value-added tax and consumption tax, except for the commodities that are not exempt from taxes as explicitly prescribed in laws, regulations and relevant provisions or whose import is prohibited by national provisions, as well as the equipment listed in the appendix to the Circular. Production equipment for own use subject to zero tax tariff (the “Production Equipment”) will be included into a negative list management, which will dynamically be adjusted by the Ministry of Finance, the General Administration of Customs and the State Taxation Administration in concert with other related departments.

For the purpose of the Circular, the Production Equipment includes commodities excluding spare parts, accessories and components of household appliances and equipment in Chapter 84, 85, and 90 of the Import and Export Tariffs of the People's Republic of China, with its scope to be made clear by the Ministry of Finance and the General Administration of Customs in concert with other related departments.

Article 3 The list of enterprises eligible for the policy and the list of enterprises in the industries covered by the appendix to the Circular will be notified to Haikou Customs District through the "single window" of international trade after being determined by the competent departments of development and reform, industry and information technology of Hainan Province in conjunction with the Department of Finance of Hainan Province, Haikou Customs and the Hainan Provincial Tax Service, State Taxation Administration. Before transmitting the list of enterprises through the network, the competent departments of Hainan Province shall inform Haikou Customs District in writing of the above-mentioned list of enterprises.

Article 4 The Production Equipment shall be governed by the principle of "one enterprise, one account".

Enterprises eligible for the policy (the "Enterprises") in the first declaration of imports of the Production Equipment shall be registered with the Customs in accordance with the relevant provisions of the Administrative Provisions of the People's Republic of China on Customs Declaration Unit Registration and perfect account information in the "Hainan zero tariff imports of production equipment and vehicle platform" system in the International trade "single window".

Article 5 When declaring the import of "zero tariff" production equipment for self-use, Enterprises shall fill in name and code of subordinate customs or business site of the Customs district (excluding "Sansha Customs District"), "zero tariff production equipment for self-use" (code: 491) in the "nature of exemption" or "zero tariff production equipment for self-use (payment of import taxes)" (code: 493) if Enterprises voluntarily pay import VAT and consumption tax, in "general trade" (0110) in "supervision mode", in “exemption upon levy” (code: 5) in the levy, exemption and reduction nature and in name of the Enterprises in the “Users”.

Article 6 Unless otherwise provided by the state, if the State has restrictions on the import of the relevant production equipment, the Enterprises shall handle the import and other related customs procedures with the relevant license documents in accordance with the provisions.

Article 7 The Production Equipment can only be used by the Enterprises in line with the policy in Hainan FTP for their own use, subject to customs supervision.

Years of supervision are: 3 years.

The years of supervision are calculated from the date of release of goods.

Customs supervision will be automatically released from the expiration of the years of supervision.

Unless otherwise specified by the General Administration of Customs, within the years of supervision, the Enterprises shall keep and use the Production Equipment in accordance with the policy and customs regulations.

Article 8 Within the years of supervision, the Enterprises shall report the use of the Production Equipment in the previous year by June 30 each year (included) to their local customs (the "Competent Customs").

Article 9 Within the years of supervision, if the Enterprises intend to transfer their Production Equipment due to bankruptcy and other reasons, they shall apply to the Competent Customs via "Hainan zero-tariff production equipment and vehicle import platform" in advance and may handle the transfer procedures with the consent of the Customs.

If it will be transferred to a subject not subject to the policy, an application shall be made to the Competent Customs via "Hainan zero-tariff production equipment and vehicle import platform" before transfer and the relevant import taxes shall be paid as required. The tax-paid price after supplement is based on the tax-paid price of the Production Equipment upon import and depreciated in proportion to the time the goods have been imported and the years of supervision, with the calculation formula being listed as follows:

Tax-paid price after supplement= tax-paid price of the Production Equipment upon import * [ 1 – the time the Production Equipment has been imported / (years of supervision * 12) ]

The time the Production Equipment has been imported is calculated on a monthly basis from the date of release of goods. It will be one month if less than 1 month but more than 15 days and ignored if not more than 15 days.

Since the date of payment of taxes and handling of the customs procedures, the Production Equipment will be released from customs supervision.

Article 10 In the years of supervision, if the Enterprises need to mortgage the Production Equipment to domestic banks or non-bank financial institutions for loan, they shall apply to the Competent Customs via "Hainan zero-tariff production equipment and vehicle import platform" in advance and provide tax-based guarantee accepted by the Customs and may handle the loan mortgage with the consent of the Customs.

Enterprises may not use the Production Equipment to handle loan mortgage with citizens, legal persons or other unincorporated organizations other than banks or non-bank financial institutions.

Article 11 Within the years of supervision, if the Enterprises need to return the Production Equipment of the country or export it, shall apply to the Competent Customs via "Hainan zero-tariff production equipment and vehicle import platform" in advance and may handle the related procedures with the consent of the Customs.

The Production Equipment will be released from customs supervision since the date of return or export, and the Customs does not levy additional taxes on the Production Equipment to be returned or exported.

Article 12 Except in special circumstances, when the Enterprises apply for transfer, loan mortgage and other procedures with respect to the Production Equipment, the Competent Customs shall make the decision whether to agree within 10 working days from the acceptance date of the application.

Article 13 The Customs will conduct audit (verification) of the related enterprises that import and use the Production Equipment in accordance with the Customs Law of the People's Republic of China and the Regulations of the People's Republic of China on Customs Audit and other relevant provisions.

Article 14 Enterprises that are in violation of the relevant provisions of the Circular or use the Production Equipment for other purposes shall pay the relevant import taxes. The tax-paid price after supplement is based on the tax-paid price of the Production Equipment upon import and is converted according to the ratio of the time required to pay the tax to the number of years of supervision, which is calculated as follows:

Tax-paid price after supplement= tax-paid price of the Production Equipment upon import * [time required to pay tax / (years of supervision * 365)]

In the above formula, the time required to pay taxes is the actual time when the Enterprise violates the relevant provisions of the Circular and uses the Production Equipment for other uses and calculated on a daily basis (it will be one day if the actual use is less than or more than 8 hours per day).

Article 15 Any violation of the Measures will be handled by the Customs according to the Customs Law of the People's Republic of China and the Implementing Rules of the People's Republic of China on Customs Administrative Punishment if the case constitutes smuggling or violation of customs supervision; if it constitutes a crime, criminal liabilities will be pursued.

Article 16 The Measures shall be interpreted by the General Administration of Customs.

Article 17 The Measures shall come into force as of the date of release.