Summary

The new rules set out the temporary exemption scheme to expand the scope of eligible goods for temporary import tax exemption purposes and affirm exemption of extra duties on US origin goods. Imports for anti-COVID-19 purposes can obtain import tax exemptions. However, the temporary exemptions are only available to eligible imports from January 1, 2020 through March 31, 2020 so that foreign suppliers and importers in China must act quickly. Please note that goods exempted from import taxes will be under customs supervision for designated post-import usages, violation of which usages will trigger customs investigation and legal penalties.

A new temporary exemption scheme was made available for eligible imports from January 1, 2020 through March 31, 2020 according to the following rules issued on February 1, 2020:

(a) The Notice of China Tarif Schedule Commission (No. 6, 2020) (“TSC Notice”), which clarifies exemption of extra duties on US origin goods if falling under the temporary exemption scheme;

(b) The Announcement jointly by the Ministry of Finance (No. 6, 2020), the General Administration of Customs and State Administration of Tax (“MOF Announcement”), specifying the measures of temporary exemption of import taxes for imports to tackle COVID-19.

The main contents of these two rules are summarized as follows:

I. Eligible goods for temporary exemptions expanded

The new eligible goods were not covered by existing Interim Measures for the Exemption of Import Duties on Charitable Donations Goods (Customs Administration Announcement No. 102 of 2015) ("Customs Rules for Donation”). The new eligible goods include (a) reagent; (b) disinfection products; (c) protective products; (d) ambulances; (e) epidemic control vehicles; (f) disinfection vehicles and (g) emergency command vehicles.

The eligible goods also include those covered by the existing Customs Rules for Donation, which include medical drugs, necessaries, food and drinking water and so forth.

The new and existing eligible imported goods for prevention or control of COVID-19 are exempted from import duties, import value added tax and consumption tax.

II. Types of tax exempted

(a) For import sale transactions for tackling COVID-19, only import tariffs are exempted;

(b) For anti-COVID-19 donation imports, import tariffs, VAT and consumption taxes are all exempted;

(c) For the above imports, the extra tariffs imposed on US origin are also exempted.

III. Imports for the purpose of tackling COVID-19

Under the existing Customs Rules for Donation, import tax exemption only applies where the import itself is a donation with the foreign supplier as the donator. Under the MOF Announcement, import sale transactions with a price payment element can also be temporarily exempted from import tariff if the imported goods are used for tackling COVID-19 under the following two scenarios:

(a) Direct post-import donation by importing entities and individuals in China. However, the recipient of such donation must be the officially listed charity organization or the provincial civil administrations or their designated entities;

(b) Imports through agents designated by the health administrations.

Import taxes if paid for the above two scenarios from January 1, 2020 can be refunded if the paid taxes are not used to offset the output VAT on the part of the importer. The claim for refund must be made to the customs before September 30, 2020.

IV.  Customs clearance convenience

For the aforesaid imports, Chinese customs houses have designated the dedicated task desks and green channels and in an urgent case the imported goods including medical supplies can be released in the first place and clearance and other formalities can be processed thereafter.

V. Conclusion

The foreign suppliers can seek this temporary timeframe to contact the official charities, provincial civil administrations or health administrations for potential duty-free import sales. Of course, direct donation imports of the eligible goods will be also exempted from import taxes.