China: New Customs Credit Measures
The General Administrations of Customs issued the Interim Measures of the Customs of the People’s Republic of China for the Administration of Enterprise Credit (the “Interim Measures”) on October 8th, 2014, which is effective as of December 1, 2014.
Under the Interim Measures, companies are classified by the China Customs into the following three categories based on their credit status: (i) authorized enterprise (认证企业); (ii) general credit enterprise (一般信用企业); and (iii) uncreditable enterprise (失信企业).
Pursuant to Article 10 of the Interim Measures, company will be classified as “uncreditable enterprise” if: (i) it has engaged in smuggling activity; (ii) for company engaging agent to perform Customs declaration, the number of Customs violations in the current year exceeds 1/1000 of the number of Customs declaration in the prior year and company has received Customs administrative penalty of more than RMB 100,000 for at least two times; or the cumulative amount of the Customs administrative penalty exceeds RMB 1,000,000; for company performing Customs declaration itself, the number of Customs violations in the year exceeds 5/10000 of the number of Customs declaration in the prior year or the cumulative amount of the Customs administrative penalty exceeds RMB100,000; (iii) it has overdue taxes and duties or penalties; (iv) the Customs declaration error rate of prior quarter is 100% more than the average national customs declaration error rate of the corresponding period; (v)the registration information of the company is untruthful and the company cannot be reached; (vi)it is suspended from engaging in Customs declaration activity by the Customs; (vii) it is suspected of engaging in smuggling activity or other activity in violation of the Customs rules and fails to cooperate with the Customs’ investigation; (viii) it obtains inappropriate gain under the name of the Customs or other company; (ix) it falsifies or forges company credit information.
Uncreditable enterprise is subject to the following administrations and measures:
(i) Relatively higher inspection rate for import and export;
(ii) Tightened document review process for import and export; and
(iii) Strengthened supervision and administration of processing trade
General Credit Enterprise
Company will be classified as “general credit enterprise if: (i) it is newly registered with the Customs; (ii) it no longer qualifies as “authorized enterprise”, nor has it committed any violations specified in Article 10 of the Interim Measures; and (iii) it is classified as uncreditable enterprise, but has not committed the violations specified in Article 10 of the Interim Measures for a year.
Authorized enterprise is an economic operator authorized by the China Customs (Authorized Economic Operator or “AEO”). China implements the mutual recognition system of AEOs in other countries or regions and such mutual recognition allows Customs from both countries/regions to grant clearance facilitation for AEOs. Authorized enterprise is further classified into two categories: “advanced authorized enterprise” and “general authorized enterprise”. The relevant recognition rule is still in its infant stage and will be announced to the public by the General Administration of Customs when finalized.
General authorized enterprise is subject to the following administrations and measures:
(i) Relatively lower inspection rate for import and export;
(ii) Simplified document review process for import and export; and
(iii) rioritized import and export Customs clearance process.
In addition to the administration and measures enjoyed by the general authorized enterprise, advanced authorized enterprise is entitled to the following administrations and measures:
(i) Imported/exported commodities will be released before undergoing Customs clearance process such as commodities classification, valuation and determination of country of origin;
(ii) The Customs will assign a coordinator to the company;
(iii) Bank deposit is not required for processing trade company;
(iv) Any other facilitation measures granted by the Customs in the countries or regions mutually recognizing AEO status.
In the event of spin off, the surviving entity that inherits the rights and obligations of the existing entity will inherit the Customs credit status of the existing entity and other entities will be treated as newly registered entity. In the event of split up, the splitting company will be treated as newly registered company. In the event of absorption by merger, the merged entity is subject to the administration and measures applicable to the surviving entity. In the event of absorption by creation of new company, the merged entity is treated as newly registered company.
The company credit information system consists of the following: (i) company’s Customs registrations information; (ii) company’s import operation information; (iii) AEO mutual recognition information; (iv) any information registered by the company with other government agencies; and (v) information related to the import and export activities of the company. Subject to the restrictions imposed by the state secret law, trade secret law and privacy law, the Customs is entitled to publish the following information: (i) company’s Customs registrations information; (ii) Customs recognition of company’s credit status; (iii) administrative penalty information of the company and such information will be publicized for no more than 5 years. Any citizen, legal person or organization can object to the information published by the Customs by proving the relevant supporting documents or materials and the Customs should review and make a decision within 20 days of such application.
The company credit status is subject to the following periodical review by the Customs: (i) the status of advanced authorized enterprise will be reviewed every three years; and (ii) the status of general authorized enterprise will be reviewed from time to time, without fixed interval. Company failing to pass the recognition process cannot apply for authorized enterprise for a year. Company that has been categorized as uncreditable enterprise and has not committed any violation specified in Article 10 of the Interim Measures for a year, the Customs should certify it as general credit enterprise and such company can further apply for authorized enterprise status after one year of being recognized as general credit enterprise.