Chapter Six Trade Facilitation

 

¢ñ Easy Clearance System

      As one of the significant measures to enhance the trade and investment environment, strengthen the service function of the Port and upgrade the overall competence of the city, the Easy Clearance System is aimed to facilitate trade through integration of resources at the Shanghai Port. A managerial pattern of administrative coordination, centralized information platform, forwarded or back-warded procedures and swift clearance of cargoes will thus be established. The working mechanism of the Easy Clearance System helps achieve closer connections and smoother coordination among the customs and the enterprises and the Port, more scientific working flow and more orderly logistic operation, thus improving the efficiency of the Port and pushing forward the progress of trade facilitation. The Easy Clearance System streamlines administration at the Port and makes it possible to interconnect the computer networks of relevant departments and to interchange data amongst themselves, thus catering for easier flow and convenient clearance. Such sharing of operation data among different departments improves the clearance efficiency at the Port and optimizes operations.

The concrete measures related to the Easy Clearance System are as follows:

1£® The Leading Working Team of the Easy Clearance System

Under the leadership of the Leading Working Team, an office was set up working together with the Port Office and responsible for the coordination of the work concerning the Easy Clearance System. Meanwhile, a liaison mechanism was set up among the directors and vice-directors of the Port Office¡¯s member establishments to solve relevant problems through monthly meetings.

2. Implementation of the New Clearance Mode of ¡°Quarantine and Declaration in Advance and Immediate Clearance of Cargoes on Arrival¡±

The new mode requires that the data of shipping bills be transmitted in advance to the relevant authorities for early processing before the cargoes arrive so that upon arrival, they can be claimed immediately. The application of the new clearance mode considerably reduces the time required for customs clearance, from an average 3 to 5 days formerly to 24 hours now for sea cargoes, and 3 days formerly to 12 hours now for airborne cargoes.

3. Implementation of the 5-plus-2-days Working Schedule

Since October 1, 2003, the Shanghai Port has been running the 5-plus-2-days working mechanism, first of its kind in the country, to provide enterprises with seven days of customs clearance in every week, thus offering the same services as usual at the working sites of the Port on Saturday and Sunday. The customs clearance, the inspection and the discharging of the cargoes all operate as on the five weekdays in accordance with the normal working mode, procedures and standard. As a reform of the traditional working schedule, the 5-plus-2-days working mechanism turns out to be an extension of the normal working schedule, different from working overtime on the two weekend days in the usual sense and from the former system of ¡°clearance with appointment¡± and ¡°clearance in advance¡±. The implementation of the new working mechanism speeds up the customs clearance and facilitates the movements of the import and export cargoes. In addition, it is commonly welcomed for its anticipated promotion of economic development in the Yangtze Delta region, and it is also more particularly warmly acclaimed by the high-tech enterprises and enterprises in the neighboring region of Shanghai for its resulting lower transaction costs. For instance, the function panels of the Nanjing Ericsson Panda Communication Co. Ltd, valued € 261,300,  and the spare parts and CPUs of Sony (Wuxi) Electronic Co. Ltd, valued $ 2,822,500, transported by air to Shanghai on Saturday could go through all customs clearance on Sunday. The improved efficiency in customs clearance was highly acclaimed. The implementation of the 5-plus-2-days working mechanism brought about enthusiastic reactions in the neighboring region of Shanghai and even across the whole country. Recently, the representatives of Jiangsu and Zhejiang provinces came to Shanghai to get better acquainted with the development of the 5-plus-2-days working mechanism and announced they would launch similar mechanisms in their localities.

