SpoNSoRED Feature
explanations and documents were prepared
to justify the actual gross margin from a com-
mercial perspective. Full compliance with the
Valuation Measures (GAC Order 148-2006)
was demonstrated and full cooperation with
Customs ensured. After several discussions
with Customs, an agreement with Customs
on the correct dutiable value was reached.
Outcome:
The assessment of additional duty by Cus-
toms was reduced by over 50% and a good
relationship was maintained, enabling future
imports to clear customs smoothly.
Case Study # 2 – Tariff Classification HS Code were identified. Inaccurate de- Strategy to Resolve:
Industry: Wind power generation equipment scriptions in documents previously provided An on-site review was conducted to find
manufacturing to Customs may have misled Customs to out the root causes for the Customs Hand-
consider use of another HS Code. A formal book imbalance. Based on this, the actual
Alleged Violation: explanation letter was prepared and submit- Handbook imbalance was re-assessed using
The Harmonised System (HS) Code de- ted to Customs to illustrate the arguments a more accurate Unit Consumption rate,
clared for the importation of equipment for and correct the previous misleading points. grouping and unit price. The final Handbook
the past three years was wrong. Customs Customs conducted a physical examination imbalance reported to Customs was signifi-
alleged “correct” HS Code attracted a 10% of the imported equipment and checked the cant reduced. A self-assessment report was
duty rate while the existing HS code declared explanation letter. submitted to Customs and request for ‘vol-
attracted a 3% duty rate. Customs indicat- Outcome: untary disclosure’ sought.
ed this “correct” HS Code was determined Customs agreed that the existing HS Code Outcome:
based on certain product data provided by was correct and did not impose any addition- The assessment of customs duty was re-
the Company. Customs required additional al duty/VAT and penalty. Future incoming duced to RMB 2.5 million (irrecoverable) and
duty/import VAT as well as penalty. shipments were not detained. import VAT to RMB 14 million (recover-
Amount of Potential Exposure: able). Administrative penalty was waived as
The duty/import VAT exposure for the Case Study #3 – Processing Trade Customs accepted the voluntary disclosure
last 3 years was around RMB 7 million and (domestic sales) approach.
the penalty was around Industry: High-tech man-
RMB 2 million. Cus- ufacturing Summary
To avoid
toms threatened that In 2010 Customs is expected to conduct
they may hold clearance detainment and Alleged Violation: hundreds of post-importation audits and
of future incoming
delay of shipments,
A customs audit was investigations. Companies need to have a
shipments until the is- initiated after the local well-planned strategy for responding to this
sue was resolved.
it’s important to
in-charge Customs de- scenario. Companies may consider conduct-
Strategy to Resolve:
understand laws
tected a significant Cus- ing a self-assessment in advance in order to
The first step was toms Handbook imbal- ensure key compliance areas are well covered,
surrounding post-
to agree with Customs ance. Customs alleged identify any weak points and implement an
on release of incom- importation audits and unauthorized domestic improvement plan. Companies should also
ing shipments based on
investigations
sales of bonded materi- establish an internal protocol for responding
the payment of a cash als had taken place due to an audit or investigation. Proactive efforts
deposit. The second to the “swap” of bond- need to be made in order to seek minimal
step was to complete a detailed review of the ed/non-bonded materials during production financial liability and avoid adverse impact in
product specifications (function, composi- by the Processing Trade Enterprise. daily operations and company reputation.
tion, working principle, etc.); discussion with Amount of Potential Exposure:
engineers to confirm; and reviewing docu- Customs duty payable up to RMB 4 mil-
ments already provided to Customs. A thor- lion and import VAT payable up to 17 mil- Damon R. Paling is a
ough research of the relevant tariff classifi- lion; an administrative penalty ranged from
partner at Pricewater-
houseCoopers. Based in
cation rules and rulings for similar products RMB 29 million to 40 million, and a poten-
Shanghai, he consults on
was also conducted. Based on this, strong tial downgrading of Enterprise Classification
customs, trade and supply
arguments to support the existing declared from Category “B” to “C”.
chain issues.
www.supplychains.com MARCH/APRIL 2010 57
Page 1  |  Page 2  |  Page 3  |  Page 4  |  Page 5  |  Page 6  |  Page 7  |  Page 8  |  Page 9  |  Page 10  |  Page 11  |  Page 12  |  Page 13  |  Page 14  |  Page 15  |  Page 16  |  Page 17  |  Page 18  |  Page 19  |  Page 20  |  Page 21  |  Page 22  |  Page 23  |  Page 24  |  Page 25  |  Page 26  |  Page 27  |  Page 28  |  Page 29  |  Page 30  |  Page 31  |  Page 32  |  Page 33  |  Page 34  |  Page 35  |  Page 36  |  Page 37  |  Page 38  |  Page 39  |  Page 40  |  Page 41  |  Page 42  |  Page 43  |  Page 44  |  Page 45  |  Page 46  |  Page 47  |  Page 48  |  Page 49  |  Page 50  |  Page 51  |  Page 52  |  Page 53  |  Page 54  |  Page 55  |  Page 56  |  Page 57  |  Page 58  |  Page 59  |  Page 60  |  Page 61  |  Page 62  |  Page 63  |  Page 64  |  Page 65  |  Page 66  |  Page 67  |  Page 68