Introduction to Customs Duties

Ⅰ. Introduction to Customs Duties

Customs duty is an important part of national tax revenue, a chief source of Central fiscal revenue, and also a means of the contracting parties of the World Trade Organization to protect their domestic economies. Levying tax legally is one of the main tasks of the Customs.

(Ⅰ) The Definition

Customs duty is a kind of circulation tax levied on the goods and articles entering or leaving the customs territory by the Customs on behalf of the nation in conformity with the tariff policies formulated by the nation as well as the tax laws and the import and export tariffs promulgated and implemented by the nation.

Customs duty is a kind of national tax revenue, which is its most essential nature. The nation is the subject of taxation of Customs duty. Customs duty is collected from the taxpayers by the Customs on behalf of the nation. The object of taxation is the goods and articles entering or leaving the customs territory. The laws, the administrative rules and regulations formulated by the nation are the foundation of the Customs duty collection.

The importance of Customs duty is determined by its basic nature. Although the function of Customs duty is not entirely the same in different times of different countries, the basic function of it is the consistent embodiment of national sovereignty. The purpose of customs duty collection is to maintain sovereignty and promote the national economic construction.

Practically, the so-called "Import Duties and Taxes" in some international conventions and agreements differ with the concept of Import Customs Duties. "Import Duties and Taxes" include Import Customs Duties and other domestic taxes levied on the imported goods. After going through duty-levying procedure and approved by the customs, imported goods should be regarded as the domestic commodities and treated equally with home-made commodities, and therefore, should be levied domestic taxes likewise.
Usually, domestic taxes are levied by the customs during import period, but they don't fall into the category of customs duties.

The Customs Law of the People's Republic of China prescribes that the Customs of China should levy taxes legally on the import and export goods and the articles entering or leaving its customs territory. Some international agreements limit the definition of customs duties to the tax levied according to the import and export tariffs. The definition excludes anti-dumping duties, anti-subsidy duties and retaliatory taxes, which are not listed in the tariffs.

As prescribed in the Customs Laws of the People's Republic of China, the consignee of the import goods, the consignor of the export goods and the owner of the articles entering or leaving the customs territory are the taxpayers of customs duties.
Taxpayers of customs duties have the right to make inquiries about customs duties, to enjoy legal tax-reduction and tax-exemption, to require the customs to return the over-levied tax, to apply to the customs for an administrative reconsideration in conformity with the legal procedure or to file an administrative suit in the People's Court when objecting to the decision of customs on duty collection, At the same time, the taxpayers of customs duties have the obligation to accept legal supervision and control of the customs, to make truthful declaration to the customs about the condition of the import and export goods or articles entering or leaving the customs territory; to accept the audit of the customs, and to pay the amount of tax ratified by the customs within the time limit according to the law. The taxpayer should bear the corresponding legal responsibility for his behaviors violating the Customs Law.

(Ⅱ) The Object of Taxation

It is prescribed by law that the object of taxation, also known as the tax object, refers to the goods or articles entering or leaving the customs territory of a country, which is the material basis of the obligation of customs duties. The object of taxation is the core element of customs duty system. It is a key standard to distinguish customs duties from other categories of taxes and is also the basis of determining other elements of customs duty system.

The detailed division of the object of taxation is called tax items in the customs tariff. The purpose of the detailed division of the object of taxation is to calculate the actual amount of dutiable customs duties. The Customs Law of the People's Republic of China prescribes that different customs duty rates should be applied according to different objects of taxation. In addition, the exemption and reduction of customs duties is also determined by the different objects of taxation.

(Ⅲ) The Classification of Customs Duties

The customs duty can be divided into different categories according to different standards or from different angles. According to the flow direction of the import and export goods, it can be divided into import duties, export duties and transit duties; according to the taxation standard(or taxation method), it can be divided into ad valorem duties, specific duties, mixed duties (including compound duties, alternative duties), sliding duties, seasonal duties, variable levies, etc; according to the nature of the customs duty, it can be divided into ordinary customs duties, preferential duties (most-favored-nation duties, preferential duties, generalized system of perference, etc), differential duties (anti-dumping duties, anti-subsidy duties and retaliatory taxes); according to the primary purpose of tax collection, it can be divided into revenue duties and protective duties, which are the concepts of customs duties sometimes used in making customs policies; according to the restrictions from other countries or international organizations when formulating customs duties, it can be divided into autonomous tariffs, non-autonomous tariffs, state-designated duties, agreement tariffs, and bound tariffs, etc.

