Trade Advice
The purpose of this article is to share an update with New Zealand exporters on the new Commodity, Inspection and Quarantine (CIQ) Credit Management System so that you can then work with your Importer in China to enhance supply-chain performance at the Customs border.
According to a recent PwC survey almost two-thirds of New Zealand exporters have appointed a third party distributor to act as the Importer-of-Record in China. Others have appointed a third-party Import/Export Agent or use their Wholly Foreign Owned Enterprise (WFOE). In the same PwC survey almost half of all respondents reported that obtaining certainty in Customs clearance was their main supply-chain priority.
Original Pilot and New Measures
The State Administration for Sanitation, Inspection and Quarantine (AQSIQ) issued Tong Han [2009] No.118 <Measures and Operation Instruction for the Administration of Credit of Entry-exit Inspection and Quarantine Enterprises> that was applicable from 2009 through 2012. This pilot program represented the creation of a new Credit Management System for importers/exporters, agents, and other related parties.
AQSIQ then published on 16 July 2013 Announcement [2013] No.93 <Issuing the Measures for the Administration of Credit of Entry-exit Inspection and Quarantine Enterprises> which was effective 1 January 2014 and transforms the pilot program into a new risk-based ranking system for ensuring compliance with non-tariff measures at the Customs border.
Supervision and Affected Parties
The General Administration of Quality Inspection, Supervision and Quarantine (AQSIQ) is responsible for nationwide credit management and regional CIQ (provincial and municipal level) through the Clearance Department will be in charge of implementation and administration.
The new Credit Management System impacts the following:
- Exporters/Importers
- Agents for inspection declaration, entry-exit inspection operators and quarantine processing entities
- Port food production and operation entities, storage entities, inspection and identification institutions;
- Other inspection and quarantine supervision and administration objects for which credit management is necessary.
Enterprises across most industry sectors are subject to significant non-tariff measures in respect of product testing, quality, marking and labeling. This includes dairy, food and beverage, and related consumer products which are being exported from New Zealand to China. Most of these measures are based on WTO principles and are associated with consumer health and safety and protection of other national security interests. Compliance with non-tariff measures is fundamental to ensuring market access and a smooth supply-chain at the Customs border. Attaining good standing with CIQ under the new Credit Management System will aid in reducing intervention by CIQ in the supply-chain.
Enterprise Evaluation and Ranking
What is my initial ranking?
No clear rules have been given in Announcement [2013] No.93 in respect of the initial ranking of enterprises. However, based on our consultation, the enterprise ranking obtained under Tong Han [2009] No.118 will be followed under the new rule. Category "B" applies for newly established enterprises.
What is the ranking evaluation period and methodology?
A ranking for Category "A" to "D" will generally be made based on a one-year rating cycle and according to AQSIQ enterprises do not need to apply for Category "A" to "D". The ranking will be granted by the in-charge CIQ and enterprises can consult with the in-charge CIQ thereafter.
What is the evaluation standard?
Announcement [2013] No.93 sets out the ranking standard from Category "AA" to Category "D". The initial credit score for each company is 100 and deductions will be made thereafter based on any identified violations. The score range for each Category is tabled below:
|
Category |
Score |
|
A |
89 – 100 |
|
B |
77 – 88 |
|
C |
65 – 76 |
|
D |
0 – 64 |
Dynamic management rules apply and these refer to the immediate measures that CIQ will take against enterprises based on the deduction obtained within one evaluation period. Set out below is a table for deduction points and correspondence management measures:
|
Annual Deducted Points |
Management Measures |
|
12 – 24 |
“Stake-out” (i.e. tightening the supervision) |
|
25 – 36 |
“Immediate
downgrading” |
|
>37 |
“Included in the list of serious and dishonest
enterprises” (i.e. published) with tightened supervision and downgrade to
Category “D”. |
The detailed deduction standard has yet been issued and is expected to be released during 2014.
Who is responsible for violations and points deductions therein?
Strict liability applies when determining which enterprise shall bear the deduction when multiple enterprises are involved. For example, when the product is detected to have a non-conforming quality issue, the exporter will usually be subject to a deduction of points instead of the agents for inspection declaration.
What preferential treatment is granted based on the ranking?
Detailed preferential treatment is likely to vary in different regions and local CIQ should submit pilot plans on the preferential treatment for central AQSIQ review and approval. The preferential treatment will most likely be granted not only based on the ranking of the enterprises but also on the risk of the imported/exported products. In principle, the preferential treatment to be granted by the local in-charge CIQ to the enterprise should be as follows:
|
Category |
Preferential Treatment |
|
AA |
· Enjoy all preferential treatment as granted to
Category “A” · Priority for inspection declaration, quarantine and
release · Priority for appointment of inspection declaration · Priority for filing, registration and other
procedures · Priority for trial of new trade facilitation
measures |
|
A |
· Access to inspection and quarantine incentives · Priority for implementation of “class one”
preferential inspection, quarantine, green channel and related trade
facilitation measures |
|
B |
· Carry out daily supervision, inspection declaration,
inspection and quarantine, release and other processes in conjunction with
the relevant provisions |
|
C |
· Supervised in a strengthened manner |
|
D |
· Supervised in a strengthened manner |
A Category "A" enterprise can apply for Category "AA" subject to meeting certain additional criterion.
Next Steps
In order to enhance trade facilitation at the Customs border under the new CIQ Credit Management System New Zealand exporters should work with their designated Importer-of-Record in China to:
- Confirm the new ranking that has been assigned by CIQ
- Complete a compliance self-assessment against the new Measures
- Implement a new procedure so as to ensure ongoing compliance
- Validate the preferential treatment that will be implemented by the local in-charge CIQ
- Monitor for new more detailed regulations to be implemented in 2014 and beyond
- Seek an upgrade to a higher ranking if this will deliver benefits of enhanced trade facilitation
Lastly, strong relationships should still be maintained with the in-charge CIQ so as to ensure that the benefits of the new Credit Management System are realised in practice.
Contact
Damon Paling,
Partner, Customs & International Trade
PwC, Shanghai
damon.ross.paling@cn.pwc.com
Damon has 16 years experience in Asia advising companies on customs, trade and related supply-chain and market access matters, the last 10 years of which have been spent in Shanghai, China.
Jan 27, 2014