LIQUID MILKS

Importer Qualifications

The Chinese importer is the party who, for customs purpose, makes (or on whose behalf an agent or broker makes) the import declaration, and who is liable for the payment of duties (if any) on the imported goods. Normally, this party is named either as the consignee in the shipping documents and/or as the buyer in the exporter’s invoice. The Chinese importer must be registered in China and must have the import qualification.

Once the goods have arrived at the designated port, the importer will first transfer the goods to the customs supervisory warehouse, and then handle the customs clearance formalities with required documents and materials, including but not limited to import commodity inspection and customs declaration. Since the procedure is very complicated and involves multi-stakeholders, to complete it smoothly, cooperating with an experienced and qualified importer is very critical. After successfully securing clearance of the product, the importer will pick up the goods and relocate it to their warehouse in readiness for distribution.

Customs Inspection Credit Management System

What is Customs Inspection Credit Management System?

The Customs Inspection “Credit Management System” refers to the procedure whereby China Customs Inspection collect and review the credit information of recorded enterprises and then give those enterprises a certain credit rating.

The Credit Management System impacts the following enterprises:

1. Exporters/Importers (such as Australia exporters/agents of imported foods, Chinese importers);
2. Agents for inspection declaration, entry-exit inspection operators and quarantine processing entities in China;
3. Port food production and operation entities, storage entities, inspection and identification institutions in China;
4. Other inspection and quarantine supervision and administration entities for which credit management is necessary. The Customs Inspection “Credit Management System” enables the customs inspection to score and evaluate the enterprise’s inspection credibility and notes violations (if any). Businesses with a higher credit rating are viewed more favourably and usually experience a smoother transition through the import clearance process.

What is the initial ranking for new enterprises?

Newly established enterprises will be granted Category ‘B’.

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 China Customs Inspection enterprises do not need to apply for Category ‘A’ to ‘D’. The ranking will be granted by the in-charge local Customs Inspection, and enterprises can consult with the in-charge Customs Inspection thereafter.

What is the evaluation standard?

The ranking standard is 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:

Dynamic management rules apply and these refer to the immediate measures that Customs Inspection will take against enterprises based on the deduction obtained within one evaluation period. Set out below is a table for deduction points and corresponding management measures:

Who is responsible for violations and points deductions therein?

When multiple enterprises are involved, deduction will be determined on a case by case basis in terms of the corresponding enterprise’s responsibility.

What preferential treatment is granted based on the ranking?

Detailed preferential treatment is likely to vary in different regions and local Customs Inspection should submit pilot plans on the preferential treatment for central China Customs 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 Customs Inspection to the enterprise should be as follows:

How to know the credit ranking of the enterprise?

Enterprise may achieve its credit ranking by asking local Customs. Or search from the following official website of China Customs by the Chinese name of the enterprise, the steps are as below.
Step 1 Access to http://www.customs.gov.cn/customs/302427/302442/qyqk/index.html, you will see the following page

Step 2 Within the red square, input the Chinese company name and verification code in the corresponding table. Then click query, the company information will appear below the query table (Pic 2). The credit rating is in the fourth column.

Note: This system can only use the company’s Chinese name to do research. To ensure the accuracy of the results, please use the official Chinese name of the company, which is the company name in the business license. Besides, you may use the customs code in the second column to check.

Exporter Filing

1. General Administration of Customs, P.R.China (Customs) is responsible for inspection and accreditation of import and export food.
2. According to “Administrative Provisions on Filing of Importers and Exporters of Foods”, food exporters should conduct filing with Customs through an on-line registration system prior to initial export to China.
3. This simple and free procedure requires inputting basic company information and takes around 3 working days for approval.

