2010 Imported Printing Equipment Policies: Provisional Tariffs, VAT Deductions, and Easier Customs Clearance

In 2009, as the global financial crisis weighed on markets, Chinese authorities rolled out support measures aimed at high-tech printing equipment imports. VAT transformation reform and sharply lower import tariffs gave the strongest push to equipment purchases. For 2010, what incentives remain available to imported printing equipment? The new package sets or adjusts provisional tax rates for selected high-tech equipment to bring import duties down, while several policies introduced in recent years continue. Below is a practical roundup of the key new and recent benefits.

1. Broader provisional tax rate coverage, deeper import tariff cuts

To attract high technology, the Tariff Commission of the State Council issued the 2010 Tariff Implementation Plan (Tariff Commission [2009] No. 28) on December 16, 2009. Effective January 1, 2010, China further adjusted its import and export tariff schedules and rates. More than 600 import rates (provisional rates) were reduced, including 17 categories of printing equipment and parts. Seven printing equipment types were added, with import duties lowered at the same time. For example, the curved tube for paper cutting machines received a 4% provisional rate, 50% below the previous 8% most-favored-nation rate.

Under tariff code 84431313, for four-color sheet-fed offset presses running at 16,000 folio sheets/hour or more, newly added items include (2) folio sheet-fed double-sided printing at 13,000 sheets/hour or more, and (3) full-sheet or super-full-sheet sheet-fed offset presses with single-sided printing at 13,000 sheets/hour or more, both at a 7% provisional rate—30% lower than the original 10% rate. Under tariff code 84431319, for five-color and above sheet-fed offset presses at 16,000 folio sheets/hour or more, newly added items include (4) folio sheet-fed double-sided printing at 13,000 sheets/hour or more, and (5) full-sheet or super-full-sheet sheet-fed presses with single-sided printing at 13,000 sheets/hour or more, also at 7%, down 30% from 10%.

Other additions include: (6) in-line narrow-web flexographic presses with hot stamping, holographic, or screen printing units (linear speed >160 m/min; 250 mm ≤ web width <800 mm), at a 5% provisional rate, 50% lower than the original 10%; and (7) automatic web feeding machines (linear speed >12 m/s), at a 4% provisional rate, a 67% reduction from 12%. These changes enlarge the pool of printing equipment eligible for reduced tariffs under the provisional rate policy.

The revised list is also more precise and detailed, matching the goal of advancing high-tech printing and making day-to-day implementation easier. In the past, documents often stated only that folio four-color offset presses could qualify. When a Zhejiang printing company imported a five-color offset press, local customs said the five-color machine could not enjoy the preference. Earlier rules also set a 16,000 sheets/hour threshold for folio multi-color offset presses but did not address double-sided four-color (eight-color) presses—for example, the speeds of eight-color machines using different printing methods from Japan's Akio, Heidelberg, and others. Applying single-sided press speed requirements to double-sided presses was not very reasonable, and companies often faced complications at customs.

1. VAT deduction continues

In 2009, the State Council decided on VAT reform: across China and in all industries, including foreign-invested enterprises, purchases of domestic and imported equipment can be fully deducted for VAT. The policy remains in effect this year. It differs substantially from the earlier customs duty and VAT exemption approach, most notably because the upfront payment when buying a machine is much higher. For a folio four-color offset press priced at USD 1 million, a 7% provisional duty is paid first, bringing the price to 100 × 1.07 = USD 1.07 million; then 17% VAT must be prepaid to customs, lifting the price to 107 × 1.17 = USD 1.2519 million.

As a result, under the provisional rate plus VAT deduction policy, a printing company buying that folio four-color offset press spends a nominal USD 1.07 million—USD 181,900 less than before the VAT reform. However, the company must pay USD 1.2519 million upfront in total (principal + duty + VAT), which remains a heavy burden. For small and medium-sized enterprises in particular, completing the VAT deduction can take a long time. In some places, grassroots tax authorities do not fully follow national policy when handling VAT deductions, which can prevent companies from deducting smoothly.

1. Tax benefits for cultural enterprises

On March 27, 2009, the Ministry of Finance, General Administration of Customs, and State Administration of Taxation jointly issued the Notice on Several Tax Policy Issues Concerning Support for the Development of Cultural Enterprises (Cai Shui [2009] No. 31). Article 7 states that self-use equipment, supporting parts, and spare parts that cannot be produced domestically and are imported to make key cultural products are exempt from import duties under current tax policy. The implementation period runs from January 1, 2009 to December 31, 2013.

Item 18 of the annex, “Scope of Cultural Enterprises,” also covers book, newspaper, periodical, audio-visual product, and electronic publication printing enterprises that use high-tech equipment such as digital printing, computer-to-plate (CTP), high-speed fully automatic multi-color printing presses, and high-speed book and magazine binding lines.

Yet the definition of “key cultural products” is unclear, the printing enterprise scope for cultural enterprises is broad, and the phrase “self-use equipment, supporting parts, and spare parts that cannot be produced domestically” is general. With no clear implementation basis and difficult operation, these otherwise favorable policies are often hard to apply—or cannot be applied at all.

1. Incentives available to foreign-invested enterprises

All foreign-invested enterprises importing printing equipment can enjoy VAT deduction and provisional customs duty rates. In addition, printing equipment imported without compensation by foreign investors in processing trade enterprises, along with technology, supporting parts, and spare parts imported with such equipment under contract, remains exempt from customs duties within the originally defined scope.

Second, for encouraged foreign-invested projects such as “folio and full-sheet multi-color sheet-fed offset presses with printing speeds above 16,000 and 13,000 folio sheets/hour, and web offset presses with printing speeds above 75,000 folio sheets/hour,” imported self-use equipment may also be exempt from customs duties.

In addition, under Order No. 4 of [2008] jointly issued by the National Development and Reform Commission and the Ministry of Commerce, the Catalogue of Advantageous Industries for Foreign Investment in the Central and Western Regions includes packaging and decorative printing as an advantageous industry for foreign investment in seven provinces—Shanxi, Anhui, Jiangxi, Henan, Hunan, Hubei, and Yunnan. This allows qualified projects to enjoy encouraged foreign-investment incentives, meaning imported self-use equipment is exempt from customs duties.

1. Simpler import procedures, delegated management authority

Most printing equipment imported into China is offset presses. For years, imports of sheet-fed and web offset presses were tightly controlled. They were first classified as restricted imports and later as specified products, with complex approvals and long processing times. Besides approval by local authorities where the importing company is based, companies had to go to Beijing for approval, and import licenses were issued by the Ministry of Commerce. After China joined the WTO, the Ministry of Commerce and General Administration of Customs jointly issued documents that moved 11 catalogued products, including web offset presses and sheet-fed offset presses, from specified product management to automatic import license management for mechanical and electrical products. As a result, import licenses for offset presses are now issued by the mechanical and electrical product import office in the province, autonomous region, or municipality where the importing company is located, rather than by the Ministry of Commerce. This delegation has simplified procedures, improved efficiency, and made equipment imports easier.

—Source: China Packaging Network (pack.cn), original link: http://news.pack.cn/show-362194.html