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

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 Sub-inventory first. Only when there are material requirements from domestic sales, we will transfer a certain amount of bonded materials into non-bonded
sub-inventory.

 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 inventory?

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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Build up your ERP’s strength with some OATS! Join our webcast “Make Oracle ERP Better, Faster and Stronger with Oracle Application Testing Suite”, on Tuesday January 27th at 8:00 AM PST/11:00 AM
EST to learn how to go about it. Register here.