CNCA Registration

CNCA is the abbreviation of Certification and Accreditation of the People’s Republic of China which is the subsidiary organisation of State Administration for Market Regulation. CNCA registration refers to overseas manufacturers of meat, aquatic, dairy products and bird’s nest which should be registered as approved establishments with CNCA. For dairy products, the registered objects include processing plants, cold stores and dry stores. CNCA registration is a prerequisite and should be accomplished before the products are exported to China.

Do you need to register with CNCA?

Yes, all establishments manufacturing pasteurised, sterilised or modified milk products must obtain CNCA registration. A list of the establishments that have been audited, approved and listed by the CNCA is available on the CNCA website.

The term of validity of the CNCA registration of manufacturers is 4 years. If a registered manufacturer needs to renew its registration, it shall submit its application one year prior to the expiration of its registration, and provide relevant information and supporting documents to prove that the company continues to comply with the registration requirements as requested.

Applications, related information and supporting documents will be reviewed by the CNCA. For those manufacturers that meet the registration requirements, their registration will be approved or renewed; for those manufacturers that can’t meet the registration requirements, their registration will be refused or suspended; and for those manufacturers who fail to submit applications to registration renewal after the expiration of the registration, their registrations will be cancelled.

Preparation for product formula

Just like the Australia New Zealand Food Standards Code in Australia, the national food safety standards (GB standards) are counterparts in China. Usually, each category of food has one corresponding GB product standard, which stipulates the definitions, sensory and physicochemical indexes, limits of contaminants, mycotoxin, pesticides and microbial indicators of the food. The Chinese authority will conduct inspection and quality control based on related GB standards when the products arrive at China ports. If the tested product cannot meet the requirements of GB standards, it will be returned or destroyed.

In addition to the mandatory Product Standards which apply to each product category, there are general (GB) Product Standards which must be complied with as a first measure regardless of product. It is critical for the need to meet all these required General Standards.

Introduction to Chinese Labelling

According to “Food Safety Law of China”, pre-packaged food should be labeled on the package. Imported prepackaged food and food additive shall have Chinese labels.

In China, there is a general standard for the labeling of prepackaged normal foods wich is called GB 7718. This standard applies to the labelling of prepackaged normal foods available directly and indirectly to consumers.

In addition, there is another labelling standard of prepackaged foods for special dietary purpose which is called GB 13432. Foods for special dietary purpose include:

─ Infant formula
─  Older infants and young children formula
─  Infant formula for special medical purpose
─  Cereal-based complementary foods for infants and young children
─  Canned complementary foods for infants and young children
─ Food for special medical purpose (excluding Infant formula for special medical purpose)
─  Others

Besides the above labeling standards, to be a qualified Chinese label, it should also comply with the corresponding product standard if there is any requirement for the labeling in the product standard.

In China, there are two forms of labeling:

─  Paste a Chinese label on the original label (Pic 1). Usually, the pasting work can be done before arriving at the port or in the specified warehouse in the bonded area.

Note: Infant formula should have the Chinese label designed and printed on the packaging directly before importation, the label of infant formula cannot be pasted on the original label.

─  Design a Chinese label and print on the packaging directly (Pic 2). You can also use foreign languages simultaneously in corresponding to Chinese (excluding trademark, name and address of overseas manufacturers, name and address of overseas distributors, website). All foreign characters shall not be larger than the corresponding Chinese characters (except for trademark).

You cannot make claim of any contents related to the function of disease prevention and treatment in food labels.

According to GB 7718, the mandatory items for labels of imported normal foods are as follows:
Product name, ingredient list, net content, importer information, country of origin, manufacturing date, shelf life, storage condition, nutrition information.
Other information, such as allergen, consumption method are recommended items, they can be labelled optionally.

In the Chinese label, the font size of all Chinese characters should be no less than 1.8mm. For net content, the font size should meet the requirements below:

According to GB 13432, labelling of food for special dietary purpose should not only meet the basic requirements in GB 7718, but also should comply with relevant provisions for labels in the corresponding product standards. In addition, consumption methods and suitable groups should also be indicated on the label.

