Customs and Trade Alert — Adjustment and Analysis of 2017 “Customs Import and Export Tariff of the People’s Republic of China”

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Overview of Tariff Book AdjustmentSince the revised 2017 Convention of the Harmonized System covers a wide

commodity range, more adjustments have been made to the 2017 tariff

book than before. After the adjustments, the 2017 tariff book covers 760

taxable items, with an increase of 253 items as compared to 2016. The

revised harmonized system and tariff book focus on four aspects, namely,

enhancing environment protection, promoting ecological protection,

adapting to technological development, and adapting to changes in

businesses.

To name a few, toadsiool, organic-inorganic compound fertilizer, eggs

separator and napkins for babies are newly added items in the 2017 tariff.

In addition, notes to several chapters are adjusted so as to further clarify

scope and classification.

Except for taxable items, the tariff book has adjusted the tariff rates for

certain information technology products and for certain tariff concessions

such as trade agreements like CEPA.

The “2017 Tariff Adjustment

Scheme” has been approved and

issued by the 7th plenary session

of tariff commission of the state

council, and came into force on 1

January, 2017. The “Customs

Import and Export Tariff of the

People’s Republic of China” and

“Convention of the Harmonized

Sy stem” are revised

simultaneously. According to

General Administration of

Customs’ (GAC) prediction, more

than 10,000 enterprises may

need to adjust HS codes of

declared commodities for this

y ear’s declaration. This trade

alert aims to provide an

introduction to the main

adjustments so as to help

relevant enterprises make full

preparation for the changes.

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Main Adjusted Chapters

I. Integrated Circuits under Heading 8542

According to WCO’s requirements in the 2017 Convention of the

Harmonized System, “multi element integrated circuits (MCOs)” are added

to the tariff book, which means the product scope covered by Heading No.

8542 is expanded. Commodities originally classified as parts are now

classified under Heading 8542. For example, chip integrated circuits in

mobile phones are originally classified under Heading No. 8517 as mobile

phone parts, but now may be classified under Heading No. 8542 as

electronic integrated circuits.

Key Points

1. Definition of “Multi element integrated circuits (MCOs)”

Multi element integrated circuits (MCOs) are composed of one or more

single, mixed or multi chip integrated circuits and at least containing one of

the following components: the combination of silicon sensor, actuator,

oscillator, resonator or its components, or with heading No. 85.23, 85.33,

85.41 items of commodities listed in the function components. Inductor of

heading 85.04. In fact, the same is inseparably integrated like integrated

circuits, as components, through the pin, lead wire, solder ball, bottom

contact, bump or conductive pressure points are connected to the printed

circuit board assembly (PCB) or other carrier, through the connecting of

pins, leads, balls, lands, bumps, or pads.

Standards for MCOs:

1) include integrated circuits;

2) multi element;

3) inseparable;

4) with external electrical connection;

5) installed on printed circuit boards or other carriers.

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2. Adjustment to the original commodity structure under Heading 8542, focusing on adjustments for“MCOs”(see

details in Table1)

Table 1: Adjustment of Commodity Structure and HS code

HS code Commodity MFN Duty Rate

（%）

VAT

Rate（%）

8542 Electronic integrated circuits:

-Electronic integrated circuits:

--Processors and controllers, whether or not combined with memories,

converter, logic circuit amplifier, clock and timing circuit or other circuit:

---Multi-component integrated circuits：

8542.3111 ----Semiconductor modules with converting function 5 17

8542.3111（interim）10 Automatic data processing equipment machine and assembly in multi

element integrated circuit, semiconductor module with variable kinetic

energy for telecommunication equipment

5 17

8542.3111（interim）90 Semiconductor module with variable current function in multi element

integrated circuit

5 17

8542.3119 ----Other 3.2,2.5 17

8542.3190 ---Other 0 17

--Memories

8542.3210 ---Multi-component integrated

Circuits

3.4,2.7 17

8542.3290 ---Other 0 17

--Amplifier

8542.3310 ---Multi-component integrated

Circuits

3.4,2.7 17

8542.3390 ---Other 0 17

--Other:

8542.3910 ---Multi-component integrated circuits 3.4,2.7 17

8542.3990 ---Other 0 17

8542.9000 -Parts 0 17

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3. Increase of tariff rate: The duty rate of integrated circuits under the original Heading

No. 8542 is zero, while in the new tariff book, if the product belongs to MCOs, a duty

rate ranging from 2.5%-5% is applicable depending on its function.

4. According to the “Amendment to Tariff Concession Schedule of the Accession of the

People’s Republic of China into the WTO”, MFN rate of information technological

products will decrease from 1 January 2017 to 30 June 2017, and the second tax

reduction will be implemented from 1 July 2017. (See details in Table 2)

Table 2: Adjustment of Duty Rate after 1 July 2017

HS code Commodity Duty Rate

%

(2017.01.01-

2017.06.30)

Duty Rate

%

(2017.07.01- )

8542311900 Other multi element integrated

circuit for processor and controller3.2 2.5

8542321000 Multi element integrated circuit for

memories3.4 2.7

8542331000 Multi element integrated circuit for

amplifier3.4 2.7

8542391000 Other multi element integrated

circuit3.4 2.7

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II. Monitors under Heading 8528

Based on the research and discussion with relevant

ministries like Ministry of Finance, GAC has made

adjustments to monitors with HDMI in the tariff

book and the tariff notes according to the revised

“Harmonized System”.