4. Reform of the Clearance Mode in Particular Areas to Achieve Speedy Clearance

In order to satisfy the special requirements of high-tech enterprises and multinational companies on customs clearance, the Shanghai Customs applies a new clearance mode for imported air cargoes by enterprises in such special areas as the export processing zones and the Waigaoqiao Free Trade Area. They can make customs declaration in advance with shipping bills examined afterwards, and take delivery immediately with cargoes directly transferred from the airport, examined in real time and released at customs check-points. In other words, the enterprises in the export processing zones make their declaration to the customs before the flights arrive and they directly take delivery at the airport and transport the cargoes with customs seal by appointed vehicles to the export processing zones. Then the cargoes go through customs clearance procedures at the check-points stationed in the zones. The clearance time for air cargoes from landing to arrival in the processing zones is cut down from 3 days formerly to 4 hours, with merely 10 minutes spent on clearance procedures. In addition, direct customs clearance is implemented for airborne cargoes in the Waigaoqiao Free Trade Area, shortening the clearance time from 4 days to 6 hours, with only 30 minutes needed for clearance procedures. The enterprises in such special areas as the export processing zones and the Waigaoqiao Free Trade Area, as well as high-tech companies, high credit-ranking businesses, high-foreign-exchange-earning companies and large-sized enterprises can now complete customs clearance and take delivery of their imported air cargoes within 4 to 8 hours. Most of the aforesaid enterprises are high-tech enterprises manufacturing IT products that have strict requirements for customs clearance speed, and contributing over 30 % of the total exports of Shanghai. The implementation of speedy clearance measures has effectively promoted the increase in export of high-tech products.

5. Implementation of EDI Clearance to Achieve Paperless Clearance

Referring to international practices, the Shanghai Port has experimented EDI paperless clearance on import and export cargoes. EDI paperless clearance, taking advantage of information technology and network control through electronic ports, is a particular clearance mode resorting to the automatic clearance system to process the formatted data of import and export cargoes. EDI paperless clearance operation is characterized by its high automation, speediness, low costs and strict control. The EDI paperless clearance is now undergoing trial in more than 1,000 enterprises at the Shanghai Port, accepting 2,000 bills every day, and reducing the clearance time spent on import and export by 27% and 85% respectively compared with the paper-based normal clearance operation.

6. Taking Convenient Clearance Measures to Support High-tech Industry

To support the development of high-tech industry, convenient clearance passageways for speedy documents handling and electronic document inspection have been established for high-tech enterprises with proven good business integrity. Under the guarantee of a certain bank, the cargoes are released beforehand and taxes paid later. The convenient clearance measures, supported by other measures such as pre-classification and pre-valuation, help high-tech enterprises achieve speedy clearance. In normal cases, it only takes two hours for the imported cargoes to complete all customs clearance procedures.

7. Implementation of Speedy Clearance across Customs Areas to Promote Integration of Regional Economy

Because the traditional working mode of customs clearance can no longer satisfy the practical requirements of the regional economy¡¯s rapid development, the Shanghai Customs has launched speedy clearance across customs areas. The speedy clearance across customs areas supported by modern information technology adopts a working mode of the type ¡°Release upon One Declaration and One Inspection¡±. Characterized by simple operation, synchronization of declaration and cargoes transportation, and quick information feedback from different customs areas, the new working mode is better than traditional working mode in terms of efficiency. The implementation of speedy clearance across customs areas helps alleviate constraints on transshipments and simplify customs clearance to enhance transshipment efficiency. It therefore facilitates full use of the surveillance force to have tougher control over logistics management. It also helps the Shanghai Port to fulfill its influential function as the largest port in the country and push forward the economic development of the Yangtze Delta and even the whole reaches of the Yangtze River. In addition, upgrading clearance efficiency at the Shanghai Port will promote the establishment and further development of Shanghai as an international shipping center.

The new working mode of speedy clearance across customs area reduces the claiming time of cargoes imported by inland enterprises and declaration and discharging time of cargoes exported by the inland enterprises. As an effective measure to drive forward the integrated operation of inland customs and coastal customs, it improves the investment environment of the central and western regions in China, inducing remarkable economic growth.

With the above-mentioned measures for convenient and speedy clearance, the Easy Clearance System greatly enhances the efficiency at the Shanghai Port. By the end of 2002, preliminary achievements had been made in fulfilling the strategic goal of ¡°Improving the city¡¯s overall competence through implementation of the Easy Clearance System¡± set by the Municipal Government. Now, the clearance time for sea cargoes and air cargoes has been shortened to no more than 24 hours and 12 hours respectively, with customs operation time in the whole process reduced to 17 % from 21% in 2001.

