China Announces Changes to Valuation Regs, Tariff Rates

China Customs also separately announced changes to tariff levels for 2014 that include reduction in tariff rates on more than 760 products such as piston aircraft engines and cell phone and tablet computer cameras, said Chinese government-sponsored website E-to-China.com (here) and (here). The tariff changes took effect Jan. 1.

Changes to Valuation Regulations Include ‘Circumstances of Sale’ Test

The changes to China’s valuation regulations replace General Administration of Customs Order No. 148 issued in 2006 with two decrees. Order No. 213 contains the new general valuation procedures, while Order No. 211 for the first time splits out valuation procedures for bonded goods that will be sold domestically. The additional detail for bonded goods is meant to address a growing area of business activity in China as manufacturers evolve from pure export factories to also selling domestically, said Ernst & Young.

Major changes to general valuation procedures in Order No. 213 include the addition of a “circumstances of sale” test to determine whether transaction value should be used to appraise related-party sales. Previously, the arm’s length nature of a transaction could only be established through comparison to a test value, which was based on alternate valuation methods, said Baker & McKenzie. By adding the circumstances of sale test, China Customs is bringing itself into line with valuation procedures established under World Trade Organization agreements, it said. The change will give multinationals engaged in related-party distribution in China more ways to prove the acceptability of transaction value, said the firm.

China Customs also changed treatment of international freight and selling commissions in the valuation of imported goods. International transportation costs will now be valued at the price “actually paid or payable,” said Baker & McKenzie. That replaces a scheme where China Customs relies on several methodologies to value transportation costs, such as one percent of the FOB value for truck or railway freight. Meanwhile, commissions borne by the seller and listed separately will no longer be excluded from dutiable value, as was previously the case.

The decree on valuation of domestically-sold bonded goods covers domestic sales from contract and toll manufacturers, free trade zones, other customs special supervision areas, and bonded supervision locations, said Ernst & Young. For the first time, storage, insurance, transportation and other costs incurred in these bonded areas will no longer be added into the dutiable price of the imported goods, which will help import/export businesses to reduce import duty payments, it said.

Lower Tariffs on Phone Cameras, Engines in 2014

China Customs also announced 2014 changes to the Chinese tariff schedule, according to E-to-China. “Provisional” duty rates will be applied to more than 760 goods, resulting in an average 60 percent reduction in duties on piston aircraft engines, cellphone and tablet computer camera modules, native grass products, and audio life detectors, said the website, which is authorized by China Customs and sponsored by the China Customs Brokers Association. Some products are being completely exempted from import duties, including optical fiber preforms and multi-point injection turbo-charging gasoline engines. Export duties will remain unchanged, although temporary export tariffs on chemicals are being lowered “moderately.” New tariff provisions, including for CNC crankshaft grinders, 3D printers, welding robots, crystal, and tourmaline are also being added to the Chinese tariff schedule, it said. The tariff changes took effect Jan. 1.