The Shipping Point: The Rise of China and the Future of Retail Supply Chain Management

CHAPTER TWELVE

THE ROLE OF CHINA CUSTOMS

PETER LEVESQUE

Many of the customer questions that arise when discussing supply chain management processes in China have to do with the various export customs procedures and warehouse classifications that exist in the mainland. This topic can be confusing, since China's customs regulations are not uniformly administered across the country and many issues must be dealt with in an adhoc manner depending upon which province has jurisdiction. To reduce costs and avoid delays it is critical for supply chain managers to understand the function of customs and the application of China's value added tax (VAT). VAT, and more specifically VAT refunds, drive the behavior of most export manufacturing vendors in China. It is worth having a more in-depth look at this subject in order to better understand the concerns of vendors in China when it comes to implementing new supply chain programs.¹

DEMYSTIFYING CHINA'S VALUE ADDED TAX (VAT)

China began charging VAT back in 1984. The tax system was overhauled in 1993 when the State Council of China enacted The Provisional Regulation of the People's Republic of China on Value Added Tax, which is still in use today. VAT is administered by the State Administration of Taxation. Seventy-five percent of VAT tax revenues go to the central government and local governments receive the remaining 25 percent. A significant portion of the central government's annual revenues (about 33 percent of total tax revenues in 2007) ...