 

¢òComputerization of Customs Clearance and Electronic Management

Having integrated the systems of documents inspection, logistic control and functional management into one computerized platform, the Shanghai Customs has fully achieved computerization and networking of customs management through the application of computer networking across departments and regions. Supported by information technology and computer networking, and with the guarantee of real time surveillance on cargoes, an electronic customs has thus been established.

1. Integrating Information Resources to kick off the Operation of the Shanghai Branch of China¡¯s Electronic Port Databank

Pushed forward by the government, operated on market basis and run by enterprises, the integration of the Shanghai EDI Center, the Portinfo EDI Center and the Shanghai Business and Trade Network ushers the establishment of an integrated logistic information and e-business platform. Meanwhile, the Shanghai Branch of China¡¯s Electronic Port Databank was set up and began operating in May 2002. As an integrated platform of customs clearance and logistic information, ¡°easypass.com¡± now has over 20,000 registered users, 50 % of which are enterprises from other provinces, covering most regions of the Yangtze River reaches. The network connection and improvement of the information platform quickens the application of electronic customs documents. The electronic platform is connected with quarantine and inspection information, indicating the need for examination or release. Paperless clearance documents are also processed through electronic network.

 

2. Launching of a Pilot Project of E-account books Networking for the Processing Trade

In view of the rapid development of processing trade in Shanghai, the Shanghai Customs has introduced bold reforms to the traditional way processing trade was managed. Since mid-August 2002, the Shanghai Customs has launched a pilot project for management through networking in the processing trade. Under this scheme, using the China Electronic Port as the data interchange platform, the networks of enterprises and supervising trade authorities are connected with that of the customs to transmit and process the data on submission for approval, filing, contract modification, declaration for customs and auditing by processing trade businesses.  A good illustration of this is Inventec (Shanghai) Electronic Co. Ltd, which is the first enterprise to have implemented networking. Time required for processing trade filing is reduced from 5 working days to half a day, and time needed for contract modification is cut from 3 working days to 1.5 or 2 hours. Before the network connection, the company¡¯s exports over seven months and a half amounted to US$ 86 million. In four months and a half after the network connection, the company¡¯s exports were up to US$250 million. The Dafeng Computer Co. Ltd in the Songjiang Export Processing Area is also a success with the trial of management through interconnected network. Before the trial, the exports of this company in 2002 valued US$ 980 million, while after the trial, they soared to US$1, 392 million. Up to now, the Shanghai Customs has concluded the networking agreement with 57 enterprises, 26 of which have carried out network interconnection.

 

3. Data Interchanges among Port Law-Enforcement Departments and Inspection through Interconnected Network

Taking advantage of modern information technology, the network of the customs, the entry-exit inspection and quarantine administration, the industrial and commercial administration and such relevant departments as those engaged in international trade, tax, foreign exchange and transportation can now be interconnected. Through the interconnected network, electronic data pertaining to import and export, capital flow and cargoes can thus be transmitted to the Electronic Port of China, which is a public data center. The relevant authorities can conduct cross-department and cross-industry data checking and retrieving while enterprises can carry out online importing and exporting procedures through the interconnected network such as customs declaration, tax refunding after exportation, foreign exchange writing-off and transshipment. The new pattern of joint management by different departments through data interchanges and interconnected network is now playing a significant role in lowering trade costs and facilitating the development of international trade.

 

4. Payment of Import and Export Taxes and Fees through EDI System

The tariffs and other import and export fees incurred in the process of customs clearance can all be paid to the Shanghai Customs through the EDI system. Through the electronic platform of the Easy Clearance System, the EDI tax and fee payment system of the Customs is connected with the relevant computer systems of banks. The enterprises with IC cards can send pay- to- the-bank orders through the EDI system. On receiving the order, the bank¡¯s computers will automatically transfer the very amount of taxes and fees to the account of the customs. Then the import or export cargoes get released by the customs. The EDI system is now interconnected to six major banks in Shanghai and accepts interbank payments for all tariffs and import and export taxes. There are currently 2,000 users with a monthly transfer of 60,000 bills and an amount of over RMB 2 billion.

