Bonded and Non-Bonded Processes in China: Your Questions Answered

Yesterday we had our webcast on China:

“The Manufacturing Company’s Guide
to Success: Bonded and Non-Bonded Processes”

. As usual we are happy to
provide a copy of the Q&A session that followed the webcast presentation.

Can you introduce the policy of Chinese customs tariff and
import VAT?
At present, there are two kinds of customs tariff rates: one
is the preferential rate; the other is the standard rate. The preferential rate
is applied to those goods imported from countries who have signed a mutual
agreement of preferential customs tariff with China. The standard rate is
applied to goods which are imported from countries who have not signed a mutual
agreement of preferential customs tariffs with China. For import Value Added Tax,
there are two kind of VAT rates: the normal rate is 17%, but for those goods
which are related to national economy and people’s daily life, there’s a
reduced rate of 13%, for example in foods, vegetable oil, water, magazines, etc.
How do we manage bonded materials for our domestic and
overseas sales?
Bonded materials are always received into the Bonded
Subinventory first. Only when there are material requirements from domestic
sales, we will transfer a certain amount of bonded materials into non-bonded
 What is the
difference between bonded area and free trade zone?
A bonded area is more focused on the free trade of goods and
materials, while a free trade zone focuses on the opening of service sectors,
like: banking, shipping, trade, professional services, etc. For example, in the
Shanghai pilot free trade zone, which was newly setup in 2014, foreign banks
are allowed to open their branches, and both private and foreign capitals are
encouraged to open joint venture banks – RMB cross border usage, the interest
rate market, offshore business, all these are encouraged.
For goods imported from an overseas market, they can be
delivered into a free trade zone directly, and after that enterprises can
declare the goods to customs for record. The goods have free movement within
the free trade zone, so in this sense a free trade zone is sort of an upgraded
version of a bonded area, more open.
For the “Same Item Number” solution you mentioned, what is
the required handbook process to move inventory from the bonded to non-bonded
Handbook is the manual released by customs to the processing
factories in order to track the material and finished goods movement. Before
the handbook is released, enterprises need to report to customs the contract
and BOM structure, so as to show which materials will be consumed and which
products will be produced. So when the materials need to be transferred from
bonded to non-boned inventory under the “Same Item Number” option, enterprises
need to declare to customs the materials movement, and customs will confirm it
is the right material needed for the processing, approve its entry to the non-bonded
inventory and register on the handbook.
With the Demand Class option, do the distinct demand classes
show up on the material transaction?
Demand Class cannot show up on Material Transaction, in just
shows up on Work Orders and Sales Orders so that the system is able to tell
where materials come from for demands.
For more information on how Oracle E-Business Suite can help
your organization set foot in China and take full advantage of its bonded
areas, visit
our China Services page.
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