1. Adjustment under Heading 8528 (see details in

Table 3)

2. Standards for monitors capable of directly

connecting to and designed for use with an

automatic data processing machine of heading

84.71:

Monitors capable of receiving signals sent by CPU of

automatic data processing system and representing

processed data with graphs having the following

characteristics:

• They usually display signals of graph adapter

integrated by CPU of automatic data processing

sy stem ( monochrome or chromatic);

• No channel selector and video turner installed.

• Usually installed with contactors specific to data

processing system ( for example, RS-232C

interface, and DIN、SUB-D、VGA、DVI、HDMI

or DP (ports) contactor);

• The v isual image size of the monitor is no more

than 76cm (30 foot);

• The monitor’s display space (usually less than

0.3mm) is suitable for close v iew.

• Voice-frequency circuit and built-in speaker could

be equipped ( total power less than or equals to

2W);

• Control button is usually installed on front panel;

• Remote operation is not available;

• Mechanisms with tilt, rotation and height

adjustment functions could be installed. The

monitor has surface free from glare and flicker so

as to prolong the time for short distance v iew;

• The monitor can use wireless communication

protocol to display data from automatic data

processing system under heading 84.71.

Table 3: Adjustment under Heading 8528

HS code Commodity

85.28 Monitors and projectors, not incorporating television

reception apparatus: reception apparatus for television,

whether or not incorporating radio broadcast receivers

or sound or video recording or reproducing apparatus:

-Cathode-ray tube monitors:

8528.42 --Capable of directly connecting to and designed for

use with an automatic data processing machine of

heading 84.71

8528.49 --Other:

-Other monitors:

8528.52 --Capable of directly connecting to and designed for

use with an automatic data processing machine of

heading 84.71:

8528.59 --Other

-Projectors:

8528.62 --Capable of directly connecting to and designed for

use with an automatic data processing machine of

heading 84.71:

8528.69 --Other

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Commodity Structure under Heading 8703

Vehicles specially designed for trav elling on snow: golf cars and similar v ehicles — 8703.1

With engine

With spark-ignition engine — 8703.2

With compression-ignition engine — 8703.3

Hybrid Vehicles

Without plug

With both spark-ignition engine and electric motor — 8703.4

With both compression-ignition engine and electric motor — 8703.5

With plug

With both spark-ignition engine and electric motor — 8703.6

With both compression-ignition engine and electric motor — 8703.7

With motors for propulsion — 8703.8

III. Newly Added Items of New Energy Automobile under Heading 8703

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Suggestions from PwC

Upon above-mentioned changes, we suggest to:

1. Pay attention to commodity classification changes

Enterprises should keep an eye on changes of HS codes and classification in the 2017

“Customs Import and Export Tariff “. Enterprises with changed import and export

commodity classification should conduct a careful study on the product so as to avoid

delayed declaration or incorrect classification. Take integrated circuits under heading

8542 for example, although the HS codes of monolithic integrated circuits, hybrid

integrated circuits, multichip integrated circuits have been adjusted, the duty rates

remain the same. Thus, we suggest determining whether the imported and exported

products belong to multi element integrated circuit from the perspective of production

technology, internal elements, combination form, external electrical connection,

installation to carrier, etc. In addition, in order to ensure trading compliance and

avoid potential risks, enterprises can apply for customs classification administrative

ruling, pre-classification ruling or seek consulting advices from professional agencies.

2. Pay attention to financial implications due to import and export tariff

rate changes

The new tariff implementation scheme has adjusted import tariff of certain items.

MFN rate will change again after 1 July 2017 in line with ITA requirement. For

example, commodities originally under heading 8542 and 8571 with zero tariff rate are

now classified under heading 8542 with tariff rate ranging from 2.5%-3.4% depending

on purpose of use. The increase of tariff rate will result in import tax cost, which will

directly impact on margins.

3. In principle, tax refund rate remains unchanged in new tariff book

Some reference books have not provided tax refund rates under certain HS codes.

After inquiry, related adjustment usually takes one more month. Fundamentally it will

be decided in line with conversion relationship of tax refund rate, namely, generally

keeping original refund rate, and adopting lower rate for combined subheadings.

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PwC’s Customs & International Trade

Practice

Customs and international trade in China is complex,

but with the right approach is manageable. A planned

and structured approach results in cost savings,

higher levels of compliance and fewer unwanted

surprises during an audit. PricewaterhouseCoopers’

specialists within our Greater China customs and

international trade practice provide a wide range of

advice and services related to creating value, ensuring

compliance, and managing risk in relation to the

movement of goods into and out of China.

Contacts

For further assistance about PwC’s customs and

international trade services, please contact:

Susan Ju

Partner

PwC China, Beijing

+86 (10) 6533 3319 susan.ju@cn.pwc.com

Frank Wu

Director

PwC China, Shanghai

+86 (21) 2323 3864 frank.j.wu@cn.pwc.com

Derek Lee

Partner

PwC China, Shanghai

+86 (21) 2323 7733 derek.wc.lee@cn.pwc.com

Colbert Lam

Partner

PwC China, Shenzhen

+852 2289 3323 colbert.ky.lam@hk.pwc.com

For more information, please also v isit:

www.pwccustoms.com

This content is for general information purposes only, and should not be used as a substitute for consultation with professional a dvisors.

© 2017 PwC Worldtrade Management Services (Shanghai) Co., Ltd. All rights reserved. PwC refers to the PwC network and/or one or more of its

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