 

 

¢ó Customs Valuation

1. Setting up New Rules for Customs Valuation

After China¡¯s entry into the WTO, the Shanghai Customs conducts customs valuation strictly in line with relevant laws and regulations to comply with the new principle of ¡°objectivity, fairness and unity¡± and the WTO Agreement on Customs Valuation in setting transaction prices, adopting valuation methods and regulating paid values and values to be paid, forgoing the former practice of setting referential values for important commodities. With the enhanced transparency of customs valuation, importers are now enjoying more rights in customs valuation.

In the past two years following China¡¯s entry into the WTO, 95% of imports and exports have used transaction value as dutiable value in customs all over the country, and the ratio in the Shanghai Customs is up to over 98%. If we compare the statistics of extra taxes collected through customs valuation before and after China¡¯s entry into the WTO, we can find the following facts. In 2001, the Shanghai Customs altogether conducted valuation on 10,505 bills of imports, and collected RMB155 million of extra taxes, collecting 60,000 items of price information through filtering 320,000 items of price information in the data bank of customs declaration forms. In 2002, the figures rose to 13,199 bills of imports and RMB190 million of extra taxes, an increase by 25.64% and 22.58% respectively. 120,000 items of price information were collected after filtering 290,000 items of price information in the data bank of customs declaration forms. From January through October of 2003, the figures even exceeded the total of 2002 to reach 18,552 bills of imports and RMB214 million of extra taxes, up 76.6% and 38.1% respectively over the same period in 2001 before China¡¯s accession to the WTO. 100,000 items of price information were collected after filtering 300,000 items of price information in the data bank of customs declaration forms.

2. Measures taken by the Shanghai Customs to Safeguard the Compliance to the Newly Established Rules

To secure the application of rules stipulated by the WTO Agreement on Customs Valuation, the Shanghai Customs has worked hard to make its customs valuation consistent with international practice, trying to strike a balance between its tasks of ¡°safeguarding the economic interest¡± and ¡°facilitating the economic development¡± in line with the practical situation of China. In view of such situations as the large turnover via the port of Shanghai where most multinational companies are located, the Shanghai Customs is actively renewing its concepts, building its expertise and attempting to establish a valuation system with Shanghai characteristics based on the system designed by the General Customs Administration, which is a computer technology backed ¡°scientific, standard and loophole-free¡± customs valuation system using transaction price as valuation basis, price information as support, risk management as means, and price monitoring plus price verification and inspection as guarantee. The two years of customs valuation after China¡¯s entry into the WTO have proved that it has stood the test brought about by China¡¯s entry to the WTO, with great improvements in service and clearance efficiency.

(1) Innovation of Customs Valuation through the Pre-valuation Measure

After China¡¯s entry into the WTO, the Shanghai Customs established its valuation system in line with the relevant legal system. On the one hand, to combat falsification and smuggling through false declaration of values by some citizens and businesses lacking any law-abiding consciousness, the Shanghai Customs makes full use of price oppugning and price negotiation to verify declared values. On the other hand, in line with the characteristics of the economic development in Shanghai, the Shanghai Customs has worked out a scientific valuation process and experimented the measure of pre-valuation along with the reform on clearance operation and achieved favorable social effects.

(2) Breaking the Restraints and Establishing a New Mode with Certain Steps Moved   Forward and Others Backward

In contrast with international practice, the traditional mode of customs valuation in China laid emphasis on on-the-spot price verification, but neglected follow-up auditing. Therefore, the Shanghai Customs is actively attempting to introduce a new mode of early-stage pre-valuation, on-the-spot verification, mid-term-tracking and follow-up auditing to remove the time and special restraints, improve accuracy of valuation, alleviate the pressure of clearance at port customs and safeguard the interest of importers. To secure orderly operation of the new mode, the Shanghai Customs has formulated a series of operating rules, such as the Implementing Regulations for the Valuation System, the Procedures of Customs Valuation, and the Price Surveillance System. Meanwhile, it has pushed forward the process of integration of business operation with science and technology by innovating the facilities and developing a valuation agreement application system to bring the customs valuation in line with international practices.

