Changes in China Customs' import declaration form will trigger some consequences for Swiss and other multinational companies importing into China. On 28 March 2016, the Chinese General Administration of Customs issued ‘Revised Standards for the Fillings of Customs Declaration for Imports and Exports Commodities’ with effect from 30 March 2016. While there are several changes to the declaration form announced in this notice, a few of these changes we believe to be of particular significance to Swiss companies trading in that country.

Declaration of trading country

The importer is now required to declare the country where the trading company/vendor in the import transaction is located. While not immediately clear how this reporting element may impact importers in China, it is expected to provide customs with insights into transactions through global or regional principals as well as third party invoicing arrangements.

Disclosure of special relationship

Importers are now required to report whether a special relationship exists between the importer/buyer and exporter/seller. A special relationship exists between the parties in the following circumstances:

1. The buyer and seller are the members of the same family; or 
2. The buyer and seller are commercial officers or directors of the same entity; or 
3. A party, directly or indirectly, under controlled by the other party; or 
4. The buyer and seller are, directly or indirectly, under controlled by a third party; or 
5. The buyer and seller together, directly or indirectly, control a third party; or
6. A party owns or controls, directly or indirectly, more than 5% (inclusive) public stock or shares with voting right of the other party; or
7. A party that is an employee, officer or director of the other party; or
8. The buyer and seller are partners of the same partnership.

A special relationship also exists where the importer is the agent, exclusive distributor or exclusive assignee of the exporter/seller.

Relationship impact on value

A new field in the form has been added for the importer to indicate whether the transaction value has been affected by the special relationship of the parties. The importer must now be able to prove that the transaction value is not affected by the relationship between the parties by comparison to one of the below test values:

• The transaction value of similar or identical merchandise sold to unrelated parties; or
• The deductive value of the imported merchandise; or
• The computed value of the imported merchandise.

Disclosure of royalty payment

The importer must now also disclose whether a royalty payment is made by the importer (either directly or indirectly) to the seller or other relevant parties in connection with the import transaction.

Other e-filing requirements change

The limit of maximum number of line items that a customs declaration can contain increased from 20 to 50 lines. This is a welcome improvement as it will reduce the need for importing companies to file multiple customs declarations covering a single shipment.

What does this mean?

These changes to the declaration form reflect potentially significant changes in the customs policy and enforcement with respect to valuation and trade preference claims, in particular in the framework of the China-Switzerland Free Trade Agreement. These changes will disproportionately impact multinationals, which predominantly trade amongst related entities, also providing quite some valuable information to the Chinese authorities.

What to do?

Special care should be taken in setting and monitoring transfer pricing in light of these changes. Transfer pricing adjustments and royalties structured as non-trade payments (i.e. not included in the transaction value of imported merchandise) are likely to pose higher risks to importers, demonstrating once more the close connection between transfer pricing, customs & global trade. The recommendation is to review transfer pricing and customs values in light of the heighten risks these new requirements trigger.

Benno Suter - Partner, Indirect Tax

Benno is the Lead Partner for our indirect tax practice in Switzerland covering all industries. He has about 20 years’ experience as corporate and indirect tax advisor and many years in-house experience as a tax director of a leading Swiss multinational SMI company. He is a member of the prestigious Swiss VAT competency group of the Swiss Institute for Certified Accountants and Tax Consultants.

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Jonathan Baumeler - Assistant Manager, Indirect Tax

Jonathan is an Assistant Manager and Customs expert at Deloitte in Switzerland as well as a member of the EMEA Center of Excellence for Customs & Global Trade. He had a broad and deep knowledge in Customs & Excise as well as in additional regulations governing cross border compliance. Jonathan holds a Degree in Business Administration from the Berne University of Applied Sciences and is a Swiss Certified Customs Expert.

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Yannick Maes - Senior, Indirect Tax

Yannick is a Senior Associate in the Customs & Global Trade practice of Deloitte in Switzerland. Yannick specializes in Global Trade Strategy, Free Trade Agreements, Automation (SAP GTS), Export Controls and has deep working knowledge of EU as well as Swiss Customs Regulations. 

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