According to GB 28050 “General rules for nutrition labelling of prepackaged normal foods”, while meeting certain requirements, you can make claim to the content of energy or nutrients on the label, for example:

According to GB 28050, while meeting the requirements of content claims, you can make claim to the function of energy or nutrients on the label. However, you can only use the claims listed in Appendix D of GB 28050 and the words cannot be deleted, added or combined.

According to the requirement from Customs, the label of imported dairy products should also indicate CNCA registration number of overseas manufacturer.

Top Tips

1. Please make sure that all mandatory items are included on the label.
2. Please make sure all Chinese characters are larger than 1.8 mm (except the net content, please choose the corresponding font size according to the net content).
3. When making claims of any nutrients, please make sure they can meet corresponding requirements.
4. “Nature”, “no add preservatives”, “no add additives” cannot be indicated on the label.

Organic Certification

Australian Organic Certification currently does not have Mutual Recognition Agreement with China and if you would like to claim and export organic products, the product has to be certified to Chinese Organic Regulations. China Organic Certification are issued by an accredited certification body in China, while the requirements are similar to Australian Certified Organic Certification, the process and paper work requirements are different. To certify organic, the entire supply chain has to be Chinese certified which means the raw material supplies through to processing and manufacturing will have to be certified.

Organic products are products for human and animal consumption, where production, processing and marketing activities are in line with the China National Standards for Organic Products (GB/T 19630).

Organic certification: the conformity assessment activities where certification bodies, based on the provisions of management measures for certification of organic products and organic certification rules, prove that the production, processing and marketing activities of related products are in line with the China National Standards for Organic Products.

China has a positive list issued by CNCA which illustrates the scope of food categtories  permitted for organic certification. Therefore, only products listed in the positive list and meet  reqirements can apply for China orangic certification.
For dairy products, product categories in positive list permitted for organic certification are as follows

Procedures & Estimated timeline and costs

Procedures

1. Applicant prepare dossier
2. Certification body check dossier
3. Certification body on-site inspection
4. Certification body submit inspection report to CNCA
5. CNCA issue certification number
6. Certification body issue certificate to Applicant

Timeline

If all application materials are completed accurately and all ingredients are certified organic,  then the certification timeline is around 2-3 months. The on-site audits can be arranged at a convenient date with the auditor. The validity period of the certificate is one (1) year, so it needs to be renewed annually.

Please note the timeline will depend on various factors which could include:  the status of certification for entire supply chain including raw materials & recipe, documentation from suppliers, sample record of inputs pest control, quality management, manufacturing processes and other conditions. Therefore a proper evaluation of the status of the applicant is required to assess a timetable for implementing China Organic Certification.

Costs

The cost of organic certification consists of 4 parts:

1. Organic certification
2. Testing fee
3. Traveling and inspection cost of audit
4. Consulting fee for certification authority

Please contact an accredited certification body for detailed break down on costings for China organic certification.

Link to responsible agencies and contacts

The competent authority of organic certification is CNCA. CNCA authorizes inspection and certification competency to its approved certification body (approx. 66 independent certification bodies).
Click this link: http://ffip.cnca.cn/ffip/publicquery/certSearch.jsp, you will be guided to the “China food and agricultural products certification information system”.

Click “Certification body”, then choose “Business scope” as the last one “Organic products” and click “Search”.

Choose one certification body from the list.

Australian based certified bodies

Australia’s largest internationally recognised certification body, Australian Certified Organic (ACO), and National Association for Sustainable Agriculture Australia Limited (NASSA), have both signed agreements with a Chinese certifier (NASSA media release | ACO media release) to provide Australian certified operators with a more accessable and convenient certified organic food certificate application.

Health Certificate

Health certificate for dairy products exporting to China is a certificate issued by the competent authority of exporting country and authorised by China Customs. In Australia, the issuing department is Department of Agriculture and Water Resources, DAWR. China Customs is responsible for inspection and accreditation of import and export food in China.