Customs duties can also be divided into principle duties and additional duties; the latter is as opposed to the former. The principle duty is the regular duty specifically listed in the customs tariffs while the additional duty is a kind of duty levied besides the principle duty due to some specific needs. Usually additional duties are temporary or provisional.

According to the related regulations of the WTO, dumping should be condemned and the victim country is entitled to levy a certain amount of anti-dumping duty on the dumping imports to countervail dumping or prevent its further move. Whether or not to form a dumping is a sensitive economic, even political problem, therefore, it is quite necessary to form a clear-cut, scientific concept of dumping and to distinguish different types of dumping, which is also the premise of proper application of anti-dumping duties. In order to protect fair competition, to prevent dumping and the abuse of anti-dumping measures, the Agreement on Implementation of Article VI of GATT 1994 (the Agreement) - one of the Agreements of the World Trade Organization, has laid down further guidelines on calculating the dumping margin, the anti-dumping program, the time limit of taking anti-dumping measures and the specific standards for the work of the expert panel for the anti-dumping disputes. The Agreement, however, also prescribes that the anti-dumping duty and the anti-subsidy duty cannot be levied on the same product at the same time for the reason of countervailing the dumping or export subsidies.

The Anti-Dumping and Anti-Subsidy Regulations of the People's Republic of China (the Regulations), promulgated and implemented by our country on March 25, 1997, is the first anti-dumping and anti-subsidy statute in China. The Regulations prescribes that dumping refers to exporting of import products to China at a price lower than its normal value. Based on the investigations on the dumping and the dumping margin launched jointly by the Ministry of Foreign Trade and Economic Cooperation and the General Administration of Customs, and the investigations on the damage and the extent of damage launched jointly by the National Commission of Economy and Commerce and the departments concerned under the State Council, the Ministry of Foreign Trade and Economic Cooperation and the National Commission of Economy and Commerce make the preliminary verdict respectively and the results will be promulgated by the Ministry of Foreign Trade and Economic Cooperation. Further investigations should be conducted according to the afore-mentioned article on the dumping and the dumping margin, the damage and the extent of the damage if the preliminary verdict is tenable. The Ministry of Foreign Trade and Economic Cooperation and the National Commission of Economy and Commerce will make the final verdict respectively based on the results of the investigations and the final verdict will be released by the Ministry of Foreign Trade and Economic Cooperation. The anti-dumping duty will be levied by the customs and the duty amount does not exceed the dumping margin.

(Ⅳ) The Anti-subsidy Duty

The anti-subsidy duty, also known as the countervailing duty, is a kind of import surtax levied to countervail the bonus or subsidy received directly or indirectly at the manufacture, production and output stage of the imported commodities. It is an important form of the differential duty. The importing country levies the same amount of anti-subsidy duty equal to the subsidy, allowance or bonus on all the imported products received from the government of other countries or the monopoly financial groups. The purpose of levying the anti-subsidy duty is to protect the production of the same kind of commodity of the importing country by preventing the subsidy product of other countries from dumping or competing with its domestic products at a lower price.

Through multilateral trade negotiations, the World Trade Organization signed the WTO Agreement on Subsidies and Countervailing Measures which came into effect on January 1, 1995. Based on the Agreement on Interpretation and Application of Articles VI, XVI and XXIII of the GATT engendered during the multilateral trade negotiations of the seventh round—"Tokyo Round" --of General Agreement on Tariffs and Trade in 1979, the agreement aims to ensure that every member country does not infringe upon the trade interests of others by using subsidies, or hinder the international trade by taking unreasonable anti-subsidy measures. This is the response to the unfair trade practices in the international trade rules.

It should be noted that nowadays many countries adopt the method of refunding the internal taxes of the exported products to give incentives to exports. Usually, this kind of exported products which have received the returned internal taxes (domestic indirect taxes) should not be treated as subsidy products in that tax-refunding products fall into the category of the internal tax adjustment and has no direct link with the interests of other countries. Furthermore, as the condition of internal tax items of every country is very complicated, it is difficult to reach the complete unification in setting up the tax items. In addition, according to the regulations of the World Trade Organization, the anti-dumping duty and the anti-subsidy duty cannot be levied at the same time on the same product for the reason of countervailing the dumping or the export subsidy,

The Anti-Dumping and Anti-Subsidy Regulations of the People's Republic of China, promulgated and implemented on March 25, 1997, is the first anti-dumping and anti-subsidy statute in China. Specific guidelines can be found about the confirmation, the investigation, the final verdict of the subsidy, and the collection of anti-subsidy duties in the regulation.