(3)  Setting a Scientific Surveillance Standard for Valuation through Price Databank

The Shanghai Customs fully realized the importance of a scientific and complete system of price surveillance in conducting afterward inspection of declared prices and preventing the falsification or distortion of transaction prices. On the one hand, the Shanghai Customs has intensified efforts to collect and then filter price information to establish the price databank for all sorts of commodities. On the other hand, it has actively communicated with importers about price information under the system of price negotiation and examined from time to time the accuracy of the customs at all level to set a common standard for customs valuation. It also compared local price levels with those at other customs to prevent customs tariff evasion. Over the past 2 years, 590,000 items of price information have been collected and filtered.

(4) Enhancing Enforcement Level through Research on Valuation Theory

Along with the rising enterprises¡¯ awareness of WTO rules and relevant laws, the Shanghai Customs is faced with challenges in technical issues of valuation that it had never encountered before. Although these challenges served as opportunities at the same time, they entrust a much more demanding task upon customs valuators. To improve the skills of the customs valuators and eventually establish an expert team in line with the WTO Agreement on Customs Valuation, the Shanghai Customs conducted a research on price transfer of multinational companies, royalties for licensing, interest charges and software charges. After implementing the lessons of its findings in actual practice, a number of preliminary achievements have been made. Now, the Shanghai Customs leads all the other customs in the research of difficult issues in customs valuation. In the past two years, it has collected RMB 19 million of extra taxes on royalties for licensing that might be evaded by importers. Meanwhile, the Shanghai Customs provided 20 training sessions on customs valuation, international trade and case studies, apart form the publication of Customs Valuation, An Introduction to the WTO Agreement on Customs Valuation and FAQ about Customs Valuation, which have played a positive role in cultivating talents specialized in customs valuation.

 

3. Enhancing the Transparency of Customs Valuation to Foster a Favorable Law-Enforcement Environment

Transparency of customs operation and protection of importers¡¯ rights are an important part of the WTO Agreement on Customs Valuation. To bring its customs valuation in line with international practice and enhance importers¡¯ knowledge of valuation rules, the Shanghai Customs took the following measures to drive importers to make true and accurate declarations.

1.      Relevant laws, administrative rules, regulations and procedures concerning customs valuation are publicized on the Internet. Tips for Customs Valuation and consultation on customs valuation are also available on the Internet.

2.      Strengthened training among enterprises on valuation, including introducing customs valuation course into the qualification training for professional customs brokers, and offering lectures to import and export companies with the aim of raising the consciousness and willingness to follow laws when declaring to the customs.

3.      Carrying out the system of ¡°Valuation Notification¡± to inform importers of the reason for turning down the declared transaction price, the basis of customs valuation and administrative or judicial remedies importers might seek for.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Box 6.1 China¡¯s Positive Attitude on Trade Facilitation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Trade facilitation is aimed to eliminate barriers in the movement of goods across borders in international trade, reduce transaction costs, enhance customs clearance efficiency and provide convenience to trade and investment. Trade facilitation is one of the four items of the ¡°Singapore agenda¡±, but the WTO members haven¡¯t yet come to a multilateral agreement on it. China has along cherished a positively cooperative attitude on trade facilitation, just as stated in Article 144 of Part 11, Other Customs Formalities, in the Report of the Working Party on the Accession of China: China joined the International Convention on the Simplification and Harmonisation of Customs Procedures in 1988 and on 15 June 2000 signed the Draft Protocol on the Amendment of the International Convention on the Simplification and Harmonisation of Customs Procedures.  The Customs authorities of China had only adopted such customs formalities as declaration, examination, levying of duties and release which were consistent with international practices.