SERIES: Connecting Australia and China

So far we’ve looked at major organisations who can help your business when you make the decision to expand into China and the tips regarding business culture and etiquette when doing business with China. We know who can help us, and we know how to behave when we first get in touch with potential Chinese partners. Now, what laws do we need to be aware of if we’re going to work with China?

Here are a few that are crucial for importers and exporters to be aware of.

The China Australia Free Trade Agreement (FTA)

This is likely the most important piece of legislation for companies working within the Australia-China corridor. It came into effect on 20 December 2015 and gives Australian businesses unprecedented access to China by reducing the barriers to trade and investment. It also provides for an improved competitive position for Australian exports, especially in industries such as agriculture, manufacturing exports, services, investment, resources and energy.

While the FTA does cut tariffs on trade, the tariffs are not applied automatically. There are three steps to follow in order to benefit: First, you need to make sure your product is included in the North Asia FTA. You can do this by using the DFAT’s FTA portal and searching for your product’s HS code - the site will give you information on what tariff is applicable. You will then need to make sure your product meets the FTA’s Rules of Origin, and finally obtain a Certificate or Declaration of Origin for your products.

China Australia Free Trade Agreement: http://dfat.gov.au/trade/agreements/chafta/pages/australia-china-fta.aspx

Cross-border e-commerce (CBEC)

A special import channel that allows products to be sold directly to Chinese consumers through online sales, the CBEC is exempt from tariffs and other regulations enforced on business-to-business trades. The CBEC sells its merchandise on popular e-commerce marketplaces in China like JD.com and Tmall. Australian businesses can make use of CBEC when exporting their goods into China.

When compared to traditional retail, CBEC allows online shoppers to choose from a wider variety of products at lower prices. The CBEC has lists called ‘Positive lists’ filled with products they approve of and will store in one of their 25 bonded warehouses. If your products fall within the categories mentioned on these lists then it can make use of the preferential tax policies offered by the CBEC.

With the Circular on Tax Policy for Cross-Border e-Commerce Retail Imports, the CBEC announced new regulations that expressed their intention to impose taxes on products being sold through CBEC and filing requirements for these products. As a result, it’s advised for Australian exporters to register their products with Chinese authorities as soon as possible. There is a regulatory grace period that will end on 12 May, 2017.

CBEC: https://www.austrade.gov.au/australian/export/export-markets/countries/china/doing-business/e-commerce-in-china

Customs Law of the People’s Republic of China

The Customs of the People’s Republic of China is the governmental organisation that exercises control over articles entering or leaving the country. The Customs Law consists of nine chapters, each with several articles under them, that cover a range of topics of interest to importers and exporters. Some of these include: the means of transport used to get the goods to the customs office, the rules applicable from the moment goods arrive at a customs office until all the customs formalities are completed, the rules surrounding customs duties and exemptions, etc. In order to get more information on how the law and its various articles, you can take a look at the link given below.

Customs Law of the People’s Republic of China: http://english.customs.gov.cn/Statics/644dcaee-ca91-483a-86f4-bdc23695e3c3.html

All goods imported into China need to pass a series of inspections and meet certification requirements before they are issued a China Inspections and Quarantine Certificate - only then can they be sold and used in China.

Import and Export Duties Regulations

The Regulations of the People’s Republic of China on Import and Export Duties consists of sixty seven articles. These articles are in line with provisions of the Customs Law of the People’s Republic of China. They exist so as to allow the implementation of the policy of opening the Chinese economy to the outside world and promoting the development of foreign economic relations and foreign trade. Customs will collect import or export duties on all goods imported into or exported out of China on the basis of these regulations. There are different kinds of duty rates applicable, such as the most-favoured-nation duty rates, conventional duty rates, temporary duty rates etc. These regulations breakdown the circumstances under which the different duty rates are applicable on import and export goods.

Import and Export Duties Regulations: http://english.customs.gov.cn/Statics/d30338b4-2f6a-47ea-a008-cff20ec0a6d2.html

We’ve only just scratched the surface of all the legal know-how you would need when deciding to do business with China. Feel free to check out the links available in the post to get more information on these topics!