Q&A ON THE DOUBLE-CHECKING SURVEILLANCE SYSTEM OF

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Kellie Grant
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1 Q&A ON THE DOUBLE-CHECKING SURVEILLANCE SYSTEM OF IMPORTS OF SOME TEXTILES FROM CHINA This notice is for information purposes only and has no force in law. Please note that where legal advice is required importers should make their own arrangements. All clarifications regarding China's export system for certain textile products contained in this notice are based on explanations received from the Chinese administration. Definitions, abbreviations: Export licence = E/L Import licence = import authorisation = I/L Chinese local department of Ministry of Commerce = local Mofcom Chinese Ministry of Commerce = Mofcom Système Intégré de Gestion de Licences = SIGL 1. Generally: steps for an export licence from application to insertion into SIGL The system is substantially the same as during the quota regime which expired on 31 December However, some changes have been introduced which are reflected in the Notice 91 from the Chinese Ministry of Commerce (Mofcom) on "Surveillance scheme applicable to some textile exports to the EU in 2008". The original Notice 91 in Chinese as well as an informal translation have been put on DG Trade's website, in the chapter on China at The main difference is that the exporting means of transport determines the moment at which the Export Licence (E/L) is inserted into Système Intégré de Gestion de Licences (SIGL) by the Chinese administration. The aim is to ensure that the data collected on the E/L correspond as much as possible to what is actually exported to the EU. 1.1 Who is an Export Licence Holder? Export licence holder refers to both manufacturers and trade dealers. The list of qualified exporters can be found on the website of the China Chamber of Commerce for Import & Export of Textile and Clothing Products at oume It is only these qualified exporters who are able to apply for an E/L with local Mofcom; to interrogate the electronic licence administration system to check the status of an E/L; and to ask local Mofcom to update the status if necessary

2 A list of qualified exporters as export licence holder is published as annex to Notice 91 and regularly updated on the Mofcom website. For further information on access to China's licensing system, see also reply to question Means of Export the key change The means of export from China and then to the EU determines how the E/L data is inserted into SIGL. Different means of export will attract different administrative processes within the Chinese system and these means affect how quickly the E/L data is inserted into SIGL. Sea freight / land freight For sea freight/ land freight, the E/L is not inserted into SIGL upon issue of E/L but only after customs clearance in China. After the customs clearance in China, the local customs offices send the data to central customs office. These data are dispatched from central customs to central Mofcom within 24 hours. The latter then inserts the data into SIGL. The Chinese E/L holder, who has applied for the E/L at local Mofcom, has access to the computerized licence administration system of Mofcom and can check the status of the E/L. If the status of the E/L has not been updated on the basis of an information by Chinese customs 10 days after customs clearance, the Chinese E/L holder should contact the local Mofcom where the E/L was issued to present the proof of customs clearance and to ask for the update of the E/L status and its insertion into SIGL. Air Freight The regime establishes special treatment for goods exported by air consisting of insertion into SIGL upon issue of an E/L. This special treatment must be specifically asked for when the export licence is being registered with local Mofcom, i.e. the E/L holder needs to declare air freight to local Mofcom when applying for the E/L. In that case, the E/L data are sent directly to central Mofcom which inserts them into SIGL within 24 hours. Mixed Transport (land/sea, sea/sea, sea/air or land/air) via Hong Kong or a third country Particular attention should be paid to transactions via Hong Kong or a third country. Generally the above mentioned rules apply: the means of transport from Hong Kong or a third country to the EU should be declared at the moment of application for an E/L. If air transport is involved, then this should be declared to the local Mofcom when applying for an E/L. When goods are to be air freighted from Hong Kong or a third country to the EU then the special treatment under air freight would apply and the E/L data will be inserted within 24 hours into SIGL (see reply to Question 8 for more detail)

