Post on 23-Jun-2020
© 2019 KPMG Advisory (China) Limited, a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
China Government Is Ready to Implement Product Exclusion Process for
Retaliatory Tariffs on US Origin Products
Background
Since April this year, escalation of the economic and trade conflict between China and the US adversely affected companies in both countries. On May 13th 2019, the Tariff Commission of the State Council (hereinafter referred to as "the Tariff Commission") issued “Circular Regarding the Trial Implementation of Product Exclusion Process for Retaliatory Tariffs on US Origin Products” (“Circular No. 2”), to announce that the application can start to be submitted from June 3rd 2019. Circular No. 2 outlines that products could be granted exclusion from paying retaliatory tariffs if they meet with certain criterion and retaliatory tariffs can be refunded for products that fulfil with certain conditions.
Measures to apply for product exclusion
Eligible applicants
• Chinese enterprises who import, process, or use the relevant imports of US origin products;
• Relevant industry associations and chambers of commerce.
Scope of products that can be applied for exclusion
Batch One:
• Products subject to retaliatory tariffs since July 6th 2018, according to List 1 attached to Tariff Commission Circular [2018] No. 5;
• Products subject to retaliatory tariffs since August 23rd 2018, according to List 2 attached to Tariff Commission Circular [2018] No. 7;
Regulations discussed in this issue of Express:
• Circular [2019] No. 2 released by the Tariff Commission of the State Council, “Circular Regarding the Trial Implementation of Product Exclusion Process for Retaliatory Tariffs on US Origin Products”
China Tax Alert Issue 16, May 2019
© 2019 KPMG Advisory (China) Limited, a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
Batch Two:
• Products subject to retaliatory tariffs since September 24th 2018 (of which some of the retaliatory tariff rates will be raised since June 1st 2019), according to List 1-4 attached to Tariff Commission Circular [2018] No. 6.
Note: Automobiles and spare parts thereof, which are temporarily suspended from retaliatory tariffs according to Tariff Commission Circular [2018] No. 10 and Tariff Commission Circular [2019] No. 1, are not within the scope.
Application channel and timelines
• Applications should be submitted through the relevant website of Ministry of Finance (https://gszx.mof.gov.cn/);
• Products under different 8-digit tariff items shall be applied separately;
• Batch One products shall be applied during June 3rd 2019 to July 5th 2019, and Batch Two products shall be applied during September 2nd 2019 to October 18th 2019.
Review focus of the Tariff Commission
The Tariff Commission will review applications for product exclusion mainly from the following three angles:-
• Difficulties in finding replacement products; • Severe financial harms caused by retaliatory tariffs on the
applicants; and • Significant structural harms on the relevant industries or severe
social consequences cause by retaliatory tariffs.
Benefits from a successful product exclusion application
• Products on exclusion lists will be exempted from corresponding retaliatory tariffs for one year, starting from the enforcement date of the exclusion lists;
• The relevant importers can apply for the refund of retaliatory tariffs levied, in the event that refund conditions can be satisfied (e.g., the product is under an 8-digit tariff item entirely excluded from retaliatory tariffs, or the product is distinguished with a specific HS code).
KPMG Observation
KPMG recommends that Chinese importers of US origin products subject to retaliatory tariffs to seize this opportunity and fully assess the impact of retaliatory tariffs on business and the necessity of product exclusion application. Before raising a product exclusion application, attention should be paid to the following matters:-
Format requirements for product exclusion applications
As stipulated by Circular No. 2, applications should be submitted through the website of the Tariff Research Center of Ministry of Finance. However, Circular No. 2 only provided general guidance without sufficient details. Companies that would like to join the application are
© 2019 KPMG Advisory (China) Limited, a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
required to prepare in advance the information that may need to be filled based on Circular No. 2, and then revise and supplement necessary information to fulfill with the application format as soon as the website is online, in order to ensure that the content of the application could meet the requirements of the Tariff Commission.
Retroactive period for tariff refund
Circular No. 2 stipulates that refund can be granted to importers for retaliatory tariffs levied if necessary conditions are satisfied, without a clarification about the retrospective period of the refund. We understand that such retroactive period as well as other practical matters related to the refund may be published along with the exclusion list once the exclusion list is in place.
