International trade and commercial transactions in China: overview

A Q&A guide to the regulation of international trade and commercial transactions in China.

The Q&A covers key matters relating to sale of goods contracts, including rules on formation, price and payment, delivery, passing of title and risk, variation and assignment, enforcement and remedies, exclusion of liability, choice of law and jurisdiction, and arbitration. It also provides an overview of the rules governing storage of goods, imports, trade remedies, exports and international trade restrictions.

To compare answers across multiple jurisdictions, visit the international trade and commercial transactions Country Q&A tool.

This Q&A is part of the International Trade and Commercial Transactions Global Guide. For a full list of jurisdictional Q&As visit www.practicallaw.com/internationaltrade-guide.

Ryan Tang, Allbright Law Offices
Contents

Recent trends

1. What are the recent trends affecting the regulation of international trade in your jurisdiction? Is your jurisdiction a member of the World Trade Organization (WTO)?

Recent trends

China joined the WTO in 2001. Since then, China has experienced a wave of rapid economic growth, with exports being given a high priority. The relatively stable political situation also provides a social environment that is favourable to the development of the economy. However, after almost 30 years of rapid growth, China is experiencing a slowdown (although it is still growing faster than any other major economy). According to data released by the National Bureau of Statistics, the gross domestic product grew by 6.7% in the first quarter of 2016, which is lower than the 6.8% growth in the fourth quarter of 2015. China's total value of imports and exports fell by 8.5% from January to October 2015, with exports decreasing by 2.5% and imports by 15.7%. In this context, the Chinese Government plans to release new policies and regulations to stabilise the economy, with a focus on:

  • Maintaining a solid amount and growth of foreign investment, and improving the quality of foreign investment.

  • Actively guiding foreign investment in emerging industries, high technology, energy conservation and environmental protection.

  • Encouraging Chinese enterprises to make investment overseas.

  • Improving the import discount policy, focusing on supporting the importation of advanced equipment and advanced technology, in order to encourage enterprises to adapt to innovation.

  • Supporting enterprises in establishing international marketing network systems, building overseas show centres, distribution centres, wholesale markets and retail outlets.

  • Encouraging enterprises to establish overseas service security systems, in order to accelerate the development of foreign trade of independent brands, and to foster a number of brands in key industries.

Additionally, there have been more international trade frictions as a result of the global economic slowdown. During the first quarter of 2016, the EU and US launched a few anti-dumping investigations against Chinese enterprises for a number of products, including seamless pipes, hot rolled plates, cold rolled steel, cast iron parts, stainless steel sink drawings and so on. In addition, the US Government has been negotiating the Trans-Pacific Partnership and the Transatlantic Trade and Investment Partnership without China's participation, which will represent a significant challenge for China's economy. China launched several counter-initiatives (for example, seeking to execute the Free Trade Zone Agreement with South Korea and Japan).

Generally, China has a stable political environment and a stable economic policy. China is also committed to build up a new China-led trade system and rules. Economic recovery can therefore be expected and achieved.

Trade agreements

China is a party to the following international agreements:

  • WIPO Paris Convention for the Protection of Industrial Property 1883.

  • WIPO Madrid Agreement Concerning the International Registration of Marks 1891.

  • UN Universal Copyright Convention 1952.

  • WIPO Rome Convention for the Protection of Performers, Producers of Phonograms and Broadcasting Organisations 1961.

  • Convention on the establishment of the World Intellectual Property Organization 1967.

  • Patent Cooperation Treaty 1970.

  • WIPO Berne Convention for the Protection of Literary and Artistic Works 1971.

  • WTO Agreement on Trade-Related Aspects of Intellectual Property Rights 1994.

  • WIPO Copyright Treaty 1996.

  • WIPO Performances and Phonograms Treaty 1996.

  • Convention on the Protection and Promotion of the Diversity of Cultural Expressions 2005.

  • Convention on the Unification of Certain Rules for International Carriage by Air.

China also concluded free trade agreements with about 22 countries and regions including the Association of Southeast Asian Nations, New Zealand, Singapore, Pakistan, Chile, Peru, Costa Rica, Iceland, Switzerland, South Korea and Australia.

China is currently negotiating free trade agreements with some other major economies such as Canada, the UK, Russia and so on.

