Circular on the “Zero-Tariff” Policy for Raw and Auxiliary Materials in the Hainan Free Trade Port

Cai Guan Shui [2020] No. 42
Issuing Authorities: Ministry of Finance, General Administration of Customs, State Taxation Administration
Date of Issue: November 11, 2020
Effective Date: December 1, 2020
Official Source: Government of the People’s Republic of China – Policy Database

To:

The Department of Finance of Hainan Province, Haikou Customs, and the Hainan Provincial Tax Service of the State Taxation Administration

In order to implement the Overall Plan for the Construction of the Hainan Free Trade Port, and with the approval of the State Council, the “zero-tariff” policy for raw and auxiliary materials in the Hainan Free Trade Port is hereby announced as follows:

I. Scope of “Zero-Tariff” Raw and Auxiliary Materials

Before the island-wide customs closure operation, raw and auxiliary materials imported by enterprises registered in the Hainan Free Trade Port as independent legal entities shall be exempt from import tariffs, import value-added tax (VAT), and consumption tax when used for:

• processing activities carried out within the Hainan Free Trade Port; or

• the provision of service-trade activities requiring raw materials sourced from abroad and primarily serving overseas markets.

II. Positive List Management

A “positive list” system applies to all “zero-tariff” raw and auxiliary materials.
The list—detailing eligible materials and parts—is attached to this Circular and is to be dynamically adjusted by the Ministry of Finance, the General Administration of Customs, and the State Taxation Administration in coordination with relevant departments according to Hainan’s practical needs and supervisory capacity.

III. Repair Parts and Components

Parts and components listed in the appendix are subject to the “zero-tariff” policy and are exempt from import duties and taxes when used to repair aircraft and vessels (including their parts) under any of the following conditions:

1. For aircraft or vessels entering China from overseas and subsequently leaving China;

2. For aircraft operated by aviation enterprises whose main operating base is located in the Hainan Free Trade Port;

3. For vessels registered in the Hainan Free Trade Port and operated by shipping companies registered in Hainan as independent legal entities.

IV. Transfer and Use Rules

“Zero-tariff” raw and auxiliary materials must be used exclusively for the production and operation of enterprises within the Hainan Free Trade Port and remain under customs supervision.
They shall not be transferred on or off the island.
If transfer is necessary due to bankruptcy or other special circumstances, customs approval and full payment of relevant import taxes are required.
For goods processed using “zero-tariff” raw and auxiliary materials:

• If sold within the island or the Chinese mainland, import tariffs, import VAT, and consumption tax corresponding to the raw and auxiliary materials must be paid.

• Domestic VAT and consumption tax shall also be levied as required.

• Exports of such goods shall be governed by existing export-tax policies.

V. Voluntary Payment Option

Enterprises that voluntarily wish to pay import VAT and consumption tax when importing items listed in the positive list may apply at the time of customs declaration.

VI. Supervision and Risk Prevention

Relevant departments shall strengthen supervision, enhance risk control through information technology, promptly investigate and handle violations, and ensure the stable implementation of the “zero-tariff” policy for raw and auxiliary materials.
Hainan’s authorities shall also improve inter-departmental data sharing and information exchange on enterprises and goods under “zero-tariff” supervision.

VII. Implementation

This Circular shall come into effect on December 1, 2020.

Subsequent adjustments and updates to this policy are detailed in the Circular on Adjusting the “Zero-Tariff” Policy for Raw and Auxiliary Materials in the Hainan Free Trade Port (Cai Guan Shui [2025] No. 1) 

Ministry of Finance
General Administration of Customs
State Taxation Administration
November 11, 2020

Adjusting the Zero-Tariff Policy for Raw and Auxiliary Materials in the Hainan Free Trade Port