SCIO briefing on master plan for Hainan Free Trade Port

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What will the Yangpu bonded port advance during the early stages of constructing the Hainan Free Trade Port?

Li Guo:

Thank you for your question. The master plan stipulates that the construction strategy of the Hainan FTP will be divided into several different steps and phases. For instance, according to the master plan, 18 highlighted programs are scheduled to be rolled out by 2025. Among them, the first is to place several qualified special customs oversight areas, such as the Yangpu bonded port, under the jurisdictions of first-and-second-line customs with institutionalized administration working on imports and exports. The first-line concentrates on openness, and the second-line on monitoring and regulations. This means that Yangpu can be one of the areas running with special customs jurisdictions. In other words, Yangpu will be the Hainan FTP's pilot zone. In this particular zone, an innovative management institution with liberalizing (the first) and controlling (the second) lines will be launched to yield positive policy-related interests during the early stages. The zone will also act as a trailblazer in taking a raft of measures to reinforce the facilitation and liberalization of trade so as to stimulate and improve the Hainan FTP's development in accordance with the experiences it has gained. From this point of view, the construction and implementation of the Yangpu bonded port will play significant roles in exploring and ensuring the operation of Hainan's closed-off and free trade port policies. 

In accordance with the deployment made by the CPC Central Committee, the General Administration of Customs (GAC) issued the "Regulatory Measures on Yangppu Bonded Port" ("The Measures") on June 3, 2020, after several rounds of research and deliberations. Despite focusing on liberalization and facilitation of free trade, the GAC has abided by the principle that the pursuit of overall openness depends highly on administrators' good command of situations. Therefore, "The Measures" is learning from the experiences of customs administrated with special jurisdictions. While looking into "The Measures," people may notice that Article 31 of Chapter Seven features a number of points regarding trial operations:

First, the pilot processing value-added tax (VAT) policies stipulated in the master plan will exempt a number of enterprises in highly-needed industries from import tariffs. More specifically, processing enterprises with no imported raw materials, or those with imported materials but whose processing value added surpasses 30%, in the Yangpu bonded port, can sell their products to the rest of the country free of import taxes. However, import VAT and consumption tax still need to be levied. There are two critical points in this provision that require pointing out: first, the enterprises should be entitled to the preferential policies, and second, the tax exemption refers to customs duties.

Second, reports submitted to the first-line customs will be streamlined. With risks being controlled, a certain number of commodities transferred between the Yangpu bonded port and overseas markets will no longer need to be reported to customs. Reports will be validated only for goods in need of being checked or quarantined by the entry-and-exit administrations, including those stipulated by international conventions, treaties or agreements, or those on the security list. Despite this, access will be maximized as much as possible at the first-line customs.

Third, the liberalization of the zone will be highlighted with enterprises being dutybound to self-operate and manage. In most cases, enterprises in the zone can transfer, merge, cooperate, process, transact, research, develop, redevelop, inspect, test and change without needing to undertake any customs procedures. Meanwhile, their commodities in the zone can be stockpiled with no time limits. Customs has revoked registration procedures to enable enterprises to forgo the previous normal regulatory procedures, including write-off procedures. At the same time, customs will utilize a big data platform for risk evaluation and artificial intelligence identification to launch critical inspection, and practice precision-targeted administration.

Fourth, the second-line management will be accentuated. The digital network should be strong and passes should be monitored flawlessly with customs inspections being launched for every vehicle (including those for official use), commodities, belongings and people entering and exiting the zone, in accordance with laws and regulations. 

Fifth, the statistical approaches will be reformed. The real-time single-ticket calculation at customs will be substituted by a digital information management platform which enables automatic mathematics to be applied by the administrative bodies in the zone. 

Sixth, the development of interim consolidation services will be supported. International shipping can be streamlined with interim consolidations backed by a digital platform based on which warehouse receipts will be sent online. 

Seventh, a coordinated mechanism will be established. Based on the holistic digital information management services platform established by the regulatory bodies of Yangpu bonded port, a mechanism will be formed using unified regulations and reliable data stock in terms of original accounts. Based on the mechanism, the interconnection among administrative bodies, border regulatory authorities and enterprises in the zone, can be achieved and the responsibilities can be precisely targeted thanks to available data. Therefore, the mechanism will enable local governments to have a big say, ensure coordination between multifaced administrations and regulatory bodies, and promote greater autonomy for enterprises.

Eighth, no facilities established by local residents for commercial use will be prohibited. In view of the business nature of the Hainan Free Trade Port as well as indigenous commerce and consumptions, the facilities for commercial use in the Yangpu bonded port will not be embargoed. This is a major breakthrough since residences and business facilities are not allowed to be established at places under the special jurisdiction of customs. This is an initial attempt.

In the next phase, customs will improve their regulatory work to support the high-quality opening-up and development of the Yangpu bonded port. We will evaluate the pilot performance inside the zone in a timely fashion before expanding and implementing a more mature scheme under the special jurisdiction of customs to the rest of the zones, such as the Haikou Integrated Free Trade Zone. Thank you.

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