I. What Is Post-Clearance Supervision of Duty-Free and Tax-Reduced Goods?
Under the Measures of the Customs of the People's Republic of China for the Administration of the Tax Reductions and Exemptions for Imported and Exported Goods (Order of the General Administration of Customs of the People's Republic of China, No. 245), and unless otherwise specified by the General Administration of Customs, applicants for tax reduction or exemption must store, use, and manage imported duty-free or tax-reduced goods in accordance with Customs regulations and accept ongoing supervision throughout the Customs supervision period. Applicants for tax reduction or exemption are required to submit an annual Report on the Usage Status of Duty-Free and Tax-Reduced Goods to the supervising Customs authority by June 30 (inclusive), reporting the usage status of such goods throughout the Customs supervision period.
Please note: Failure to submit the usage report of such duty-free and tax-reduced goods as required will result in the Customs authority refusing any subsequent applications related to duty exemption or reduction.
II. Customs Supervision Period
Unless otherwise specified by the General Administration of Customs, the supervision periods for imported duty-free and tax-reduced goods are as follows:
(I) Vessels and aircraft: 8 years;
(II) Motor vehicles: 6 years;
(III) Other goods: 3 years.
The supervision period begins on the date the goods are released by Customs.
Within the Customs supervision period and for three years after its expiration, Customs may conduct audits on the concerned enterprises or entities regarding their importation and use of duty-free and tax-reduced goods, in accordance with the Customs Law of the People’s Republic of China, the Regulations of the People's Republic of China for Customs Audits, and other relevant provisions.
III. Change of Entity
(I) Entity Restructuring
Within the Customs supervision period, if the applicant for tax reduction or exemption undergoes a change in entity status such as division, merger, change in shareholders, or restructuring, the successor entity obligated to assume its rights and duties shall, within 30 days from the date of the change registration, report the change in entity status together with the status of the relevant duty-free and tax-reduced goods to the original supervising Customs authority.Upon approval by the original supervising Customs authority of the applicant for tax reduction or exemption, the successor entity obligated to assume its rights and duties shall complete relevant formalities such as payment of outstanding tax or carry-over of such goods.
(II) Termination of the Applicants for Tax Reduction or Exemption
In case the applicants for tax reduction or exemption cease operations due to bankruptcy, revocation, dissolution, restructuring, or other circumstances:
1. If there is a successor obligated to assume its rights and duties, follow the procedures outlined for entity restructuring.
2. If there is no successor obligated to assume its rights and duties, the original applicant for tax reduction or exemption or other parties legally obligated to pay tariffs and import taxes must apply to the original supervising Customs authority of the applicant for tax reduction or exemption within 30 days of asset liquidation to settle payments of outstanding tax and other necessary procedures. For goods subject to import licensing requirements, the corresponding license(s) must also be submitted.
IV. Disposal of Goods
(I) Change of Use Location
Within the Customs supervision period, duty-free and tax-reduced goods must be used at locations approved by the supervising Customs authority.
1. To change the use location, an application must be submitted to the supervising Customs authority with appropriate justification and may be carried out only upon approval by corresponding Customs.
2.To use the goods outside the jurisdiction of the supervising Customs office, an application for off-site supervision procedures must be submitted to the competent Customs authority. Once the off-site use is completed, the obligor shall promptly apply to the Customs office at the destination for the conclusion of the off-site supervision procedures.
(II) Re-export
Within the Customs supervision period, a request by the applicant for tax reduction or exemption to re-export products is subject to approval by the supervising Customs authority and the completion of relevant procedures.
(III) Mortgage
Within the Customs supervision period, to use duty-free and tax-reduced goods as collateral for a loan, corresponding entity must apply to the supervising Customs authority and provide a Customs-approved property or right as tax security.
Please note: Loans must be obtained from banks or non-bank financial institutions; mortgages to natural persons, legal persons, or unincorporated organizations are not permitted.
Upon approval by the supervising Customs authority, the applicant for tax reduction or exemption must submit the mortgage and loan contracts to the supervising Customs authority for record within 30 days of signing of such mortgage and loan contracts.
To extend the loan mortgage, the obligor must apply to the supervising Customs authority for approval before the current term expires.
(IV) Transfer
Within the Customs supervision period, if the duty-free and tax-reduced goods are to be transferred to another entity that is eligible for the same duty exemption or reduction treatment on the same type of imported goods, the authorized entity shall apply to the supervising Customs authority for transfer procedures. The remaining supervision period of such goods shall continue to be calculated consecutively.
If the goods are to be transferred to an entity not eligible for preferential policies or treatment, the authorized entity shall, in advance, apply to the supervising Customs authority to pay outstanding taxes. For goods subject to import licensing requirements, the corresponding license(s) must also be submitted.
(V) Change of Use
Within the Customs supervision period, any intended change in the use of the duty-free and tax-reduced goods shall require an application to the supervising Customs authority.
A change of use includes the following cases:
1. Allowing entities other than the authorized applicant for tax reduction or exemption to use the goods;
2. Using the duty-free and tax-reduced goods for purposes other than the originally declared use;
3. Using the duty-free and tax-reduced goods outside the originally approved region.
Unless otherwise specified by the General Administration of Customs, changes under item 1 shall require advance payment of outstanding taxes corresponding to the duration of the changed use. If the duration cannot be determined, a tax guarantee shall be provided.
(VI) Release from Supervision
1. Supervision for duty-free and tax-reduced goods shall be automatically lifted upon expiration of the Customs supervision period.
2. Supervision shall also be released upon completion of relevant formalities for the duty-free and tax-reduced goods, or from the date of their re-exportation.
3. If the authorized applicant for tax reduction or exemption requests early release from supervision, it shall apply to the supervising Customs authority, pay any outstanding taxes, and, for goods subject to licensing requirements, do submit the relevant license(s).
Within one year from the date of release, the authorized applicants for tax reduction or exemption may apply to the supervising Customs authority for the Certificate of Release from Customs Supervision for Imported Duty-Free and Tax-Reduced Goods of the People's Republic of China.