3 All of the above means that E/L needs to contain the correct data concerning the intended means of transport at issuance of the E/L. Corrections are possible thereafter but they need to be communicated to local Mofcom and take time. The annex to this document contains a flow diagram showing the process in a simplified manner. 2. What is the role of the central and local Mofcom at each step of the procedure? What is the role of central and local customs authorities? 2.1 Mofcom Local Mofcom Local Mofcom is where the Chinese E/L holder applies for the E/L and declares the mode of transport together with other information contained in the E/L. Local Mofcom sends the data to central Mofcom. It also can update the E/L status in case of delays of over ten days in data transmission from the Chinese customs to central Mofcom, provided the E/L holder supplies the proof of customs clearance. Central Mofcom Central Mofcom updates the SIGL database with information received from local Mofcom and customs authorities. 2.2 Customs authorities Customs authorities are responsible for customs clearance of the goods leaving China. They have become a relevant step in the licence procedure, in particular as goods that are sea or land freighted are only loaded into SIGL after customs clearance. The General Administration of Customs transfers the customs clearance data of the 8 categories under double checking, which it collected from the local customs, to the China International Electronic Commerce Centre (CIECC) of Mofcom on a daily basis. 3. What can an EU importer do so that the customs clearance in the EU of his goods is not delayed? It is suggested that the EU importer keeps in close contact with his/her Chinese exporter. If the importer operates through an agent, it is important to note that, as outlined in question 1.1, only the Chinese E/L holder has direct computerized access to the information on the E/L status and the status of the export transaction linked to a particular export licence, in particular the clearance of Chinese customs. The latter is a precondition for a proper loading - 3 -

4 of the SIGL system for sea freight. The Chinese E/L holder is also the only one who can ensure via the local Mofcom that the status of the export transaction is properly updated in the Mofcom system should this prove to be necessary. This means that the EU importer has an interest to apply for an I/L only after confirmation from his/her exporter that the E/L has effectively been inserted by the Chinese authorities into SIGL. EU importers facing problems linked to the status of an E/L should ask the intermediary/agent whom they have been dealing with to contact the Chinese E/L holder to solve the problem. The present Chinese licences system can only be accessed by the official exporter, namely the E/L holder. There are cases where the goods have arrived in EU ports but the E/L is not yet inserted into SIGL by Mofcom. These "urgent cases" are being followed up separately and as a matter of urgency by the Member States licensing offices, the Commission's SIGL team and Mofcom. Contact between importer and exporter is also important in such cases in order to ensure the update of the relevant Mofcom databases. 4. What should be done if the mode of shipment is not known when the export licence is issued? Declaring the mode of transport is a compulsory element when the E/L is issued. Only the correct declaration will ensure proper treatment of the E/L (air-freight or not). Omitting inclusion of this information in the E/L will cause undue delays. It is thus of prime importance that the E/L holder transmits the necessary information concerning the mode of transport when he applies for the E/L. Should a change in the means of transport occur after application for the E/L, this should be notified as soon as possible to minimise delays (see question 5). 5. What happens if the mode of transport is switched from sea freight to air freight or vice versa, after the E/L has been issued? The E/L holder should contact local Mofcom to ask for a change in the E/L concerning the mode of transport. If the switch is from sea freight to air freight, then the "special treatment" (i.e. immediate sending of data by local Mofcom to central Mofcom for inserting into SIGL within 24 hours) will apply but this must be specifically requested. It is important that the E/L holder transmits information concerning such changes as soon as possible to local Mofcom given the link between the means of transport and the moment of inserting E/L data into SIGL

5 If the mode of transport is changed from air freight to sea freight after loading the E/L into SIGL system, the Chinese authorities will not re-send those data. 6. Why is there still a delay in inserting E/L data into SIGL for air freighted shipments? There are several instances when the goods are already at EU customs but E/L data do not appear in SIGL. No delays should happen if the air-freight special treatment has been requested when the export licence was registered with local Mofcom. There have been some teething problems which the Chinese authorities are now resolving. 7. What is the role of the Chinese E/L? Why 45 days validity? Why the English E/L is valid only 75 days? China has introduced changes into the E/L validity periods, with 45 days for the Chinese E/L and 75 days for the English E/L. The validity periods are based on historical data giving indications concerning the actual time needed by exporters to complete the export procedure in China (maximum of 45 days). In addition to this time China gives a period of 30 days reflecting the actual shipment time and for allowing the EU importer to apply for the import licence. After the 75 days, the E/L is no longer valid. The validity period may not be extended and the Chinese authorities will withdraw the E/L from SIGL. According to Notice 91, expired licences are invalid. If the importer applies for the import licence within the 75-day validity of E/L, he or she can import the goods within the following six months according to the validity of the import authorisation. A procedure has been set up analogue to the urgent cases referred to in reply to Question 3 to seek rapid solution of goods having arrived in the EU for which the E/L has been deleted by Mofcom as a result of the 75 days rule. These cases are being dealt with separately and as a matter of urgency by the Member States licensing offices, the Commission's SIGL team and Mofcom. Contact between importer and exporter is also important in order to ensure the resolution of such cases. 8. What happens if the goods are being shipped via Hong Kong and then air freighted to the EU? Does China consider that the goods are shipped by air or other means of transport? If such mixed modes of transport are used (land or sea to Hong Kong and air from Hong Kong to the EU) the E/L holder should indicate "air-freight" when declaring the mode of transport to local Mofcom. The "special treatment" for air-freight described in Question 1.2 is to be requested. Importers are advised to make their Chinese contacts aware of this "special treatment" for air-freight when shipping via Hong Kong

