Since early February, COVID-19 has had a huge impact on businesses in China. While the rest of the world is now experiencing what has become a pandemic, in China, domestic cases have reduced significantly, and so companies are now trying to resume normal business. The Chinese government has announced a series of new legislation and policies to ease the impact of COVID-19. These include tax cuts, reduction of social insurance fund contribution, exemption of import duty etc.
Companies in China are struggling to fight against the dual economic and commercial effects of COVID-19 as well as US-China trade dispute.
The protracted trade war between China and the US ended in January 2020 with the signing of phase one of the trade deal. The US ceased adding new tariffs on Chinese goods, but still maintained high tariffs that had previously been imposed. which the Chinese government responded to imposing their own tariffs on US products.
The State Council in China published an “Announcement of the Customs Tariff Commission of the State Council on Exclusion of Goods under Market-oriented Procurement from Additional Tariff against U.S.” (Announcement  No.2) on 17 February 2020. In fact, this is not new. The State Council published similar announcements in 2019 encouraging companies affected by the trade war to apply for tariff exclusion.
For Announcement No. 2, there are 696 items in total of goods included, including medical equipment, IT system related equipment, valves, metal products, wood, medicine, seafood and poultry etc. You can see the complete product list here.
A company importing goods in the list above may apply for a tariff exclusion the Ministry of Finance’s online system here. As part of the process, the applicant needs to explain the impact of the additional tariff on its business, reasons why purchasing from a US supplier is unavoidable. If the explanation is reasonable, the exclusion will be granted, and the additional tariff would not be imposed. The application came into force on 2 March 2020.
The review of the exclusion application is case by case. Based on our understanding from discussions with relevant authorities, the reasoning and logic of the explanation will help them decide whether an exclusion should be granted. We recommend companies purchasing from the US check the list to see whether your products are there. If yes, the companies should make an application.
This article is the first in a series from our team in China about the Chinese government incentives and policies to mitigate the commercial and economic impact of COVID-19.
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