US origin automobile and spare parts
Circular No. 2 mentioned that automobiles or spare parts that originate from China are suspended or ceased being subject to the retaliatory tariffs, hence cannot be applied for product exclusion. In view of the fact that some automobile parts have not been included into the list attached to Circular [2019] No. 3 regarding raising the rates of retaliatory tariffs, many media and professionals speculate that the “suspension of retaliatory tariffs” have been changed to "discontinue of retaliatory tariffs”. According to our understanding, in the absence of further policies announced by the Tariff Commission, automobile and automobile parts are still under the status of being “suspended” from retaliatory tariffs, which means China government may resume the retaliatory tariffs on US origin automobiles and spare parts in the future.
Suggestions from KPMG
Any importers or business that decides to submit an application for product exclusion need to prepare in accordance with the three aspects concerned by the Tariff Commission. The applicant can state relevant objective facts and quantitative data in connection with negative impacts from retaliatory tariffs, and demonstrate the necessity of putting the relevant product into the exclusion lists from the following perspectives:
• Chinese business are not able to acquire replacement products from reliable source other than the US, the retaliatory tariffs cannot attain its goal as a countermeasure to the US;
• The impacts of additional tariff burdens on the enterprise and its related upstream and downstream industries are severe; and
• The imposed retaliatory tariffs on the relevant products may bring significant negative influences to China's social development.
KPMG Trade and Customs team has extensive experience in assisting enterprises to participate in tariff policy-making and cope with challenges under the climate of China-US trade conflict. Our team can provide valuable guidance and assistance to enterprises in selecting products for exclusion applications, researching for and developing the arguments for product exclusion applications, and establishing communication channels.
© 2018 KPMG, a Hong Kong partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. © 2016 KPMG Advisory (China) Limited, a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.
© 2019 KPMG Advisory (China) Limited, a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
The KPMG name and logo are registered trademarks or trademarks of KPMG International.
并肩赋能
税道渠成
© 2018 KPMG, a Hong Kong partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. © 2018 KPMG Advisory (China) Limited, a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. The KPMG name and logo are registered trademarks or trademarks of KPMG International.
The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Althoughwe endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received orthat it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thoroughexamination of the particular situation.
© 2019 KPMG Advisory (China) Limited, a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. The KPMG name and logo are registered trademarks or trademarks of KPMG International.
Contact us
并肩赋能税道渠成
Northern Region
Eastern and Western Region
Southern Region
Eric ZhouChina Trade and Customs ServicesLead PartnerEmail: ec.zhou@kpmg.com Tel: +86 (10) 8508 7610
Helen HanPartnerEmail: h.han@kpmg.com Tel: +86 (10) 8508 7627
Anthony ChauPartnerEmail: anthony.chau@kpmg.com Tel: +86 (21) 2212 3206
Dong ChengPartnerEmail: cheng.dong@kpmg.com Tel: +86 (21) 2212 3410
Rachel TaoDirectorEmail: rachel.tao@kpmg.com Tel: +86 (21) 2212 3473
Grace LuoPartnerEmail: grace.luo@kpmg.comTel: +86 (20) 3813 8609
Vivian ChenPartnerEmail: vivian.w.chen@kpmg.comTel: +86 (755) 2547 1198
Phillip Xia
DirectorEmail: Philip.xia@kpmg.comTel: +86 (20) 3813 8674
Daniel HuiPartnerEmail: daniel.hui@kpmg.comTel: +852 2522 7815
Hong Kong
© 2019 KPMG, a Hong Kong partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. © 2019 KPMG Advisory (China) Limited, a wholly foreign owned enterprise in China and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
For any enquiries, please send to our public mailbox: taxenquiry@kpmg.com or contact our partners/directors in each China/HK offices.
The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate andtimely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on suchinformation without appropriate professional advice after a thorough examination of the particular situation.