Health certificate should include following contents:

• Dairy raw materials were taken from healthy animals
• Dairy products have been prepared or processed and will not infect or carry any animal epidemic disease;
• The dairy manufacturing enterprise is under supervision of local government;
• The dairy products are safe and fit for human consumption.

Health certificate should be sealed and signed by local competent authority (Department of Agriculture and Water Resources).

According to “Announcement on standardizing the management of health certificate for imported dairy products”, imported dairy products without a health certificate will not be accepted from March 1, 2010.

Every exporting country that can export dairy products to China will have a different template of health certificate authorised by China Customs. While exporting your dairy products to China, you should make sure that the format of health certificate should be identical to the template on the China Customs website. (See Pic.1 for the health certificate template of Australia, the stamps and seals have been changed since 20 November 2016.)

Do you require health certificate for your product?

All dairy products exported to China will require a Health Certificate. So, to export dairy products to China, you need to obtain the health certificate from DAWR.

If so, who and how to obtain?

Who?

The exporter in Australia should obtain a health certificate from DAWR.
How?

1. If the products met all requirements of Australia and China and are ready for export, you can make a Request for Permit (RFP) in the Export Documentation System (EXDOC).
2. To make a RFP, you should have been registered as an exporter and EDI user in EXDOC. This can also be done by an agent on your behalf, if your detailed information is registered in EXDOC). Click here to find more information about EXDOC.
3. While making a RFP, you also need to include details of dairy product codes in EXDOC.
4. After the RFP is approved, you will be issued with a health certificate.
5. Check the DAWR website for the per documentation fee for the health certificate.

Links to responsible agencies and contacts

Department of Agriculture and Water Resources
Website: http://www.agriculture.gov.au/export/controlled-goods/dairy 
Telephone General inquiry: 1800 900 090 or + 61 3 8318 6700 (from outside Australia)
National office: +61 2 6272 3933

What is Certificate Of Origin (COO)?

Certificate of Origin (COO) is a document to certify the place of growth, production or manufacture of goods. Certificate of Australian Origin is a document to specify goods that have been grown, produced or manufactured in Australia (see Pic.1 for the sample).

COO is issued according to the requirements of the destination country, it can be classified as two types: Preferential and Non-Preferential Certificates. Preferential Certificates can only be issued when there is a Free Trade Agreement between the two countries, otherwise, Non-Preferential Certificates will be issued. The Customs of destination country will assess tariff treatment according to Preferential Certificates.

Since Australia and China has signed the China Australia Free Trade Agreement (ChAFTA), exporter of Australia may obtain Preferential Certificates.

Is it required for your product?

Although there are no regulation that explicitly stipulates COO is mandatory for dairy products in China, importers in China will always ask overseas exporters to provide COO for Customs clearance as common practice. The China Customs will use COO for trade statistics, sanctions and quota applications, antidumping administration, as well as the preferential tariff treatments.

In addition, since Australia and China has signed the ChAFTA, if you don’t provide COO, you cannot enjoy the agreement tariff under ChAFTA. Generally, the agreement tariff will be lower than general tariff rate and the most ‘favoured nation’ (MFN) rate.

As a result, COO is required and you need to provide it to the importers.

Please note that a COO only applies to a single shipment, it may cover one or more goods, but should not exceed 20 items (20 unique goods) and will remain valid for one year.

If so, who and how to obtain?

Who?

The exporter in Australia should obtain COO and provide it to the importer in China.

How?

