On November 11, Hainan General Administration of Taxation issued “the first free trade tariff list of Hainan Province”. The first batch of “zero tariffs” raw materials and auxiliary materials include coconut, other agricultural products, coal, other resource products, chemicals such as xylene, optical fiber preform, other raw and auxiliary materials, as well as aircraft, other aircraft and ship maintenance parts, a total of 169 items of 8-level tariff commodities. The notice below will be formally implemented from December 1, 2020.
Before the operation of the island-wide customs clearance, for enterprises registered in Hainan Free Trade Port as independent legal entities, the imported raw and auxiliary materials consumed for own production, for import-process-export production activities, or for import-service-export in the process of trade-in service, are exempt from import duties, import value-added taxes and consumption taxes.
Zero-tariff raw and auxiliary materials are subject to positive list management. The contents of the list are dynamically adjusted by the Ministry of Finance and relevant departments in accordance with the actual needs and regulatory conditions of Hainan.
Parts and components are subject to the zero-tariff policy for raw and auxiliary materials and should be used for maintenance of aircraft and ship (including maintenance of related parts and components). Import tariffs, import value-added taxes, and consumption taxes could be exempted if items are used to repair and maintain aircraft or ships that would be re-transported out of China; operated by aviation companies whose main operating base is in Hainan, or operated by shipping companies registered in Hainan as independent legal entities and whose port of registry are ports in Hainan Province.
Zero-tariff raw and auxiliary materials are restricted to production and use by enterprises in the Hainan Free Trade Port, subject to customs supervision, and are prohibited to be transferred within or leave the island. In case of real necessity for the materials to be transferred or leave the island due to bankruptcy and other reasons, approval must be obtained taxes should be paid. For goods processed and manufactured with zero-tariff raw and auxiliary materials to be sold on the island or in the mainland, import tariff, import value-added tax, and consumption tax of the corresponding materials must be paid, and domestic value-added tax and consumption tax shall be collected according to regulations. The export of goods processed and manufactured with zero-tariff raw and auxiliary materials shall be implemented in accordance with current tax policies for export goods.
Enterprises importing raw materials listed in the positive list and voluntarily paying import value-added tax and consumption tax can apply at customs declaration.
Relevant departments should strengthen supervision through information-based and other means, prevent and control possible risks, promptly investigate and deal with violations, and ensure the smooth operation of the zero-tariff policy for raw and auxiliary materials. Relevant departments of Hainan Province should strengthen information inter-connectivity and share regulatory information on aircraft and ships.