From 1985 to 2015, China has participated in almost 300 international conventions or treaties.

Reform

After nearly 30 years of development, China has now set up a relatively comprehensive legal system that guides/governs the market, and which is based on ensuring free trade under supervision. The legislative authorities have adopted laws and decrees governing the commercial and business sector (including contract law, IP law, civil law and laws on foreign direct investment), which not only regulate the market but also set up a market economy and encourage the protection of property rights. This system of rules provides a basis for regulating and resolving conflicts of rights and interests under due process. In particular, in recent years, China has pursued a national strategy for protecting IP rights (IPRs) through:

  • Establishing and improving legislation on IPR protection.

  • Reinforcing enforcement measures and judicial protection.

Additionally, a series of regulation and decrees were issued to improve the execution of valid judgments/verdicts in order to protect the interests of the parties, and with the aim to set up a completed "social credit" system. In summary, the ultimate goal of the Chinese Government is to set up a free market that promotes lawful competition while protecting legitimate property rights.

 

Contracts for the sale of goods

General

2. What is the legal system in your jurisdiction based on (for example, civil law (codified), common law or sharia law)?

The Chinese legal system is based on codified law. The judicial authority resolves contractual and civil disputes based on law and decrees, rather than judicial precedent. However, in recent years, tribunals have been more willing to take into account past cases in order to harmonise decisions relating to like or similar cases.

The basic law that applies to business activities is the Contract Law of the People's Republic of China (Contract Law). Parties must comply with the general principles set out in the Contract Law, including the principles of:

  • Equality.

  • Voluntariness.

  • Fairness.

  • Honesty and good faith.

  • Causing no harm to the public interest.

If the Contract Law does not apply, relevant international treaties or conventions can be taken into account, in particular for cross-border transactions.

 

Formation

3. What domestic legislation and international rules apply to a sale of goods contract in your jurisdiction? Are standard international contractual terms commonly used?

Domestic legislation

The main domestic legislation that applies to a sale of goods contract includes the:

  • Contract Law of the People's Republic of China (Contract Law).

  • Judicial Interpretation of Contract Law of the People's Republic of China.

  • General Principles of Civil Law of the People's Republic of China.

International rules

China is a party to the:

  • United Nations Convention on Contracts for the International Sale of Goods.

  • Convention for the Unification of Certain Rules for International Carriage by Air.

Standard contractual terms

The International Chamber of Commerce international commercial terms (Incoterms) 2010 are commonly used in China.

 
4. What are the authority/capacity rules for entering contracts, for different commercial entities?

The following commercial entities can enter into contracts, provided that the execution of the contract is not contrary to the laws or the public interest:

  • Limited liability companies.

  • Companies limited by shares.

  • Listed companies.

  • State-owned enterprises.

  • Domestic enterprises.

  • Foreign invested enterprises.

  • Non-corporate legal persons.

 
5. What are the essential requirements to create a legally enforceable contract?

Substantive requirements

The requirements to create a legally enforceable contract are as follows:

  • The parties must have capacity to enter into the contract.

  • The parties' declaration of intention must be authentic.

  • The contract must not violate the law or the public interest.

  • The subject of the contract must be determined and enforceable.

Formal requirements

In 2013, China withdrew its reservation to Article 11 of the United Nations Convention on Contracts for the International Sale of Goods, which provides that a contract of sale need not be concluded in, or evidenced by, writing and is not subject to any other formal requirements. This means that a legally binding contract can be in written form, electronic form or can be concluded orally. However, in practice, a written contract is highly recommended.

There is no mandatory language requirement. However, for the purpose of legal proceedings, Chinese courts require that contracts drafted in a foreign language be translated into Chinese.

A contract generally includes the following terms (Article 12, Contract Law of the People's Republic of China):

  • Name and domicile of the parties.

  • Subject of the contract.

  • Number of goods subject to the contract.

  • Quality of the goods subject to the contract.

  • Price or remuneration of the contract.

  • Time, place and manner of performance/delivery.

  • Liability for breach of contract.

  • Dispute resolution.

 

Price and payment

6. If price provisions are not agreed by the parties, does local law impose requirements in relation to price (for example, the time, method and place of payment)?