Australian Chamber of Commerce and Industry (ACCI) and Australian Industry Group (AIG) are authorised to issue Certificates of Australian Origin for dairy products by the Australian Government, and there are several local accredited bodies who can issue COO on behalf of ACCI. The exporter can also obtain COO from those local accredited bodies.
There are some points that you should pay attention to:

1. The Exporters Information Form Update must be completed and forwarded to the issuing body of COO, together with a list of signatories authorised to sign the certificates on behalf of your company.
2. Evidence of origin must be supplied prior to stamping (such as copies of invoice, bill of lading, letter of credit, or statutory declaration).
3. Exporters must provide a copy of the documents being stamped for Chamber records.
4. All export documents must be signed by the exporter on the bottom left hand side under the exporter’s declaration before submission for authentication.
5. Please note that Certificate of Australian Origin forms cannot be used for any other origin than Australian.
6. Certificates of Origin must be typed.

Register COO today? Here are links to responsible agencies and contacts

Licence for quarantine of entry of animals and plants

According to “Administrative measures for the examination and approval of entry animal and plant quarantine”, in order to prevent the infection of zoonosis, parasitosis, pests and weeds of plants, plant and animal products should get the quarantine licenses. General Administration of Customs will publish the list of products that require quarantine licenses.

For dairy products, there are 3 categories that require quarantine licenses:

Note: The above HS codes are the relevant HS codes for dairy products which require quarantine licenses, but it does not mean all products under these HS codes need quarantine licenses. Whether the product requires quarantine license or not will also depend on the production process.

Is your product required?

Test Report

For dairy products, test report of the product shall be provided for the customs inspection to demonstrate that products comply with China’s food safety standards (GB standards). The test items are different for different situation. For first-time import (hereafter FI) product, the test results should be provided against all criteria in the GB standard. For subsequent import product (hereafter SI) , only part testing indexes required by AQSIQ are needed. But the copy of initial test report and inspection application form from FI should also be attached.

What is first-time import (FI) and subsequent import (SI)?

According to AQSIQ 2013 Announcement No. 53, first-time import (FI) means that the same product is imported to China through the same China port for the first time, and the same product means product with the same manufacturer, product name (includes trademark), formula, overseas exporter, China’s importer/distributor/agency. The follow-up import of the same product through the same port will be regarded as subsequent import. However, if any of the above information changed, say the China port or the product formula changed, the follow-up import will also be defined as FI.

Let’s take the following example for your better understanding. Product A has been imported to China through China port B with manufacturer C, product name D, trademark E, formula F, overseas exporter G and China’s importer/distributor/agency H for the first time. The follow-up import of product A will be regarded as FI or SI under different situation. Please refer to the table below for more details:

What are the qualifications of the laboratories?

The report can be issued by official laboratory, third-party testing agency or corporate laboratory outside China, or by testing institutions with the Certificate and Mark of Qualification Certification for Food Inspection Agencies (CMAF) in China.

Please note that if the test report is issued by official laboratory, third-party testing agency or corporate laboratory outside China, a Chinese translation of the report should also be provided. And the test results should be converted to the units stipulated by the GB Standards.

List of testing items for FI and SI modified milk

The table below summarized the required testing items and their limits for both first-time import (FI) and subsequent import (SI) modified milk. ‘√’ means the corresponding index is requested, ‘×’ means the opposite.

Customs Inspection Check

After product shipment arrives at China port, the products will be stored in a designated location (warehouse) before final clearance. The importer who has Customs declaration qualification (or entrusted professional Customs broker) will submit relevant documents for Customs inspection and Clearance. Then Customs will check the documents and conduct sampling test. If all documents and the test result are compliant, after paying the tariffs, the importer will get an Inspection and Quarantine Certificate for imported goods, and Customs will release the goods.

Usually, it will take about 5-20 working days for Customs inspection and clearance. It may be shortened or prolonged according to different factors, such as preparation of documents, importer credit rating, communication with Customs, etc.

This checklist is for Customs Inspection declaration. Customs will check those items according to product category. Please refer to the following checklist for more details.