Contact Us
Khoonming HoHead of Tax,KPMG Asia PacificTel. +86 (10) 8508 7082khoonming.ho@kpmg.com
Lewis LuHead of Tax,KPMG China Tel. +86 (21) 2212 3421lewis.lu@kpmg.com
Beijing/Shenyang/QingdaoVincent PangTel. +86 (532) 8907 1728vincent.pang@kpmg.com
TianjinEric ZhouTel. +86 (10) 8508 7610ec.zhou@kpmg.com
Shanghai/Nanjing/ChengduAnthony ChauTel. +86 (21) 2212 3206anthony.chau@kpmg.com
HangzhouJohn WangTel. +86 (571) 2803 8088john.wang@kpmg.com
GuangzhouLilly LiTel. +86 (20) 3813 8999lilly.li@kpmg.com
Fuzhou/XiamenMaria MeiTel. +86 (592) 2150 807maria.mei@kpmg.com
ShenzhenEileen SunTel. +86 (755) 2547 1188eileen.gh.sun@kpmg.com
Hong KongKarmen YeungTel. +852 2143 8753karmen.yeung@kpmg.com
Northern Region
Vincent PangHead of Tax,Northern RegionTel. +86 (10) 8508 7516
+86 (532) 8907 1728vincent.pang@kpmg.com
Conrad TURLEYTel. +86 (10) 8508 7513conrad.turley@kpmg.com
Yali ChenTel. +86 (10) 8508 3036yali.chen@kpmg.com
Milano FangTel. +86 (532) 8907 1724milano.fang@kpmg.com
Tony FengTel. +86 (10) 8508 7531tony.feng@kpmg.com
Flora FanTel. +86 (10) 8508 7611flora.fan@kpmg.com
John GuTel. +86 (10) 8508 7095john.gu@kpmg.com
Rachel GuanTel. +86 (10) 8508 7613rachel.guan@kpmg.com
Helen HanTel. +86 (10) 8508 7627h.han@kpmg.com
Michael WongTel. +86 (10) 8508 7085michael.wong@kpmg.com
Henry KimTel. +86 (10) 8508 5000henry.kim@kpmg.com
Ruby JiangTel. +86 (10) 8553 3680ruby.jiang@kpmg.com
David Ling Tel. +86 (10) 8508 7083david.ling@kpmg.com
Lisa LiTel. +86 (10) 8508 7638lisa.h.li@kpmg.com
Lucia LiuTel. +86 (10) 8508 7570lucia.jj.liu@kpmg.com
Shirley LiTel. +86 (10) 8553 3758shirley.s.li@kpmg.com
Alan O’ConnorTel. +86 (10) 8508 7521alan.oconnor@kpmg.com
Shirley ShenTel. +86 (10) 8508 7586yinghua.shen@kpmg.com
Joseph TamTel. +86 (10) 8508 7605laiyiu.tam@kpmg.com
Joyce TanTel. +86 (10) 8508 7666joyce.tan@kpmg.com
Christopher XingTel. +86 (10) 8508 7072christopher.xing@kpmg.com
Kensuke MATSUDATel. +86 (10) 8508 7034kensuke.matsuda@kpmg.com
Irene YanTel. +86 (10) 8508 7508irene.yan@kpmg.com
Adams YuanTel. +86 (10) 8508 7596adams.yuan@kpmg.com
Jessie ZhangTel. +86 (10) 8508 7625jessie.j.zhang@kpmg.com
Sheila ZhangTel: +86 (10) 8508 7507sheila.zhang@kpmg.com
Tracey ZhangTel. +86 (10) 8508 7509tracy.h.zhang@kpmg.com
Eric ZhouTel. +86 (10) 8508 7610ec.zhou@kpmg.com
Vivian ZhouTel. +86 (10) 8508 3360v.zhou@kpmg.com
Carol ChengTel. +86 (10) 8508 7644carol.y.cheng@kpmg.com
Ally MiTel. +86 (10) 8508 7583ally.mi@kpmg.com
Kenny WangTel. +86 (10) 8508 7655kenny.wang@kpmg.com
Fiona YuTel. +86 (10) 8508 7663fiona.yu@kpmg.com
Lily ZhangTel. +86 (10) 8508 7545lily.l.zhang@kpmg.com
