China Releases Interpretation on Tariff Misclassification

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Apr. 12 – In China, importers and exporters are required to make a complete and accurate declaration of goods through the customs authorities within a designated time, including the correct Harmonized System (HS) code. The customs authorities will then review such declarations and make sure the correct HS codes have been declared. In practice, tariff mis-classification may lead to the seizure of goods, interruptions in the supply chain, monetary fines, or even criminal penalties.

With that in mind, and with the view to better regulate the identification and handling of tariff mis-classification cases, China’s General Administration of Customs (GAC) released the “Interpretation Regarding Tariff Mis-classification of Imported and Exported Goods (shufafa [2012] No.495, hereinafter referred to as the ‘Interpretation’)” on December 28, 2012, which came into effect on February 1, 2013. The Interpretation clarifies how the authorities will test and determine whether or not regulatory violations have been made when tariff classifications are inconsistent with the proscribed rules. Detailed information can be found below.

According to the Interpretation, the test as to what counts as a regulatory violation mainly depends on the existing rules for a given product. Where the existing rules are specific and clear, any improper classification will be deemed a regulatory violation and will be subject to customs administrative penalties.

The Interpretation puts forward the following situations whereby the classification rules for a given product are clear:

  • The product has been expressly listed in the headings or subheadings of the PRC Customs Import and Export Tariff Schedule; or has been expressly described in the annotations to the sections, chapters or headings of the PRC Customs Import and Export Tariff Schedule.
  • The product falls into the product scope as provided in the Annotations on Commodities and Commodities Categories under the Import and Export Tariff Schedule.
  • The product is identical to the one described in the Annotations on Domestic Sub-categories under the PRC Customs Import and Export Tariff Schedule.
  • The product is identical to those announced in the classification rulings or decisions by the GAC.

Moreover, the Interpretation provides that if evidence shows that the customs authorities have, in writing, made a pre-classification decision regarding the correct classification of the product to the party concerned, failing to comply afterwards by the party may be deemed as a regulatory violation.

On the other hand, mis-classification would not be counted as a regulatory violation if the mis-classification arises from a wrong pre-classification decision rendered by the customs authorities or where the product under mis-classification is difficult to be properly classified and, as a result, the GAC has sent the classification issue to the relevant authorities for a final decision.

However, the Interpretation states that if any misleading or deceptive conduct has been found during the application process for pre-classification, classification rulings, or customs clearance, the above non-violation clause shall not apply.

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