The parties can agree on the payment terms. The following methods of payments are accepted, provided that mutual consent was reached between the parties:

  • Letters of credit.

  • Bills of exchange.

  • Promissory notes.

  • Funds transfer.

  • Banker's drafts.

If the parties do not agree on the method/currency of payment, they will need to agree on supplementary terms at a later stage. If the parties cannot agree on supplementary terms, the currency and methods of payment can be determined by reference to business customary practices for the relevant type of transaction. For example, renminbi will be the currency of payment in a domestic transaction. For transactions with European countries, the euro will be first considered as the appropriate currency of payment. US dollars will always be considered as the main currency for business transactions with the US.

 

Delivery

7. If delivery provisions are not agreed by the parties, does local law impose requirements in relation to delivery (for example, the time, method and place of delivery)?

If the parties do not agree on delivery provisions, they can agree on supplementary terms on delivery. If the parties cannot agree on supplementary terms, business customs will be taken into account. Normally, the seller has a duty to pack the goods properly and is responsible for delivering the goods to the buyer, and the buyer has a duty to take delivery of the goods.

 

Passing of title and risk

8. If not agreed by the parties, when does title to the goods pass to the buyer?

The passing of title is governed by the provisions of the contract. If title provisions are not agreed by the parties, title to the goods is transferred when the goods are delivered. However, the transfer of real estate must be registered with the relevant authority.

 
9. Are retention of title clauses enforceable in your jurisdiction? If so, what are the requirements to create a legally enforceable retention of title clause?

A sale and purchase contract can stipulate that the seller will retain title to the goods if the buyer fails to pay the price for the goods or fails to perform any other obligations (Contract Law of the People's Republic of China). Retention of title clauses are generally upheld and enforceable under Chinese law. However, a retention of title clause must be clearly and expressly included in the sale and purchase contract.

The purpose of a title retention mechanism is to protect the seller's rights against the buyer, as well as the interests of the buyer' in order to minimise the risk involved in the transaction. Under a retention of title clause, the seller can take back the goods that were delivered to the buyer if the buyer fails to pay the price in accordance with the terms of the contract. If the goods were delivered by the buyer to a third party, the seller can invalidate the assignment between the buyer and the third party. A buyer cannot use a retention of title clause to refuse to pay the price set in the contract.

 
10. If not agreed by the parties, when does risk in relation to the goods pass to the buyer?

Risk in relation to the goods passes to the buyer on transfer of the goods to the buyer, unless otherwise agreed in the contract.

 

Variation and assignment

11. What are the main ways and formalities to transfer contractual rights?

When transferring contractual rights to a third party, a party (creditor) must notify the other party (debtor) (Contract Law of the People's Republic of China). If the creditor fails to notify the debtor, the transfer will have no effect against the debtor. A creditor cannot transfer its contractual rights to third parties if the transfer is not permitted according to the:

  • Nature of the contract.

  • Parties' agreement.

  • Law.

A debtor can only transfer its obligations to a third party if it obtains the creditor's prior written approval.

 
12. What are the main rules relating to waiver of contractual rights?

Contractual rights can be waived provided that the waiver is not contrary to the law and public interests.

 

Enforcement and remedies

13. What are the seller's obligations in relation to the description and quality of the goods?

The seller is responsible for the description and quality of the goods, regardless of whether the goods are clearly described in the contract. The seller must deliver the goods in accordance with the prescribed quality requirements (Contract Law of the People's Republic of China). If the contract includes a description of the quality of the goods, the goods delivered must meet that description. If the parties did not agree on quality requirements, the national standards and/or industry standards will prevail. If there are no national standards or industry standards, the goods must meet the usual quality standards for the goods concerned, or the quality requirements can be determined by reference to the purpose of the contract.

If the quality of the goods does not conform to the contract, the seller will be liable for breach of contract in accordance with the agreement of the parties. If the contract (or supplementary terms) does not include provisions on liability for breach, or the agreement is not clear, the buyer can reasonably request the seller to do any of the following:

  • Repair the goods.

  • Take the goods back.

  • Grant a reduction of the price or remuneration set in the contract.

 
14. What are the different types and legal status of contractual terms in your jurisdiction?

A party that fails to perform its contractual obligations is liable for breach of contract and must continue to perform the contract, take remedial measures or compensate any losses suffered by the other party. The innocent party can terminate the contract in the case of a material breach, provided that the breaching party fails to correct the breach after being notified of it by the innocent party.

