China & Singapore Implement Mutual Recognition Arrangement Program
Mar. 20 – China’s General Administration of Customs (GAC) released “Announcement No.13 of the GAC (hereinafter referred to as the ‘Announcement’)” on March 14, 2013, which confirms that China will roll out the China-Singapore Mutual Recognition Arrangement Program (MRA Program) across the entire country.
In June 2012, the GAC and Singapore Customs signed the “Mutual Recognition Arrangement of the ‘Measures of PRC Customs on the Classified Management of Enterprises’ and the ‘Secure Trade Partnership Program of Singapore,’” which represented China’s first MRA concluded with another country. In response, the Guangzhou Customs was chosen as the first custom administration in the country to pilot the MRA Program, with the trial program lasting for three months from September 1, 2012 to November 30, 2012. Now, after its successful conclusion, the GAC has decided to extend the MRA Program to cover all customs districts of China effective from March 15, 2013.
According to the Announcement, from March 15, 2013, Chinese Customs will regard all STP-Plus enterprises (defined below) accredited by Singapore Customs as authorized economic operators (AEOs) of Singapore. Likewise, Singapore Customs will regard all AA enterprises (defined below) accredited by Chinese Customs as AEOs of China.
What is an AEO?
The World Customs Organization (WCO) defines an AEO as “a party involved in the international movement of goods in whatever function that has been approved by or on behalf of a national customs administration as complying with WCO or equivalent supply chain security standards.”
In general, under the AEO system, the customs authorities will set up certain standards, and qualified enterprises which have met those standards shall be accredited as trusted by the customs authorities and granted preferential treatment.
Under China’s customs system, enterprises have been divided into five categories based on their compliance records and business performance. AA enterprises, which are at the highest customs accreditation level, have been credited as AEOs in China and such enterprises are entitled to the maximum preferential policies issued by the customs authorities. Under an MRA, China’s AEOs will be granted preferential treatment by the customs authorities of the other side.
To qualify as an AA enterprise, an enterprise shall satisfy the following conditions:
- The enterprise shall meet “A level” administrative criteria and shall have conducted “A level” administration for more than one year
- The enterprise’s aggregate number of customs declaration forms for import and export and the entry-exit filing lists it submits for declaration in the preceding year shall exceed 20,000 (or 5,000 for enterprises in the central and western regions)
- The enterprise’s error rate of customs declarations for import and export in the preceding year shall be lower than 3 percent
- The enterprise shall pass the customs inspection and verification, and meet the requirements on customs administration, enterprise operation and trading security
- The enterprise shall submit all of the relevant documents required by the GAC
The Singapore Customs launched its Secure Trade Partnership Program (STP Program) on May 25, 2007, which is a voluntary certification program that encourages companies to adopt robust security measures in their trading operations. An “STP-Plus enterprise” refers to enterprises with the highest level of accreditation on secure trade approved by the Singapore Customs. STP-Plus enterprises are also the AEOs in Singapore. The Singapore Customs has issued a comprehensive handbook for the program. Detailed information on how to be qualified as an STP-Plus enterprise can be found here.
Moreover, the Announcement provides that China Customs and Singapore Customs will facilitate customs clearances for AEOs from both sides. Exports from AEOs will be recognized to be of lower risk and greater security, and will be given priority clearance. Therefore, these companies can better plan their cargo movements and enjoy cost savings which would otherwise be incurred due to port delays.
Preferential measures include the following:
- Implementing fewer inspections
- Giving priority inspection to goods that need to be examined
- Providing rapid clearance in the case of international trade interruptions
The China-Singapore MRA Program is expected to further reduce the burdens and costs of enterprises from the two countries, thereby promoting bilateral trade.
“As China is the second largest economy in the world and a major trading partner of Singapore, the signing of this arrangement is an important milestone for us,” said Yong Kian Fong, Director-General of Singapore Customs.
“The signing of this arrangement with Singapore has significant implications for China Customs as this is our first arrangement with our counterparts. As an active player in the world customs community, China Customs will continue to put in its greatest effort for the security and facilitation of the global supply chain,” commented Sun Yibiao, Vice Minister of the GAC.
Dezan Shira & Associates is a specialist foreign direct investment practice, providing corporate establishment, business advisory, tax advisory and compliance, accounting, payroll, due diligence and financial review services to multinationals investing in emerging Asia. Since its establishment in 1992, the firm has grown into one of Asia’s most versatile full-service consultancies with operational offices across China, Hong Kong, India, Singapore and Vietnam as well as liaison offices in Italy and the United States.
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