Eric ZhaoTel. +86 (10) 8508 7493eric.zhao@kpmg.com
Laura XuTel. +86 (532) 8907 1731laura.xu@kpmg.com
Eastern and Western Region
Anthony ChauHead of Tax,Eastern & Western RegionTel. +86 (21) 2212 3206anthony.chau@kpmg.com
Cheng ChiTel. +86 (21) 2212 3433cheng.chi@kpmg.com
Johnny DengTel. +86 (21) 2212 3457johnny.deng@kpmg.com
Cheng DongTel. +86 (21) 2212 3410cheng.dong@kpmg.com
Chris GeTel. +86 (21) 2212 3083chris.ge@kpmg.com
Chris HoTel. +86 (21) 2212 3406chris.ho@kpmg.com
Henry WongTel. +86 (21) 2212 3380henry.wong@kpmg.com
Sunny LeungTel. +86 (21) 2212 3488sunny.leung@kpmg.com
Michael LiTel. +86 (21) 2212 3463michael.y.li@kpmg.com
Karen LinTel. +86 (21) 2212 4169karen.w.lin@kpmg.com
Benjamin LuTel. +86 (21) 2212 3462benjamin.lu@kpmg.com
Christopher MakTel. +86 (21) 2212 3409christopher.mak@kpmg.com
Naoko HirasawaTel. +86 (21) 2212 3098naoko.hirasawa@kpmg.com
Ruqiang PanTel. +86 (21) 2212 3118ruqiang.pan@kpmg.com
Amy RaoTel. +86 (21) 2212 3208amy.rao@kpmg.com
Wayne TanTel. +86 (28) 8673 3915wayne.tan@kpmg.com
Tanya TangTel. +86 (25) 8691 2850tanya.tang@kpmg.com
Rachel TaoTel. +86 (21) 2212 3473 rachel.tao@kpmg.com
Janet WangTel. +86 (21) 2212 3302janet.z.wang@kpmg.com
John WangTel. +86 (571) 2803 8088john.wang@kpmg.com
Mimi WangTel. +86 (21) 2212 3250mimi.wang@kpmg.com
Jennifer WengTel. +86 (21) 2212 3431jennifer.weng@kpmg.com
Grace XieTel. +86 (21) 2212 3422grace.xie@kpmg.com
Bruce XuTel. +86 (21) 2212 3396bruce.xu@kpmg.com
Jie XuTel. +86 (21) 2212 3678jie.xu@kpmg.com
Robert XuTel. +86 (21) 2212 3124robert.xu@kpmg.com
Jason YuTel. +86 (21) 2212 3316jjm.yu@kpmg.com
William ZhangTel. +86 (21) 2212 3415william.zhang@kpmg.com
Hanson ZhouTel. +86 (21) 2212 3318hanson.zhou@kpmg.com
Michelle ZhouTel. +86 (21) 2212 3458michelle.b.zhou@kpmg.com
Eric ZhangTel. +86 (21) 2212 3398eric.z.zhang@kpmg.com
Kevin ZhuTel. +86 (21) 2212 3346kevin.x.zhu@kpmg.com
Leon ShaoTel. +86 (21) 2212 3622leon.shao@kpmg.com
Joyce WangTel. +86 (21) 2212 3387joyce.t.wang@kpmg.com
Robin XiaoTel. +86 (21) 2212 3273robin.xiao@kpmg.com
Ellen YanTel. +86 (21) 2212 3484ellen.yan@kpmg.com
Tim ZengTel. +86 (21) 2212 3759tim.zeng@kpmg.com
Southern Region
Lilly LiHead of Tax,Southern RegionTel. +86 (20) 3813 8999lilly.li@kpmg.com
Vivian ChenTel. +86 (755) 2547 1198 vivian.w.chen@kpmg.com
Nicole CaoTel. +86 (20) 3813 8619nicole.cao@kpmg.com
Felix FengTel. +86 (20) 3813 7060Felix.feng@kpmg.com
Ricky GuTel. +86 (20) 3813 8620ricky.gu@kpmg.com
Fiona HeTel. +86 (20) 3813 8623fiona.he@kpmg.com
Cloris LiTel. +86 (20) 3813 8829cloris.li@kpmg.com
Jean LiTel. +86 (755) 2547 1128jean.j.li@kpmg.com
Sisi LiTel. +86 (20) 3813 8887sisi.li@kpmg.com