 
15. What are the key rules on privity of contract and third party rights?

The Contract Law of the People's Republic of China (Contract Law) is based on the continental law tradition and incorporates the "theory of relativity of debt", which is reflected by the "principle of the relativity of the contract". Accordingly, the scope of the contract is limited to the contracting parties, which means that third parties cannot claim rights or assume obligations under a contract. However, due to regular and complex social and economic developments and to the evolution of business practices, the effects of contracts have been gradually extended to third parties. The theory of the relativity of contracts has therefore been relaxed in certain aspects.

Under current legal practice, a third party cam make an independent claim under a contract if the contract relates to its benefit or interests (sections 64 and 65, Contract Law). This applies to contracts under which either:

  • The parties must perform their obligations in favour of a third party.

  • A third party must perform certain obligations.

 
16. What are the rules relating to invalidity, misrepresentation and mistake relating to contracts?

A contract can be declared invalid or revoked if it:

  • Is concluded through the use of fraud or coercion by the parties, and it harms the state interest.

  • Is concluded as a result of malicious collusion, and harms the interests of the state or those of a third party.

  • Conceals an illegal purpose under the guise of a legitimate transaction.

  • Harms public interests.

  • Violates a mandatory provision of any law or administrative regulation.

When a contract is declared invalid or revoked, any property acquired by a party to the contract must be returned. If the property cannot be returned or need not be returned, compensation must be awarded. The party at fault must compensate the other party for any losses suffered, and both parties are liable for their respective responsibilities.

When property is acquired under a contract reached through malicious collusion and causes damage to the interests of the state, a third party or to collective interests, that property must be returned to the state, collective entity or third party (as applicable).

A contract concluded as a result of a party's misrepresentation or lack of authority can be deemed a contract with undetermined effect. However, the contract can be deemed valid if the other party ratifies or continues to perform the contract.

 
17. What are the main performance and discharge rules relating to contracts?

Under the Contract Law of the People's Republic of China (Contract Law), a lawfully concluded contract is legally binding on the parties. Therefore, the parties must perform their obligations in accordance with the contract, and cannot unilaterally modify or terminate the contract. This requires the parties to use their best endeavours to exercise their rights and perform their obligations.

However, the parties can stipulate the conditions and procedure for termination of the contract. When the conditions for termination are met, the relevant party can terminate the contract in accordance with the procedure set out in the contract. Additionally, a party can terminate the contract in any of the following circumstances (Contract Law):

  • The purpose of the contract cannot be achieved due to force majeure.

  • The purpose of the contract cannot be achieved due to a party refusing to perform the main obligations under the contract.

  • The purpose of the contract cannot be achieved due to a delay in the performance of the main obligations under the contract.

  • The purpose of the contract cannot be achieved due to a delay in performance or other breach of the contract.

  • Other circumstances as prescribed by law.

 
18. What are the main remedies and rules for losses and damages for breach of a sale of goods contract?

Under the Contract Law of the People's Republic of China, a party that fails to fulfil its contractual obligations and causes damage to the other party is liable for the damages and losses suffered by that party.

There are two types of contractual remedies, those defined by the parties and those provided by law.

The parties can agree on the application of contractual remedies, including penalties. However, contractual penalties can be adjusted by the courts. The parties can also agree that a breaching party will be liable for the indemnification of all direct/indirect damages and losses (including oss of anticipated profit) suffered by the innocent party as a result of a breach of contract. If there is no provision on remedies in the contract, the breaching party must indemnify the innocent party for all damages/losses suffered, including loss of anticipated profit (Contract Law). However, the aggrieved party must prove its actual and anticipated losses through tangible and substantial evidence.

The following key points must be noted:

  • Contractual remedies for breach of contract prevail over statutory compensation rules.

  • Remedies for breach of contract do not include compensation for personal injury, death and mental damage.

  • The amount of compensation, in particular for future losses, must not exceed the damage that could have been anticipated by the party in breach at the time of conclusion of the contract.

  • When a breach occurs, the innocent party must promptly take reasonable measures to mitigate its losses. Otherwise, it will not receive compensation for losses that could have been avoided/mitigated.

