Customs Increase Emphasis on Dutiable Value, HS Classification and Country of Origin

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Oct. 23 – The General Administration of Customs (GAC) has released GAC Order [2009] No. 49, that aims to strengthen customs enforcement by focusing on the dutiable value of imported goods, the harmonized system (HS) classification of imported and exported goods, and processing trade beginning October 1.

The GAC’s revenue target for the year is higher despite decreasing imports and exports that has subsequently slowed dutiable income. The GAC is now under pressure to implement a new declaration to ease the enforcement of customs rules and ensure that the correct amount of revenue is collected.

The GAC order will enable customs to request supplementary declarations in relation to the dutiable value, HS classification and country of origin of imported and exported goods.

These areas are key factors for determining duty and value-added tax liabilities:

Compliance Requirements
A supplementary declaration can be completed in response to a written request made by Customs, or voluntarily by the declarant of the imported / exported goods. They are also non-specific; supplementary declarations may be made in respect of all product categories.

Where customs requests a supplementary declaration, the declarant should respond within 5 working days, or customs may independently assess the dutiable value, HS classification and country of origin. Various departments, such as the verification center and field customs may also request a supplementary declaration. Goods can be cleared after this is accepted, however customs may still initiate further validation in respect of the area under question.

The supplementary declaration forms part of the declaration to customs. A declarant is obliged to submit a complete and accurate supplementary declaration. Submission of an inaccurate supplementary declaration violates rules and can result in financial penalties or a delay in the clearance of the goods.

Customs Procedures
Customs are not obliged to provide immediate decisions to supplementary declarations. However, customs should release the goods immediately if they accept the declared information in the original declaration form.

If customs no longer accept the original declaration form, they may re-value the goods or reject the preferential duty rate applied. All Customs departments, including the verification center and field customs, (customs clearance processing) can request a supplementary declaration from the declarant. However, on a case-by-case basis, it may be possible for the declarant to pay a guarantee (cash deposit) to obtain customs clearance and then complete the supplementary declaration in order to speed up clearance times.

The supplementary declaration requires the declarant to provide additional and even sensitive information in order to verify the dutiable value, HS code and country of origin that was stated on the original declaration. Previously, this information would only be requested during a post-importation audit. Now it may be required at import or export of goods.

In addition, unexpected customs clearance delays may be experienced while  the supplementary declaration is being completed. If so, clearance of the goods under cash deposit may be requested. This may reduce the impact of unexpected customs clearance delays.

For advice on customs clearance procedures, VAT and other related tax issues in China email Sabrina Zhang, the national tax partner for Dezan Shira & Associates, at tax@dezshira.com.