Before 1979 China"s foreign trade was exclusively conducted through national foreign trade corporations under import and export plans assigned by the former Ministry of Foreign Trade. With the adoption of the "open door" policy in 1979 China began to reform its foreign trade sector, very gradually decentralising and deregulating control over its foreign trade. With China"s WTO accession, China is revising many of the laws governing foreign trade to honour commitments made under the WTO protocol.
At present, the authorities in charge of imports and exports in China include the Ministry of Commerce (MOFCOM), the General Administration of Customs, the State Administration of Foreign Exchange (SAFE), the State Exit and Entrance Inspection and Quarantine Bureau (SEEIQB) and the Administration of Quality Supervision and Inspection and Quarantine (AQSIC).
Foreign trade dealers
The business activities of all enterprises and individuals involved in import and export trade are supervised by MOFCOM. Prior to July 2004, only enterprises approved by MOFCOM were allowed to engage in import and export trade; with the promulgation of the revised PRC Foreign Trade Law on 1 July 2004, such approval is no longer required. Enterprises or individuals wishing to import and export goods or technologies only need to register with MOFCOM (or its local delegates). Where foreign trade dealers fail to register as required, the customs authority may not carry out procedures such as declaration, examination and release of the imported or exported goods.
While foreign-invested manufacturing enterprises may conduct import and export transactions related to their production business (provided that the required registration is carried out with the relevant authority), China does not allow a wholly foreign-owned company specially engaged in import and export business to be set up in China - at least, not yet.
Sino-foreign equity joint venture companies specially engaged in import and export business can, however, be set up, provided that the stringent criteria prescribed by law are met: A foreign party to a proposed EJV specially engaged in foreign trading business must have an average annual volume of trade with China of over US$30 million in each of the preceding three years (or US$20 million if the EJV is to be set up in central or western China). The actual paid-up registered capital of the EJV must be no less than Yn50 million (or Yn30 million if the EJV is to be set up in central or western China). The establishment of an EJV specially engaged in import and export business also requires approval of MOFCOM.
Commodity imports administration
MOFCOM determines lists of goods and technologies subject to import prohibition. Goods with import restrictions are subject to import quotas and/or licence systems implemented by MOFCOM. Goods whose import is restricted on quantity are subject to a quota system. MOFCOM releases from time to time (normally on an annual basis) a list of goods that are subject to quota and/or licence control. Goods subject to quota and/or licence administration can only be imported after a quota and/or licence is obtained from the relevant authorities.
At present, several goods may only be imported by the state or by designated parties. Goods which may only be imported by state-owned trading companies include: grain, vegetable oil, sugar, tobacco, crude oil, processed oil, chemical fertiliser and cotton; and goods which are restricted to designated traders include: natural rubber, plywood, wool, acrylic and steel.
Commodity exports administration
MOFCOM also determines lists of goods and technologies subject to export prohibition. Goods whose export is restricted on quantity are subject to a quota system and some others can only be exported if a licence to do so is obtained. MOFCOM releases from time to time (normally on an annual basis) a list of goods that are subject to export quota and/or licence control.
China prohibits and restricts the export of certain goods and technologies on grounds of public policy or in order to comply with international treaties or agreements. Goods reserved for state trading include, for example, crude oil, processed oil, corn, rice, coal, cotton, silver and silk. Goods reserved for trading only by specially designated traders include tea (green tea, oolong tea) and certain cut steel sheets.
Where export of Chinese goods is subject to quota restrictions in other countries, a passive quota administration applies. The annual export amount of the commodities subject to passive quota management will be decided by the two countries each year in accordance with any bilateral agreements in force. The goods that are currently subject to passive quota management include textiles.
As a result of WTO accession, China now charges four import tariffs: general tariffs, Most-Favoured-Nation tariffs, preferential tariffs and a special preferential tariff.
China has in recent years made substantial tariff reductions in many sectors. Effective from 1st January 2004, the average import tariff is 10.4 per cent. China has committed to reduce its import tariff to an average of 10 per cent in the year of 2005.
There are special concessions covering tariffs on goods exported from Hong Kong and Macau to China. For import tariffs, value-added tax (VAT) and consumption tax (but only for some products) are charged. All importers of goods into China must pay value-added tax. The normal VAT rate is 17 per cent, except for certain goods (e.g. cereal and edible vegetable oils, books, newspapers and magazines, tap water, heaters, air-conditioning, hot water, coal gas, liquefied petroleum gas, natural gas, biogas and coal products for residential use) whose import is subject to a 13 per cent rate). All importers of certain selected consumer goods (including tobacco, liquour, cosmetics, skin and hair-care products, expensive jewellery, pearls, jewels and jade, motor cars, fireworks, petrol, diesel oil and motor vehicle tyres) must pay consumption tax.
The consumption tax rate varies from 5 per cent to 40 per cent.