Chinese courts usually issue a judgment based on the claims of the parties, rather than taking the initiative to decide whether to order performance of the contract or compensation for losses.

If a party has tangible evidence proving that the other party is very likely to breach the contract, it can bring a claim for either termination or performance of the contract. However, courts are less likely to issue orders preventing a party from breaching a contract.

 
19. What are the buyer's remedies for breach of a sale of goods contract?

The buyer can request termination of the contract for:

  • Late delivery.

  • Non-delivery.

  • Unqualified delivery.

  • Severe defect of the goods.

  • Other material breach of the contract.

Additionally, the buyer can seek remedies for all direct/indirect losses suffered as a result of the seller's breach, including:

  • A refund of the price paid.

  • Reimbursement of the costs/expenses engaged as a consequence of the breach.

  • Compensation for loss of anticipated profit.

Remedies do not cover compensation for death, personal injury and mental losses.

 
20. What are the seller's remedies for non-payment or late payment?

In the event of non-payment or late payment, the seller can seek:

  • Termination of the contract.

  • The return of the goods.

  • Compensation for losses suffered as a result of the buyer's breach.

Additionally (or alternatively), the seller can claim:

  • Payment of the price.

  • Interest due as a result of late payment.

  • Reimbursement of the costs/expenses engaged as a consequence of the buyer's breach.

  • Compensation for loss of anticipated profit.

 

Exclusion of liability

21. What are the main rules relating to excluding contractual liability? Are exclusion clauses enforceable in your jurisdiction? If so, what are the requirements to create a legally enforceable exclusion clause?

Exclusion clauses are recognised and enforceable in China. For an exclusion clause to be valid, the following legal requirements must be satisfied:

  • The clause must reflect the true intentions of the parties.

  • The clause must be negotiated and agreed by the parties.

  • The clause must not harm the social public interest.

  • The rights and interests of both parties must be allocated reasonably.

  • If standard terms and conditions are used, the party whose standard terms are used must explain the exclusion clause to the other party.

A contract cannot exclude liability for:

  • Personal injury.

  • Damages and losses caused intentionally or by gross negligence.

 

Choice of law

22. Will local courts recognise a choice of foreign law in a sale of goods contract? Are there any mandatory local rules that apply, despite a choice of foreign law?

The parties can agree on a foreign governing law in a sale of goods contract. However, the foreign law must cover substantive requirements, rather than procedural law.

 
23. If the parties do not make a choice of law, what rules determine the law applicable to a sale of goods contract?

If the parties do not make a choice of law, the governing law is the law of the country or region that is most closely connected with the contract. The law applicable to a sale of goods contract will be the law of either the:

  • Location of the seller.

  • Location of the buyer where:

    • the contract was negotiated at the buyer's place; or

    • the goods must be delivered to the buyer's place.

 

Choice of jurisdiction

24. Will local courts recognise a choice of foreign jurisdiction in a sale of goods contract? Are there any mandatory local rules that apply, despite a choice of foreign jurisdiction?

Chinese courts will recognise a choice of a foreign jurisdiction in a sale of goods contract, provided that it was mutually agreed on by the parties.

 
25. If the parties do not make a choice of jurisdiction, what rules determine the jurisdiction applicable to a sale of goods contract?

Under Chinese law, Chinese courts will have jurisdiction in any of the following circumstances:

  • The contract is signed or performed within the territory of China.

  • The object of litigation is within the territory of China.

  • The defendant has distrainable property in China.

  • The defendant has a representative office in China.

The competent court will be that of the above relevant location.

 

Arbitration

26. Are arbitration clauses commonly included in sales of goods contracts in your jurisdiction?

It is very common to submit contractual disputes to arbitration. As China did not conclude any bilateral treaties on the recognition of foreign judgments, judgments granted by foreign courts cannot be recognised and enforced by Chinese courts. Therefore, arbitration clauses are very often included in cross-border contracts, as China is a party the Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958.

 

Storage of goods

27. How is title to goods in storage protected and evidenced? Are warehouse receipts recognised as documents of title in your jurisdiction?

Warehouse receipts are recognised as documents of title in China. This means that a person can claim ownership of goods in storage based on a warehouse receipt. A warehouse receipt can also be assigned by endorsement and pledged.

