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China’s New Customs Compliance Rating System

Posted October 31, 2014

Earlier this year, in a move designed to “help promote the decisive role of the market,” Chinese authorities announced plans for developing a nationwide “social credit system” to assess the integrity of individuals, businesses and even government agencies on a range of areas including administrative affairs, commercial activities, social behavior, and the judicial system.
China Disclosed
As part of this credibility-building initiative, on October 8, the General Administration of Customs of China published Customs Interim Measures on Enterprise Credit Management that will replace the existing customs compliance rating scheme and will come into effect on December 1, 2014.

According to the new measures, China Customs will place companies into one of three categories: “Certified Enterprise”, “General Enterprise” and “Discredited Enterprise”.

“General Enterprise” is the default category that will likely cover most companies.

A “Certified Enterprise” obtains Authorized Economic Operator (AEO) status and will be accorded preferential customs treatment including a lower customs goods examination rate and a simplified customs review process. The category is further classified into two groups: “General” and “Senior”. For companies that qualify as a “Senior Certified Enterprise,” China Customs will designate a customs officer to help coordinate between the company and various functions and offices of China Customs.

A “Discredited Enterprise” on the other hand, is that which has been found committing non-compliance activities within the previous year. Non-compliance activities include smuggling activities conducted criminally or administratively and other violations being penalized by China Customs for a cumulative amount in excess of RMB 1 million (approx. $165,000 USD). Such “discredited” companies will be subject to a higher customs goods examination rate as well as increased scrutiny of customs declaration documents and tightened supervision of their trade activities.

An important feature of the new system for foreign companies is that China Customs will be publishing the enterprise credit system information on its website. This will include the enterprise category of a company, as well as any customs penalties which it has incurred during the past 5 years. This information will also be made available via China’s National Enterprise Credit Information Disclosure System.