It’s incredible how many people not in the supply chain business know a whole lot about global trade today – but not for the right reasons.

The ongoing trade wars between the United States and China have taken center stage in every media outlet around the world, and organizations buying and selling goods globally are feeling the effects. However, recent dramatic regulatory changes in China have been dwarfed by the tit-for-tit tariff talk. These changes have equal importance and impact on global trade, yet most shippers aren’t tuned-in quite yet.

Now, and possibly more than ever, it is critical to understand the geopolitical topics that are impacting the direction of global trade and the implementation of punitive and retaliatory tariffs.

China is acting behind the scenes

The Chinese government has not been sitting back and simply playing tariff chess with President Trump — there is a lot more going on behind the wall than you think.

In March 2018, the 13th National People's Congress of China formally approved the State Council’s proposal to implement a massive reformation of many Chinese governmental agencies, with special emphasis on those managing the operations around import and export. The restructuring plan simplified and/or integrated many agencies in an effort to improve and streamline operations. Ultimately, the government believes it will bolster the economic environment, including customs clearance, market-access measures on product quality, and the investment environment of foreign-invested enterprises.

Following this vote, the China General Administration of Customs (GAC) announced the revision of 71 regulations and abolition of two regulations related to customs supervision.

The restructuring will affect shippers far and wide

The vote translates into a massive overhaul of import and export activities, stretching far beyond China’s borders. 

In our current trade environment, doing business with China is—and will probably continue to be—an unsettled relationship. However, it helps to know some of the modifications that will affect shippers:

• China and Inspection Quarantine (CIQ) and China's customs agencies are integrated. The responsibilities for the physical inspection of goods by CIQ are totally now unified under China Customs supervision, making Customs responsible for the admittance measures and taxation of all imports and exports.
• New Single Window with one Declaration for both Customs and CIQ. Shippers can use a “single window” portal to submit their declaration and physical inspection data, creating greater efficiency at the port.
• New 13-digit Commodity Code by adding three-digit CIQ Code to HS Code. Beginning on August 1, 2018, the China Customs Commodity HS Code has been changed from the original 10-digit HS code to the new 13-digit HS code. The first eight digits are the Commodity HS code of "Import and Export Tariff of the People's Republic of China", digits nine and 10 are Customs supervisory additional numbers, and 11 to 13 are additional numbers for inspection and quarantine. This change reflects the merging of functions between China Customs and CIQ.
• Additional 20+ declaration parameters changes. Additional customs and quarantine declaration requirements will compel enterprises to have a stronger knowledge of customs and trade compliance standards for export before and after clearance.
• Golden Gate II Process and System for Processing Trade. With the planned implementation of the Golden Gate II system by the end of 2018, China Customs agency is revamping the supervision of processing trade down to part number level with expanded handbook reconciliation options.  Companies that engage in processing trade in and outside of bonded zones should plan for upgrades to the process and China Trade Management system to meet the much more rigorous compliance requirements from Golden Gate II.
• Changes in AEO Certification and Self-compliance Programs.  Compared to the previous scheme, one of the most significant changes in the new regulation is the further interpretation and differentiation between the different creditability rankings in these programs. The amendments also increase the voluntary disclosure penalty allowance from 5,000 to 50,000 RMB (US$7,331.75) before triggering a downgrade of an enterprise’s credibility assessment.

While the trade conflicts between China and the U.S. are negatively impacting supply chains already, companies in both countries who import and export goods are subject to more than just tariff increases. Additional or new documentation, data, and processes can throw a monkey wrench into the finest-running supply stream at any moment.

There is a lot going on behind the Great Wall — now is the time to be making modifications to your organization’s operation.