6 9. What happens if goods are being shipped to another country first before being shipped to the EU? Some traders have big warehouses and sorting centres from where they ship the goods from into the EU a few months later. Once the E/L is in the SIGL system, the EU importer can apply for the I/L before the expiry of the E/L. As in the past, the I/L, in line with EU Regulation 3030, is valid for six months and thus the imports have six months to enter into free circulation in the EU. To obtain an I/L in order to enter the EU, the goods originating in China must have a Chinese E/L. Therefore, even if the goods are stored in warehouses outside the EU, those goods must have been earmarked for entering the EU at some point and have a corresponding E/L. 10. How can an EU importer find out what has happened to its E/L if not on SIGL? Is there a website which can be consulted? The EU importer is suggested to keep in close contact with his/her Chinese export licence holder who in turn should have direct electronic access to the E/L website with the status of the E/L. Should the EU importer only have contact with an agent, he/she should ask the intermediary/agent whom they have been dealing with to contact the Chinese E/L holder to solve the problem. The present Chinese licences system can only be accessed by the exporter, namely the E/L holder (see also reply to question 1.1). 11. What if the status of the export licence is incorrect and therefore the E/L is not entered into SIGL? The EU importer is suggested to ask the Chinese exporter to do what is needed so that the E/L status is updated. If exports take place via an agent and the importer is thus not dealing directly with the E/L holders, his supplier will need to contact the E/L holder as only the latter can get the status corrected (see also reply to question 1.1). For instance, if the goods are shipped but the E/L is not yet in SIGL, the E/L holder should ask local Mofcom to update the status on the basis of the proof of customs clearance in China (see also reply to question 2.1). 12. If the Chinese contact of the EU importer says that everything has been done correctly but the E/L is still not in SIGL, what else can the EU importer do? Importers are advised to find out whether they are dealing directly with an E/L holder or not. If they are, it is suggested they ask the Chinese E/L holder to contact local Mofcom. If they are not, the EU importers should ask the intermediary/agent whom they have been dealing with to contact the Chinese - 6 -

7 exporter to solve the problem. The present Chinese licence system can only be accessed by the exporter, namely the E/L holder (see also reply to question 1.1). 13. What are the rules for samples, exports of exhibition items? China has adopted a flexible attitude regarding samples and exhibition items. It will issue an E/L when the EU Member States' Customs require it for the clearance of samples and the like. The Chinese E/L holder should then apply for an E/L in accordance with Notice If an export licence has been issued for the wrong category of textiles or clothing what can the EU importer do? Importers are advised to ask the Chinese exporter to apply for a re-issuing of the E/L with correct data. 15. Does each consignment require a single E/L? Yes - the Chinese authorities apply the principles of "one consignment, one licence" and "one customs, one licence". This means that an E/L is needed for each consignment and that there is one customs clearance per licence. It also means that if the licence is not used for its full quantity, the remaining quantity cannot be used to ship a second consignment at a later date. The Chinese E/L holder may be penalised by Mofcom for not fully using the E/L

8 CHINESE EXPORT LICENCE HOLDER EXPORT LICENCE ISSUE PROCESS CHINESE LOCAL DEPARTMENT OF COMMERCE SEA AIR CN-HK/ AIR LOCAL CHINESE CUSTOMS CENTRAL CHINESE CUSTOMS EXPORT LICENCE DATA TRANSFER PROCESS MOFCOM BEIJING SIGL EU MS LICENSING OFFICES IMPORT LICENCE ISSUE PROCESS - 8 -

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An Overview of the New Export System (NES)

An Overview of the New Export System (NES) Table of Contents INTRODUCTION... 3 CHANGES TO PROCEDURES... 3 BENEFITS... 4 EXPORT DECLARATIONS... 5 Standard Export Procedure (Full Pre-Entry)... 5 Simplified