 
28. What conditions and formalities must warehouse receipts comply with?

To be legally effective, a warehouse receipt must be signed or stamped by the warehouse keeper. Additionally, a warehouse receipt must include the following information:

  • Name and domicile of the depositor.

  • Type, quantity, quality, packaging of goods, and marking of packages.

  • Agreed standard relating to losses of stored goods.

  • Place of storage.

  • Duration of storage.

  • Storage charge.

  • Insured amount, duration of insurance cover and name of the insurer (if the goods have been insured).

  • Name of the person who issued the receipt, and date and place of issuance.

A warehouse receipt can be transferred provided that it is both:

  • Endorsed by the depositor of the goods or holder of the receipt.

  • Stamped by the warehouse keeper.

Warehouse receipts need not be authorised by, or registered with, a regulatory agency.

 
29. Are other interests over goods in storage recognised?

A warehouse receipt can be pledged. The depositor of the goods, or holder of the warehouse receipt, can execute a pledge contract with a pledgee. The pledgee's right become valid when both:

  • The depositor of the goods (or holder of the receipt) endorses the receipt.

  • The warehouse keeper signs or stamps the receipt.

 

Imports

Customs authority

30. What is the authority responsible for enforcing customs laws and regulations? Are certain goods subject to specific examination procedures?

The General Administration of Customs and its local branches in different areas/cities over the country (Customs Administration) are responsible for enforcing customs laws and regulations in China. The Customs Administration is responsible (in accordance with the customs law and other relevant laws and administrative regulations) for:

  • Supervising the entry and exit of transported items, goods and luggage, postal items and other items.

  • Collecting customs duties and other taxes and fees.

  • Issuing customs statistics.

  • Handling other customs operations.

All types of imported goods are subject to specific examination procedures before entering into China.

 

Import duties, tariffs and rates

31. What are the main customs import tariffs and duties?

General tariffs and rates

The main customs imports duties are as follows:

  • Import duty: the rates vary depending on the types of goods.

  • Import excise duty: the rates vary depending on the types of goods.

  • Import value added tax: the rates vary depending on the types of goods.

  • Import formalities: these are levied on:

    • goods entitled to a duty exemption or reduction; and

    • bonded goods (that is, taxable goods held in a warehouse pending payment of customs duties and other taxes due).

Preferential tariffs

The Chinese Government modifies import tariffs on a regular basis, mainly relating to the most favoured nation (MFN) rates, tax rates, annual tentative agreement on taxes (that is, annual agreements between the Chinese Government and other countries to offer preferential tariff on specific products), taxable items and rates and tariffs. According to the latest policy, there are several types of preferential tariff rates in China:

  • MFN rates.

  • Rates set out in the annual tentative agreement on tariffs.

  • Conventional tariff rates. China concluded free trade agreement with certain countries and regions such as South Korea, Australia and the Association of Southeast Asian Nations.

  • Preferential tariff rates. China concluded bilateral treaties with numerous countries (mainly in Africa) that provide for the application of preferential rates to certain imported goods.

 

Non-tariff barriers to imports

32. Are there non-tariff barriers to imports into your jurisdiction?

Non-tariff barriers to imports include:

  • Customs valuation.

  • Direct domestic production subsidies.

  • Discriminatory government procurement policies.

  • Foreign exchange controls.

  • Import quota systems.

  • Import licensing requirements.

  • Orderly marketing arrangements.

  • State monopoly on import and export operations.

  • Technical barriers to trade.

  • Voluntary export restraints.

The Chinese Government widely uses import licensing requirements and direct production subsidies. There is also a state monopoly on import/export operations.

 
33. Can customs decisions and import restrictions be challenged?

Customs decision and import restrictions are administrative decisions. Under Chinese law, administrative decisions can be challenged through specific legal procedures. However, in practice, the chances of success are extremely low.

 

Trade remedies

Regulatory framework

34. What are the main regulations and authorities responsible for investigating and deciding on trade remedies?

Regulatory framework

The main regulations relating to trade remedies include the:

  • Foreign Trade Law of the People's Republic of China.

  • Anti-Dumping Regulations of the People's Republic of China.

  • Anti-Subsidy Regulations of the People's Republic of China.

