On 16 and 24 October 2017, General Administration of Quality Supervision Inspection and Quarantine (AQSIQ), China’s inspection and quarantine authorities, issued the Rules regarding the Regulation of Procedures of Import/Export Inspection and Quarantine (Procedure Rules) and the Announcement regarding the Simplification of inspection and Quarantine Procedures to Improve Efficiency of Customs Clearance (Announcement). The Procedure Rules and the Announcement clarify certain procedural aspects of the inspection process and significantly reduce the “random check ratio” for those import products. The Procedure Rules also require the relevant authorities to comply strictly with the statutory time limits for completing the procedures with the aim of improving customs clearance efficiency. The Procedure Rules and the Announcement came into effect on 1 November 2017.

Background

Generally, inspection and quarantine are pre-conditions before imported products can clear Chinese customs. Depending on the types of products and the corresponding “conformity assessment” procedures, AQSIQ (or its local branches) has discretion to apply different inspection requirements, including for onsite or laboratory inspection on a random sampling basis. Historically, this process was lengthy and time-consuming due to the high random check rate and a lack of clear regulatory guidance as to how the detailed procedures were determined. This created hurdles which increased the overall efficiency of customs clearance for products imported into China. The problem is more concerning for companies doing business online as the Chinese authorities strengthened regulation in 2016 to require all products imported via cross-border e-commerce to be subject to inspection and quarantine similar to imports through traditional means (please refer to our e-bulletin dated 27 April 2016), although the grace period for implementing the new requirement has been extended to the end of 2018.

The new rules

The new rules improve the existing inspection and quarantine regime in the following ways:

Simplifying inspection and quarantine procedures

According to the new rules, a full inspection and quarantine may include the following steps: accept application, review, inspection, quarantine, quarantine treatment, overall assessment, goods release and archive. For a particular product, detailed inspection and quarantine procedures will be determined based on the nature of the product, the historical compliance of the importer/exporter and the certification/authentication obtained for the product. A simplified procedure (requiring fewer steps) may apply to low-risk products imported by companies with a good compliance record. In addition, imports not subject to random sampling will be directly released provided a written compliance guarantee is provided to the authority. It is expected that more than 80% of existing imports will benefit from the simplified procedures.

Adjusting random sampling ratio

The new rules specify the random sampling ratios for 113 types of products and significantly reduce the ratios for certain consumer products. For instance, for a particular importer, sampling ratios for each batch of wines, cakes or biscuits have been reduced from 100% to the lowest possible ratio of 3%; sugar, tea or beverages to 5% and cosmetics to 10%. After the new rules come into effect, it is estimated that the overall onsite inspection ratio will be reduced by 76% to 22%. However, the random sampling ratio may be increased (up to 100%) if an importer fails to maintain a good compliance record with AQSIQ. Random sampling ratios may also be increased if there is evidence that products may pose a high risk to health or there are safety concerns.

Specifying strict timelines

Under the new rules, the relevant authorities must comply with specified timelines for different types of products for each step of the inspection and quarantine process. Accepting an application and reviewing application documents must be completed within half a working day. For most products, onsite inspection must be completed within one working day and laboratory inspection within seven working days. In general, products are expected to clear inspection and quarantine within one to one and a half working days if they are not subject to random sampling. In addition, the new rules encourage the use of a paperless filing system to facilitate and expedite the procedures.

Our observations

Echoing the growth boom of cross-border e-commerce in China, the Procedure Rules and the Announcement are a step forward by AQSIQ towards improved efficiency in the inspection and quarantine procedures for products imported into China. While the general regulatory trend is to bring cross-border e-commerce in line with the legal requirements for the traditional importation model, companies importing low risk products are likely to enjoy faster customs clearance thanks to the simplified inspection and quarantine procedures and the reduced random sampling ratio. However, given that sampling ratios are subject to a two-way adjustment, companies must maintain a sound track record with AQSIQ to avoid their imports being targeted for heightened review. This will in turn require companies involving in China-related cross-board trade to keep updated on the latest legal developments in China and establish and enforce an effective supply chain risk management plan to comply with these regulatory requirements.