Explanation of People’s Republic of China (PRC) Customs Law (Draft)

Chairman, Vice-Chairmen, Secretary-General and members:

　　Entrusted by the State Council, I am now explaining the People’s Republic of China (PRC) Customs Law (Draft) (hereinafter referred to as the draft).

　　The CPC Central Committee and the State Council attached great importance to tariff work. General Secretary of the Supreme Leader pointed out in the party’s Report to the 20th CPC National Congress that it is necessary to promote high-level opening to the outside world and steadily expand institutional opening such as rules, regulations, management and standards; Emphasize the need to further reduce tariffs and institutional costs and continue to create a market-oriented, rule-of-law and international business environment. Premier Li Qiang gave instructions. Ding Xuexiang, He Lifeng and other leading comrades put forward work requirements.

　　Tariff is a kind of tax levied by the customs in the import and export process, which takes import and export goods and imported articles as the tax targets. Tariff collection is related to national sovereignty and interests. It is not only an important source of fiscal revenue, but also an important means to implement macro-control and trade and industrial policies. It also plays an important role in serving the overall situation of diplomacy. Since the reform and opening up, the construction of China’s tariff legal system has been continuously strengthened and improved. In 1985, the State Council issued the Regulations on Import and Export Tariffs of People’s Republic of China (PRC) and the Customs Import and Export Tariff of the People’s Republic of China. In 2003, according to the actual needs of further adjusting and perfecting the tariff system after China’s accession to the World Trade Organization, the State Council re-enacted the current Regulations on Import and Export Tariffs of People’s Republic of China (PRC) (hereinafter referred to as the Regulations), and revised some articles four times thereafter. From 1986 to 2022, the country collected a total of 4,963.88 billion yuan in tariffs, and the annual tariff revenue increased from 15.16 billion yuan in 1986 to 286.03 billion yuan in 2022, with an average annual increase of 8.5%. Practice has proved that the framework and main systems of the Regulations are generally feasible and run smoothly.

　　In recent years, there have been new situations and changes in the field of tariffs, and it is necessary to formulate a tariff law on the basis of summing up the experience in implementing the Regulations. First, the legislative law clearly requires that the basic tax systems such as the establishment of tax types, the determination of tax rates and the management of tax collection need to be enacted. Second, in order to actively and effectively respond to changes in the domestic and international situation, it is necessary to improve the tariff system, strengthen the role of tariffs as domestic and international dual-cycle regulators, and enrich legal countermeasures. Third, with the continuous deepening of the reform of customs clearance facilitation, in accordance with the relevant requirements of actively docking international high-standard economic and trade rules, it is necessary to promptly upgrade the mature experience and practices of tariff collection management into a legal system. The formulation of tariff law is included in the legislative work plan of the National People’s Congress Standing Committee (NPCSC) and the State Council in 2023.

　　In accordance with the decision-making arrangements of the CPC Central Committee and the State Council, the Ministry of Finance and the General Administration of Customs drafted and submitted the People’s Republic of China (PRC) Customs Law (Draft for Review) to the State Council on the basis of in-depth investigation and argumentation and extensive listening to opinions. The Ministry of Justice actively promoted the review, conducted in-depth investigation and study on tariff legislation, solicited opinions from relevant central units, provincial people’s governments, industry organizations, enterprises and experts twice, and went to local places to carry out field research. On this basis, it revised and formed a draft with the Ministry of Finance and the General Administration of Customs. The draft has been discussed and adopted at the the State Council executive meeting.

　　As the first special tariff law enacted in China, the draft mainly grasps the following four points in general thinking: First, adhere to the party’s leadership over tariff work, establish and improve the management system of tariff work, and clarify the adjustment authority of tariff items and tax rates and the basic system of tariff collection management of the National People’s Congress Standing Committee (NPCSC), the State Council and the State Council. The second is to keep the current tariff system basically stable, and the overall tax burden level remains unchanged, implement the statutory requirements of the legislative law on taxation, improve the contents of the Regulations and relevant policies and regulations, and raise them into law. The third is to adhere to the problem orientation, coordinate development and safety, and at the same time, make up the shortcomings of the system and reserve space for further deepening reform. Fourth, according to the nature and characteristics of tariffs, based on China’s reality and drawing lessons from international common rules, we should design relevant institutional mechanisms steadily and flexibly to meet the actual needs of camera regulation while following the statutory principle of taxation.

