China is evolving and certain things that were “no big deal” five years ago are a big deal now. Dealing with China customs law is a prime example of that. If you are a foreign company doing business in China that involves importing products into China (or exporting, but less so), it behooves you now more than ever to get things right.
This is part two of a series of posts by Shawn Mahoney designed to help you avoid China customs problems. Go here for Part I, China Importation 101, which dealt mostly with the core concepts related to importing product into China.
A good friend wrote me after reading last week’s post and asked me three questions. Why didn’t I discuss the Harmonized Tariff Schedule differences, similarities to US and EU laws and the Enterprise Classification and Management (MCME) system? I am sharing my answer with you the reader: The MCME is best discussed as part of my upcoming China Customs post as it is a GACC (The General Administration of Customs) program, and the other two are best discussed as part of today’s post. This post covers the seemingly mundane basics of the importation process in China.
China’s laws and regulations regarding imports are very similar (sometimes exactly the same) to US and EU laws and regulations. It is important to note this similarity while simultaneously understanding the differences in China’s real world enforcement and execution. A great example of this is HTS (Harmonized Tariff Schedule) codes. For those in the trade you know HTS codes are virtually the same in the US, Europe and elsewhere. In China, there is a slight difference; small enough to go unnoticed by many exporters, but large enough to cause issues when utilized incorrectly. You see, though the first six digits are the same most of the time, the 7th and 8th digits, and the 2-digit suffix, are often different from what we use in the US. To add to this confusion many items that use a full 10 digits in the US, only use 8 digits in China and vice-versa.
I guarantee some are reading this right now and saying to themselves, we use the same HTS and we have never had a problem. I am sure this is true. The question is not are you currently having a problem, the question is are you properly classifying your goods? This is important for obvious reasons, since if your goods are misclassified, you may not be paying the correct tariff and duties. If you are not paying the correct tariff and duties and you get audited, you may owe GACC a lot of money. This end result is very similar to the US, in that you will not escape without large amounts of money being spent on attorneys, fines, over due tariffs or all of the above.
In addition to the correct HTS code, there are certain items required on all shipping documents (yes even samples!) to China. If any of these is wrong or differs from the other documents you have provided (more on this in my upcoming post about GACC), it is a sure-fire way to get your shipment stopped. On all your shipping documents to China you need the following:
- The correct HTS code
- The importer’s CR (Customs Registration) Code
- Product name with description
- Product quantity
- Country of Origin
- Quantity of units, boxes, and pallets
- Unit Value and Total value
Sometimes you also will need:
- Part Number
- Lot Number – Production date – Expiration date
A quick sidebar on CR Codes, the Customs Registration Code is a unique number given to every importer in China as part of registering with GACC. No company can import anything, except documents, into China without a CR Code/Number. Many foreign companies are unaware this number is required or that all companies must have this number to legally import anything into China. I will discuss in my upcoming posts the importance of understanding these types of requirements in your interactions with GACC and AQSIQ.
Knowing what to put on your documentation for selling into China is only part of the battle. Knowing which documents are required is equally, if not more important. All shipments to China require the following documents:
- Invoice on Company Letterhead (address must be included)
- Packing List on Company Letterhead (address must be included)
- Certificate of Origin
- Airway Bill/Ocean Bill of Lading
Documents that may be required (product dependent)
- US Department of Agriculture Health or other Certificate
- Local Health, Sales and Operations Licenses
- Certificate of Analysis
- MSDS with Proof of Content (also applies to food, wine and other categories, in these cases content must be on letterhead with no MSDS)
- Certificate of Free Sale
- Bottling/Production/Manufacturing date on Letterhead
- CCC Mark or other special import license documentation
There is also a difference between shipping your goods for the first time and all subsequent importations. First time imports usually require greater documentation than all repeat importations. This is typically true for products where additional licensing is required (retail products, food, chemicals, items requiring CCC mark etc.).
Labels are the final area I will cover in this post. Chinese language labels are required for all products that will end up on retail shelves. What is required varies from product to product with the standards for electronics and food/beverage being the most stringent. One requirement that crosses all product lines is that the Chinese label cover the foreign language label. Common requirements include:
- Product Name
- Raw Materials/Ingredients
- Country of Origin
- Date of Production (Year/Month/Day)
- Expiration Date (Year/Month/Day)
- Storage Condition
- Distributor Name and Address
To be continued….