Check-list items

No.	Check-list		Remark
1	Automatic import license	1) What is that?	Automatic import license refers to the license issued by MOC authorised agency to manage the quantity or other restrictions in accordance with the regulations (see Pic.1).
		Pic.1
		2) Is your product required?	All dairy products need to get license of automatic import including fresh milk, whey and milk powder.
		3) If so, Who will obtain?	The Chinese importer needs to apply for the license before cargos arrived.
2	Certificate of origin (COO)		It is required for all dairy products.
3	Foreign official health certificate confirmed by China government	1) What is that?	Health certificate is issued by Australia government to confirm the product is produced in sound condition, fit for human consumption and of Australia origin (see Pic.2 HEALTH CERTIFICATE ).
		Pic.2
		2) Is your product required?	Yes, all dairy products need to get this certificate.
		3) If so, Who will obtain?	Exporter shall apply for it from Department of Agriculture and Water Resources. Please pay special attention to the following requirements: 1) The Health Certificate should be original with official seal and signature of official veterinarian; 2) The country of final destination should be the People’s Republic of China; 3) The form of the certificate and the official seal shall be the same as the version confirmed by China government; 4) The product information including name, specification, production batch, net weight or count, etc. on the certificate should be consistent with the declared product. For more details on this section, please click here.
4	Certificate of wooden fumigation for wooden packing		Applicable to wooden packing. Importers in China need to apply the certificate with Customs. After getting the certificate, your product would be printed IPPC logo (see Pic.3).
		Pic.3
5	Test report	1) What is that?	Test report of the product shall be provided for the customs inspection to demonstrate that testing results of the products comply with China standards.
		2) Is your product required?	Yes, it is required for all dairy products. Test report of the product shall be provided to the customs official for review to demonstrate that products comply with the testing items and parameters in the China’s food safety standards (GB standards).
		3) If so, Who will obtain?	It can be provided either by exporter or by importer.
		4) If so, how to obtain?	1) The report can be issued by the overseas official laboratory, third-party testing agency or the enterprise laboratory, or by testing institutions with the Certificate and Mark of Qualification Certification for Food Inspection Agencies (CMAF) in China. It is suggested to test with GB methods because the test results may be different due to different methods. 2) If the test report is not in Chinese, a corresponding Chinese translation should also be attached. 3) Please note that each batch should have a Certificate of Analysis (COA) and the test items required are more demanding for first-time import compared with subsequent imports. For more details on requirements for test reports, please click here.
6	Contract, invoice, packing list and bill of lading		In order to trace the origin of the product, those documents refers to the supporting documents of shipment.
7	License for Quarantine of entry animals and plants		The categories of dairy products need to get license of quarantine including: Raw milk (HS code: 0401200000), Raw milk products (HS code: 0403100000, 0406100000, 0406200000, 0406300000, 0406400000, 0406900000); Pasteurized milk and pasteurized modified milk (HS code: 0401100000, 0401200000). Importers need to apply for the license before cargoes arrived.
8	The sample of original label and Chinese translation, the sample of Chinese label	1) What is that?	Original label refers to the label of the product used in Australia. The Chinese translation refers to translation all information on the original label into simplified Chinese, with the exception of the English brand name, English name and address of manufacturer/exporter/agent outside China. The sample of Chinese label is the label intended to be applied on the product after imported into China, which must meet the relevant Chinese labelling laws, regulations and GB standards.
		2) Is your product required?	1) For first-time imported dairy products, the sample of original label, Chinese translation and the sample of Chinese label shall be provided. If requirements are met, a record number of label will be issued. 2) For subsequent imported dairy products, the sample of Chinese label and the record number of label are required.
		3) If so, Who will obtain?	The manufacturer or exporter should provide the Chinese label. However, in most cases it would be complicated to design your own Chinese label so it is recommend to seek a qualified expert to design a Chinese label according to Chinese food labelling regulations.
		4) If so, what type of Chinese labelling?	The Chinese label can be printed directly on the packaging or a pasted Chinese label stuck over the original English label which can be stuck on before or after products arrives at China port in the specified warehouse in the bonded area (Often times this can be a cost effective method, which can be organised by the importer/logistics agent/customs broker when goods arrive at China port). For more details on Chinese labelling requirements, please click here.
9	Others	1) Certificate of conformity for nutritional information	All products with nutritional facts should provide materials to demonstrate compliance.
		2) Copy of the business license of the Chinese importer/distributor/agent listed on the label	Only for first-time imported products. The Chinese importer/distributor/agent will prepare for it.
		3) Evidentiary documents for emphasized information on the labelling	If there’s some special information emphasized on the labelling of the product, such as prize, honour, legal producing area, geographical indication, certification logos,or special components; corresponding evidentiary documents shall be provided by the manufacturer/exporter/agent. Please note that organic labelling requires China organic certification.