　　The draft consists of 7 chapters and 70 articles, which mainly stipulate the following contents:

　　(1)Adhere to the leadership of the party and improve the tariff work system. First, make clear the tariff work and adhere to the leadership of the Communist Party of China (CPC). The second is to implement the decision-making arrangements of the CPC Central Committee and the State Council, and stipulate that the State Council should set up a tariff commission to perform its statutory duties. Defining the composition and working rules of the State Council Customs Tariff Commission shall be stipulated by the State Council. (Article 5)

　　(2)Clarify the scope of application of tariffs. First, maintain the current tariff collection targets and collection supervision and management organs. Goods and imported articles that are allowed to be imported and exported in People’s Republic of China (PRC) shall be subject to customs duties in accordance with this Law and relevant laws and administrative regulations. (Article 2) The second is to maintain the scope of current customs taxpayers and increase the provisions on customs withholding agents. It is stipulated that the consignee of imported goods, the consignor of exported goods and the carrier or consignee of imported goods are taxpayers of customs duties. It is clear that the units and individuals who have the obligation to withhold and remit customs duties and taxes as stipulated by laws, administrative regulations or the State Council are the withholding agents of customs duties. (Article 3)

　　(3)Implement the statutory principle of taxation and standardize the setting, adjustment and implementation of tariff items and tax rates. First, it is clear that import and export tariffs are an integral part of this law. Provisions on the tariff items, tax rates and applicable rules of import and export goods shall be implemented in accordance with the Import and Export Tariff of People’s Republic of China (PRC) attached to this Law. (Paragraph 1 of Article 4, Annex) The second is to clarify the types of tariff rates. It is stipulated that most-favored-nation tax rate, agreed tax rate, preferential tax rate and general tax rate are set for import tariffs, export tax rate is set for export tariffs, tariff quota rate is set for import and export goods subject to tariff quota management, and provisional tax rate can be implemented for import and export goods within a certain period of time. (Article 8) The third is to stipulate the applicable rules and adjustment mechanisms of various tariff rates. (Articles 9 to 13) The fourth is to authorize the reform of the tax system for imported articles on the premise of shifting the tax system for imported articles. (Article 4, paragraph 2)

　　(4)Improve the system of tax payable, tax preference and special circumstances tariff collection. The first is to improve the method of tariff collection. On the basis of ad valorem taxation and specific taxation stipulated in the Regulations, this paper summarizes the practical experience of tariff taxation, adds compound taxation methods, and clarifies the calculation formula of tax payable for each taxation method. (Article 21) The second is to maintain the current rules for determining tariffs in taxable value, exempt or reduce tariff items, and levy tariffs on goods with duty reduction or exemption, bonded goods and goods and articles temporarily entering or leaving the country. (Articles 22 to 32, 34 to 39) Third, in order to better meet the actual needs and facilitate camera control, the State Council is authorized to decide to reduce or exempt tariffs according to the needs of safeguarding national interests, promoting foreign exchanges, economic and social development, or due to emergencies, and report to the National People’s Congress Standing Committee (NPCSC) for the record. (Article 33)

　　(5)Docking international high-standard economic and trade rules and improving the tariff collection management system. First, it summarizes the successful practice of customs clearance facilitation reform and port supervision innovation, and makes it clear that the mode of separating the release of goods from the determination of tax amount can be implemented in tariff collection management. It is stipulated that taxpayers and withholding agents can choose customs to declare and pay taxes in accordance with regulations. It is clear that the customs has the right to confirm the tax amount within the prescribed time limit. If the result of tax amount confirmation is inconsistent with the declared tax amount, the tax amount shall be paid back or refunded. (Articles 40-42, 44 and 45) The second is to improve the supervision system of tariff collection, and set out the administrative compulsory measures and enforcement that can be implemented by the customs against the management system of other taxes, the surcharge, overdue payment and refund of taxes, anti-circumvention measures, and the customs’ inquiry of tax-related information. (Articles 43, 46 to 60)

　　(6)Coordinate development and safety, and enrich tariff response measures. First, while maintaining the current tariff measures of "anti-dumping, countervailing and safeguard measures" and levying retaliatory tariff measures, it is added that countries and regions that fail to fulfill the most-favored-nation treatment clauses or preferential tariff clauses in international treaties and agreements concluded or jointly participated by China can take corresponding measures according to the principle of reciprocity. (Articles 14 to 17) Relevant measures will be implemented in a way that is in line with China’s obligations under relevant international treaties. Second, in order to ensure the implementation effect of relevant measures, it is clear that the state can take anti-circumvention measures such as adjusting tariffs to avoid the relevant provisions of Chapter II and Chapter III of this Law and reduce the tax payable without reasonable commercial purposes. (Article 53)

　　In addition, the draft stipulates legal liability for relevant acts that violate the provisions of this law, and is linked with Hainan Free Trade Port Law and Ship Tonnage Tax Law. (Chapters VI and VII)

　　Whether the draft and the above explanation are appropriate, please review.