  • Regulations of the People's Republic of China on Safeguard Measures.

WTO rules on trade remedies are recognised and implemented in China, as China is a member of the WTO.

Regulatory authority

The Ministry of Commerce (MOFCOM) is the main administrative authority responsible for investigating trade remedies in China. The Ministry of Agriculture can also be involved in some cases.

The MOFCOM reports the results of its investigations to the Tariff Commission of the State Council (TCSC), which must issue a decision. The decisions of the TCSC are executed by the General Administration of Customs.

 

Investigations and enforcement

35. What are the requirements and procedure to start trade remedies investigations?

An application for trade remedies investigations can be initiated by:

  • A group of enterprises (of a certain industry) representing more than 25% of the overall domestic production of like goods (with no domestic opponent to the filing).

  • The Ministry of Commerce (MOFCOM), in specific circumstances.

Foreign parties cannot currently submit applications for trade remedies investigations.

The applicant must provide a written report to the MOFCOM, accompanied by tangible/specific evidence included as supporting documents. The report must include both:

  • A summary description of the conduct complained of.

  • A description of the damages and losses suffered by the relevant industry.

After examining the report and the evidence submitted, the MOFCOM will decide on whether to accept the application and to start an investigation. Once the MOFCOM starts an investigation, the following parties must truthfully report on the situation and submit all documents, information and materials required by the MOFCOM:

  • The applicant.

  • Known exporters and importers.

  • The government of the country (region) of export.

  • All relevant stakeholders.

On completion of its investigation, the MOFCOM can issue a preliminary decision and order provisional measures before making a final decision, especially in the case of in-depth investigations.

Normally, investigations must be completed within 12 to 18 months from the date of acceptance of the application.

 

Appeals

36. Is there a right of appeal against the authority's decision? What is the applicable procedure?

A decision of the Ministry of Commerce (MOFCOM) can be reviewed by the MOFCOM on application by any party that has an interest in the decision. This decision can then be appealed to the courts for judicial review.

 

Exports

Regulatory framework

37. What are the main requirements to export goods from your jurisdiction?

There are many laws and regulations relating to exports, which are issued by both the central and local governments. The main export laws and regulations include the:

  • Customs Law of the People's Republic of China.

  • Law of the People's Republic of China on Inspection of Import and Export Commodities.

  • Law of the People's Republic of China on Foreign Trade.

  • Regulations of the People's Republic of China on the Administration of the Import and Export of Goods.

  • Regulations of the People's Republic of China on the Implementation of the Law on the Inspection of Import and Export Commodities.

The main requirements to export goods are as follows:

  • Exported commodities that are subject to statutory inspection must be covered by an export inspection certificate.

  • A licensed customs broker must make a customs declaration and submit the following documents:

    • the dock warrant;

    • invoices;

    • a power of attorney for customs clearance;

    • the export foreign exchange verification;

    • the relevant sale of goods contracts;

    • a copy of the export commodity inspection certificate; and

    • other documents.

For more information visit: www.customs.gov.cn/publish/portal0.

 
38. Are certain categories of goods subject to specific export quotas, restraints or other controls?

Every year, the Ministry of Commerce and the General Administration of Customs issue a list of items that are subject to export licensing requirements and/or quotas. For 2016, there are 48 classes of item that are subject to export restrictions (for example, livestock, agricultural products, minerals, raw materials and so on).

 

Penalties

39. What are the consequences of non-compliance with export regulations?

Non-compliance with export laws and regulations can lead to the imposition of administrative penalties (including the recall of the goods and fines). Criminal legal proceedings can be commenced in serious cases.

 

International trade restrictions

Trade sanctions

40. Are there specific restrictions on trade with certain jurisdictions?

The Chinese Government does not frequently issue trade sanctions against other countries or regions, as the Chinese economy relies heavily on exports.

However, certain measures equivalent to trade sanctions can be taken, such as harsher inspections of certain imported goods or restrictions on the number of tourists allowed in certain countries or regions

For more information visit: www.aqsiq.gov.cn and www.customs.gov.cn/publish/portal0.

 
41. What is the authority responsible for imposing trade restrictions?

The main authorities responsible for imposing trade sanctions include the:

  • Ministry of Commerce.