Suggestions

1. Exporter should equip themselves with enough regulatory knowledge to ask the right questions regarding Chinese regulations and standards and are recommended to pay particular attention to continuously updated regulations.
2. For first-time shipments, it is suggested to airfreight a small batch of products before exporting larger quantities.
3. It is suggested to find a qualified and experienced importer who has a good relationship with Customs. You can learn more about how to find a good importer through the Customs Inspection Credit Management System under the Value of Partnerships section.
4. Exporter should maintain a good relationship and communication with the importer, and consult with expert regulatory advisors for smoother market access.
5. Customs declaration is one of the most important step of product importation. Well prepared, dilligent and accurate documentatiom will reduce the risk of problems and speed up market access during inspection.

Note
Please note that the checklist provided is for reference only and may not be complete for all circumstances.

Customs Taxes

Tariff Rates

China Customs will assess and collect the tariffs (Tax). The import tariff rate can be divided into the following categories: General Rates, Most-Favored-Nation (MFN) rates, agreement rates such as ChAFTA, Preferential rates, Tariff Rate Quota Rates, and Provisional rates. Australia and China has signed the China Australia Free Trade Agreement (ChAFTA) and tariff rates are paid according to this agreement.

Customs Valuation

The dutiable value of an imported product is calculated by adding the cost, insurance, and freight (CIF) price.

Taxes

There are 3 main taxes payable: 1) Tariff duties 2) Value added Tax (VAT) 3) Consumption Tax – See next section to identify how much you need to pay for your product.

What is ChAFTA？

The China Australia Free Trade Agreement (ChAFTA) came into effect on 20 December 2015, significantly reducing the tariff barriers affecting bilateral trade in goods, including agricultural and F&B products. Under ChAFTA, the import duty on most processed food products from Australia will be zero from 1 January 2019.

Traceability

What is dairy importation and sales record system?

According to “Administrative measures on inspection and quarantine of import and export dairy products” and “Administrative provisions on food importation and sales record”, food importers should establish a food importation and sales system.

Food importation record is a hard copy or electronic file that records imported food and relevant importing information. Food sales record is a hard copy or electronic file that records the vendors or consumers information. The inspection and quarantine organization will establish the credit record of dairy products importers.

Contents of the record system

The importation record system should include the following information:

Product name, brand, specification, quantity, manufacturing date or batch number, shelf life, country of origin, manufacturer name, name and contact information of exporters and vendors, delivery date, entry goods inspection and quarantine certificate number, etc.

The sales record system should include sales flow record and complaints-claims-recall record. All the records should be true and kept for at least 2 years.

Sales flow record should include:
Imported food name, specification, amount, weight, production batch number, sales date, buyer’s name and contact information, stock out number, Invoice number and recall process.

Complaints-claims-recall record should include:

Imported food name, specification, amount, weight, production date, production Lot No., complaints reasons, self-analysis, emergency handling and Follow-up improvement measures.