Kelly LiaoTel. +86 (20) 3813 8668kelly.liao@kpmg.com
Patrick LuTel. +86 (755) 2547 1187patrick.c.lu@kpmg.com
Grace LuoTel. +86 (20) 3813 8609grace.luo@kpmg.com
Ling Lin Tel. +86 (755) 2547 1170ling.lin@kpmg.com
Maria Mei Tel. +86 (592) 2150 807maria.mei@kpmg.com
Chris XiaoTel. +86 (20) 3813 8630chris.xiao@kpmg.com
Eileen SunTel. +86 (755) 2547 1188eileen.gh.sun@kpmg.com
Koko TangTel. +86 (755) 2547 4180koko.tang@kpmg.com
Bin YangTel. +86 (20) 3813 8605bin.yang@kpmg.com
Lixin ZengTel. +86 (20) 3813 8812lixin.zeng@kpmg.com
Nicole ZhangTel. +86 (20) 3813 8644nicole.ll.zhang@kpmg.com
Bruce LiuTel. +86 (20) 3813 8636bruce.liu@kpmg.com
Sophie LuTel. +86 (20) 2547 1141ss.lu@kpmg.com
Fiona WuTel. +86 (20) 3813 8606fiona.wu@kpmg.com
Philip XiaTel. +86 (20) 3813 8674philip.xia@kpmg.com
Hong Kong
Curtis NgHead of Tax, Hong KongTel. +852 2143 8709curtis.ng@kpmg.com
Ayesha M. LauTel. +852 2826 7165ayesha.lau@kpmg.com
Darren BowdernTel. +852 2826 7166darren.bowdern@kpmg.com
Patrick CheungTel. +852 3927 4602patrick.p.cheung@kpmg.com
Wade WagatsumaTel. +852 2685 7806wade.wagatsuma@kpmg.com
Natalie ToTel. +852 2143 8509natalie.to@kpmg.com
Elizabeth DE LA CRUZTel. +852 2826 8071elizabeth.delacruz@kpmg.com
Matthew FenwickTel. +852 2143 8761matthew.fenwick@kpmg.com
Sandy FungTel. +852 2143 8821sandy.fung@kpmg.com
Charles KinsleyTel. +852 2826 8070charles.kinsley@kpmg.com
Stanley HoTel. +852 2826 7296stanley.ho@kpmg.com
Becky WongTel. +852 2978 8271becky.wong@kpmg.com
Barbara ForrestTel. +852 2978 8941barbara.forrest@kpmg.com
Kate LaiTel. +852 2978 8942kate.lai@kpmg.com
Travis LeeTel. +852 2143 8524travis.lee@kpmg.com
Irene LeeTel. +852 2685 7372irene.lee@kpmg.com
Alice LeungTel. +852 2143 8711alice.leung@kpmg.com
Ivor MorrisTel. +852 2847 5092ivor.morris@kpmg.com
Benjamin PongTel. +852 2143 8525benjamin.pong@kpmg.com
Malcolm PrebbleTel. +852 2684 7472malcolm.j.prebble@kpmg.com
David SiewTel. +852 2143 8785david.siew@kpmg.com
Murray SareliusTel. +852 3927 5671murray.sarelius@kpmg.com
John TimpanyTel. +852 2143 8790john.timpany@kpmg.com
Lachlan WolfersTel. +852 2685 7791lachlan.wolfers@kpmg.com
Daniel HuiTel. +852 2685 7815daniel.hui@kpmg.com
Karmen YeungTel. +852 2143 8753karmen.yeung@kpmg.com
Adam ZhongTel. +852 2685 7559adam.zhong@kpmg.com
Eva ChowTel. +852 2685 7454eva.chow@kpmg.com
Anthony PakTel. +852 2847 5088anthony.pak@kpmg.com
Gabriel HoTel. +852 3927 5570gabriel.ho@kpmg.com
Vivian TuTel. +852 2913 2578vivian.l.tu@kpmg.com
Eugene YeungTel. +852 2143 8575eugene.yeung@kpmg.com
Alexander ZEGERSTel. +852 2143 8796zegers.alexander@kpmg.com
kpmg.com/cn