  • General Administration of Quality Supervision, Inspection and Quarantine of the People's Republic of China.

  • General Administration of Customs.

 
42. What are the consequences of non-compliance with trade restrictions?

The penalties for non-compliance with trade restrictions include:

  • Recall of goods.

  • Confiscation of illegal income.

  • Fines.

Criminal legal proceedings can be commenced for activities that violate criminal law provisions.

 
43. Are businesses subject to specific compliance requirements? What practical steps should a business take to ensure compliance with trade restrictions?

Generally, a cross-border transaction must comply with Chinese law and policies if the transaction relates to China. Due diligence carried out by professionals (such as law firms) is highly recommended. The contract and other legal documents relating to the transaction should also be reviewed by legal professionals.

 

Foreign trade barriers

44. What is the procedure for local exporters to complain against foreign trade barriers contrary to the WTO or other trade agreements?

Local exporters can report on, or complain against, foreign trade barriers to the Ministry of Commerce (MOFCOM). In most cases, the MOFCOM will seek to resolve any dispute within the framework of the WTO rules. However, in some cases, the MOFCOM or other competent authorities may consider taking retaliatory measures against a country or region imposing trade barriers.

 

The regulatory authorities

Ministry of Commerce (MOFCOM)

W www.mofcom.gov.cn

Principal responsibilities. The MOFCOM is the administrative authority affiliated to the State Council that is in charge of business and trade.

General Administration of Customs

W www.customs.gov.cn/publish/portal0

Principal responsibilities. The General Administration of Customs is the administrative authority affiliated to the State Council that is in charge of the enforcement of import and export regulations.

General Administration of Quality Supervision, Inspection and Quarantine (AQSIQ)

W www.aqsiq.gov.cn

Principal responsibilities. The AQSIQ is the administrative authority affiliated to the State Council in charge of supervising:

  • The quality, measurement, inspection, entry and exit of goods.
  • Frontier health quarantine.
  • The quarantine entry and exit of animals and plants.
  • The safety, certification and accreditation of food imports and exports.
  • Standardisation.

State Administration of Foreign Exchange (SAFE)

W www.safe.gov.cn

Principal responsibilities. SAFE is the administrative authority affiliated to the State Council in charge of supervising foreign exchange receipts and payments, trading, borrowing, transfers and international settlements, foreign exchange rates and foreign exchange markets.

State Administration of Taxation

W www.chinatax.gov.cn

Principal responsibilities. The State Administration of Taxation is affiliated to the State Council and is in charge of all taxation matters.



Online resources

Ministry of Commerce (MOFCOM)

W www.mofcom.gov.cn

Description. This is the official website of the MOFCOM. It is maintained by the MOFCOM and provides access to all latest news relating to export-import businesses, policies, laws and decrees, guidance and so on. It is the only authoritative website that releases and interprets the government policies and business trends. This website is translated into other languages, including English, French, Spanish, Dutch and Russian.

China Trade Remedy Information

W www.cacs.gov.cn

Description. This official website, maintained by the MOFCOM, provides information on trade remedies policy, trade remedies cases and guidance. The information on this website is accurate and official.



Contributor profile

Ryan Tang, Senior Partner

Allbright Law Offices

T +86 21 2051 1835
F +86 21 2051 1999
E ryantang@allbrightlaw.com
W www.allbrightlaw.com

Professional qualifications. Admitted to the China Bar Association, 2003; Certified Fraud Examiner

Areas of practice. Dispute resolution; litigation and arbitration; compliance.

Non-professional qualifications. Tutor of graduate students, Law Faculty of Jiao Tong University

Recent transactions

  • Representing a tier one US medical instrument company in a class action relating to product liability in China.
  • Representing the biggest dairy products exporter in litigation cases in China.
  • Advising Air France and KLM on general corporate affairs in China.
  • Advising Associate British Food on general corporate affairs in China.
  • Advising SPX on general corporate affairs in China.
  • Advising LESAFFRE on general corporate affairs in China.

Languages. Mandarin, English

Professional associations/memberships. China Bar Association; Association of Certified Fraud Examiners (ACFE); International Academy of Family Lawyers.

Publications. "Legal System of Mortgage in China" and "The China Chain-New Franchising Regulations" and their Effect on Investment, published on Business Forum China.


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