Cross Border E-commerce

Cross border e-commerce (CBEC) is a special import channel which allows goods to be sold online to consumers directly (B2C) via e-commerce platforms including: Alibaba’s Taobao, T-mall; JD.com, Kaola.com and others; opening the doors and market access to China’s e-commerce consumers. The CBEC channel has preferential policies on exemption for tariffs and regulatory requirements which usually applies to conventional general imports (B2B).

There are two models 1) CBEC Bonded Warehouse Model 2) CBEC Direct Mail Model, please see below for description:

1) CBEC bonded warehouse model

Products can be imported to any of the 15 approved CBEC bonded warehouse zones across China. Products are imported in bulk and temporarily stored in the bonded warehouse in the special pilot zone before an order is made by a consumer via a cross-border e-commerce website. After an e-sale order is made, products will be delivered from bonded area to the consumers directly via local courier. Please see pic 1 for visual flow diagram below:

2) CBEC Direct Mail Model

After the consumer places an order online, goods are shipped directly from overseas merchants (B2C) to consumer after customs clearance. Please see pic 2 for visual flow diagram below:

Only products listed in the positive list are allowed to be exported through Cross-border e-commerce

In April of 2016, China released two batches of positive list containing a list of 1,293 HS codes which can be imported /traded through CBEC, including packaged foods, UHT milk, beverages and others. Since the inception of the positive lists, all goods not included are banned on CBEC channel. Fortunately, most dairy products are included.

Infant formula (HS code 19011010) is on the positive list. The article information of the HS code is as below.

Products on the positive lists are permitted to be imported via CBEC model which have preferential policies on regulatory requirements. Unlike general imports, infant formula exports needn’t comply with China labelling and product standards which are allowed to be imported until the end of 2018. But from 1 January 2019, all CBEC infant formula shall comply with China regulations. Below is the comparison of regulatory requirements between general import and CBEC model.

* It is not sure whether regulatory requirements including GB standards, Chinese labeling and formulation compliance for CBEC will be the same as general import after 1 Jan. 2019.

CBEC Consumer Transaction Limits-RMB 2,000 per order & RMB 20,000 per year

For purchasing through CBEC, individual consumers are permitted to buy up to RMB 2,000 worth of such goods per order, up to a limit of RMB 20,000 per year.

CBEC Integrated Tax-11.2%

Products sold on CBEC are subject to 11.2% tax which is applied to the online retail price at the time of purchase (calculated as a 30% discount on VAT). However, if a single transaction exceeds the maximum value for single purchases or the combined annual total for each person, it will be taxed in full using the general trade tariff.

Suggestions for Exporters

Ensure regulatory compliance ASAP

Lack of consistency in regulations is one of the biggest challenges for companies engaging in CBEC. However, while CBEC remains an attractive channel to promote, market and sell products to Chinese buyers, Australian exporters are advised to ensure their products meet the China regulatory requirements & registration as early as possible before the end of the regulatory grace period on 31 December 2018.

Seek professional advice to track regulatory updates and ensure compliance

What is professional overseas shoppers named “Daigou”?

Apart from CBEC, Daigou to Consumer (D2C) has been a popular choice with exporters to develop overseas brand awareness in the Chinese market with maximum flexibility and cost effectiveness.

A “Daigou” is an overseas personal shopper who purchases products for others in China and delivers it as personal postage. Usually, a Daigou earns a small margin/fee by charging the people buying the products. On 20 February 2018, Australia China Daigou Association was established aiming to facilitate the cooperation between Australia brands and Daigous and make more qualified Australia products enter Chinese market.

Regulatory requirements for Daigou

Similar to CBEC, regulatory requirements for Daigou is much looser than general import. The comparison of regulatory requirements for infant formula between general import, CBEC and Daigou is as below.

* Daigou parcels are subject to tax only if customs inspected (the tax for foods is 15%, but can be exempted if tax value is less than 50RMB) , however due to significant volume of parcels flowing in and out of China, it is not possible for customs to check every parcel, leading to unclaimed taxes for many parcels via Daigou channel.