customs and trade alert — new customs enterprise ... · on 7 march 2018, the general...
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Customs and Trade Alert— New Customs Enterprise Creditability Management Rules
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On 7 March 2018, the General Administration of Customs (“GAC”) issued the new Customs Administrative Measures on Enterprise Creditability of the People's Republic of China (GAC Order No. 237) (“Measures on Enterprise Creditability”), which will come into effect on 1 May 2018. The new rules mark a significant development of the existing China AEO programme since its implementation under the Customs Interim Measures on Administration of Enterprise Creditability of the People's Republic of China (GAC Order No. 225) (“Interim Measures on Enterprise Creditability”) in 2014. The Customs Enterprise Creditability Certification Criteria are also under revision and will be implemented in parallel with the Measures on Enterprise Credit.
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Highlights
Compared to the previous GAC Order No.225, one of the most significant changes brought forward by the new Measures on Enterprise Creditability is the further clarification and differentiation between the different creditability rankings. For example, the preferential treatments available for Advanced Certified Enterprises has increased from 4 to 9 items. The administrative treatments for Discredited Enterprises has increased from 4 to 8 items. For General Certified Enterprises, the original available measures continue to be available with a newly added requirement on guarantee deposit. Specifically, the main changes include:
• Quantification of Key Treatment for Different Grading
Compared to the previously rather ambiguous preferential treatment on inspection applicable to different creditability ranks, i.e. "higher" or "lower" inspection rates, the new Measures on Enterprise Creditability provide a quantitative reference with regard to inspection rates for different ranking. Specifically, the average import/export inspection rate for Advanced Certified Enterprises would be 20% lower than the rate for General Credit Enterprises. The average inspection rate for General Certified Enterprises would be 50% lower than the rate for General Credit Enterprises. The average inspection rate for Discredited Enterprises would be above 80%..
More Detailed Differentiation between Rankings1
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• Additional Measures
In addition, the new Measures on Enterprise Creditability also introduced several new treatments to encourage attainment of a higher enterprise ranking and new restrictions to discipline Discredited Enterprises, including:
- Guarantee deposit: Advanced Certified Enterprises may apply for a full exemption on the guarantee deposit requirement. General Certified Enterprises may apply for a lower guarantee deposit amount that is below the potential import taxes payable or the GAC indicated amount. Discredited Enterprises however would need to pay guarantee deposits in full.
- Customs audit: The frequency of customs audits for Advanced Certified Enterprises would be reduced, while Discredit Enterprises would be increased.
- Joint supervision: Advanced Certified Enterprises may enjoy single window joint-incentives implemented by multiple government departments. On the other hand, Discredited Enterprise may face joint disciplinary/restrictive treatments.
- Certification restrictions: Upon downgrade to a Discredited Enterprise, the company would be prohibited from applying for an upgrade to General Credit Enterprise for 2 years (previous restriction was 1 year).
In addition to the above, Advanced Certified Enterprises could also enjoy preferential declaration facilities prior to actual export/delivery to a customs supervision area. Discredited Enterprises on the other hand would be restricted from participating in programmes such as consolidated duty payment, warehouse expenses exemption and sampling release.
Enterprise Creditability Information Sharing2
Under the new Measures on Enterprise Creditability, the collection and review of the enterprise creditability information (e.g. the Annual Report on Enterprise Creditability Information) would be a key requirement in Customs’ daily management of enterprise creditability. In this connection, the GAC and other authorities are currently in discussion to implement a “consolidated reporting” approach. Upon implementation, enterprise creditability information could be shared among various authorities via a Creditability Annual Report. Meanwhile, companies failing to submit the Creditability Annual Report as required or have not been in contact with Customs will be listed in Directory of Enterprises with Irregular Creditability Information (“Directory”). If listed in the Directory for more than 90 days, the company would be downgraded to Discredited Enterprise.
The new Measures on Enterprise Creditability have also emphasised the newly introduced cooperative arrangements between Customs and other departments to implement joint incentives and joint disciplinary measures. Disciplinary/restrictive measures would be imposed to Discredited Enterprise not only by Customs, but also by other departments such as the Industry and Commerce Bureau, Tax Bureau, Foreign Exchange Bureau, etc. in parallel.
Further Clarification on Certification Procedures3
Further clarifications in relation to the certification procedures are also provided in the new Measures on Enterprise Creditability. Supplementing the basic requirements on certification application and application timeline, more information in relation to special situations requiring withdrawal during the certification process is also provided. A new withdrawal scenario has been added to the situations previously stated in the superseded GAC Order No. 225. In addition to companies under smuggling investigation or other violation audit, the new Measures on Enterprise Creditability provide that companies under certification suspension for more than 3 months would be withdrawn from the certification process.
Voluntary Disclosure4
The new Measures on Enterprise Creditability has added a item on the treatment of voluntary disclosures on certification. The new Measures on Enterprise Creditability state that voluntary disclosures resulting in a Customs warning or a penalty less than RMB 50,000 would not have implications on enterprise creditability assessment. Following the formal introduction of the voluntary disclosure programme in the New Customs Audit Regulation in 2016, the new Measures on Enterprise Creditability establishes a direct connection between voluntary disclosure and a company’s general customs creditability management.
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PwC observations
The new Measures on Enterprise Creditability embodies the principle of offering “trade facilitation to high-creditability enterprises and penalising discredited enterprises”. The new Measures on Enterprise Creditability were derived from the collective experience of China Customs and represent its aims for its AEO programme. Partial to the overall development of the AEO programmeincludes the publication of the upcoming Customs Criteria for Enterprise Certification. In this connection, PwC would recommend:
1. Enterprise under grading re-certification should pay close attention to the effective date of the new certification criteria, which is 1 May 2018, and proactively communicate with Customs to understand the application of the new criteria in order to effectively conduct internal assessment and minimise unexpected impact brought by the change in certification criteria;
2. Companies which have completed re-certification or are considering re-certification applications should also pay attention to the new certification criteria in order to maintain or achieve the desired ranking. Given the significant differences in treatment between different rankings, professional advice could be sought to assess and improve import/export procedures, internal controls/policies, compliance programmes, trade security, etc. to qualification under the new requirements; and
3. Enterprises should also pay attention to the submission of company creditability information (e.g. the Annual Creditability Report) and conduct regular internal reviews. Any exposures identified, voluntary disclosure of the issues could be considered to mitigate impact on enterprise creditability.
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Contacts
For further assistance about PwC’s customs and international trade services, please contact:：
Susan Ju
Partner
PwC China, Beijing
+86 (10) 6533 3319
Frank Wu
Partner
PwC China, Shanghai
+86 (21) 2323 3864
Derek Lee
Partner
PwC China, Shenzhen
+86 (755) 8261 8218
For more information, please also visit: www.pwccustoms.com
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This content is for general information purposes only, and should not be used as a substitute for consultation with professional advisors.
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