China Customs 2003: Tensions and Progress

By Neal Stender and Sharon Xiao Zhang, Coudert Brothers, Hong Kong, Beijing and Shanghai

After a year of challenges for all participants in China¡¯s customs matters, 2003 ended in an atmosphere of progress on both practice and legislation. But risks remain, especially for companies that rely on complex supply chains, as China¡¯s customs regime continues its transition from administrative discretion and negotiated solutions to complex standards and procedures.

There was substantial tension between China¡¯s difficulty, some would say reluctance, in fully implementing its WTO-related customs obligations, and the expectations of foreign exporters and the US government, which had been raised by China¡¯s WTO entry in December 2001. A key aspect of WTO membership is an obligation to conform with the WTO Customs Valuation Agreement. The tension peaked in the middle of the year and then relaxed towards the end of the year, when we saw increased flexibility by the China Customs Administration (CA), and the introduction of new legislation that clarifies several aspects of China¡¯s customs law and practice.