China Tax Alert - Issue 28, November 2014
The China General Administration of Customs (GAC) will soon replace the present enterprise management system (i.e., AA, A, B, C, and D ratings) with a more simplified system of classification to bring it in line with internationally accepted best practices. These expected changes will directly affect the selection criteria, range of benefits, and enterprise ratings currently enjoyed by companies. Since this would impact all companies transacting with Customs, it is very important for management to fully understand and cautiously consider these expected changes in light of the immediate implications these could have on their existing qualification, the efficiency of their Customs clearance process, and their chances of being subject to customs audits in the future. Companies seeking to upgrade their current enterprise rating in order to avail of Authorised Economic Operator (AEO) benefits would be especially encouraged to revisit the viability of their present situation in consideration of these anticipated changes. The GAC has been constantly refining the enterprise management system since the first rules were released more than 25 years ago. For the purpose of enacting this latest round of revisions, the GAC has announced Provisional Measures of the PRC on Credit Management of Enterprises (hereinafter referred to as “Provisional Measures”). The GAC also recently circulated a draft of the Customs Certification Criteria on Enterprises (hereinafter referred to as “Certification Criteria”) which will be finalized and put into effect by the end 2014. For the benefit of companies interested in learning about the possible changes and implications that this new regulation may have on their operations, we are issuing this China Tax Alert to summarize key revisions and the possible overall impact it may have on the relationship between the Customs and companies.