Explaining China GAC's Modifications on Commodity Classification and Declaration Requirements of Imported Facial Cleansers

Background

For overseas companies intending to export goods to China, a truthful declaration of the HS code that applies to their products is the prerequisite for efficient customs clearance.

What is HS Code?

The HS Code, short for Harmonized Commodity Description and Coding System, is an international nomenclature developed by the World Customs Organization (WCO) for the classification of globally traded products. Most countries worldwide have adopted HS as the basis for import/export goods identification, customs duties assessment, international trade statistics collection, trade policies formulation, etc.

According to WCO, the system comprises over 5,000 commodity groups, and each is allocated with a unique six-digit HS code that is organized in a hierarchical structure by chapters (first 2 digits), headings (first 4 digits) and subheadings (full 6 digits).

Notably, the six-digit code remains the same among WCO’s member states. However, countries are also allowed to add more digits after the first six for further classification. The number of digits differs between countries. For instance, the commodity HS Code in China at present consists of 13 digits, as shown below.

3306101010.102 Toothpaste containing endangered vegetable (children toothpaste)
Section VI	……………		Products of the chemical or allied industries
Chapter	……………	33	Essential oils and resinoids; perfumery, cosmetic or toilet preparations
Heading	……………	3306	Preparations for oral or dental hygiene, including denture fixative pastes and powders; yarn used to clean between the teeth (dental floss), in individual retail packages
Subheading	……………	330610	Dentifrices
Article	……………	33061010	Toothpaste containing endangered vegetable
Customs Supervision Additional No.	……………	10
Inspection and Quarantine Additional No.	……………	102

(An Example of China’s 13-Digit HS Code Structure)

Commodity Classification Dilemma of Facial Cleansers

In the cosmetic sector, China's General Administration of Customs (GAC) classifies the goods into different categories, including Perfumes (3303), Make-Up & Skin-Care Preparations (3304), Hair Care Products (3305), Soap & Other Products to Wash the Skin (3401), etc.

The multiple categories would confuse the determination of HS Codes, especially for products that contain several category attributes at the same time. The most typical example is facial cleanser—a kind of cosmetics used to clean the skin and keep the skin's normal functions. It has features of both cosmetics (under the 3304 heading) and cleansing products (under the 3401 heading).

China HS Code		MFN %	General Tariff %
33.04: Beauty or make-up preparations and preparations for the care of the skin (other than drugs), including sunscreen or sun tan preparations; manicure or pedicure preparations
3304.1000	Lip make-up preparations	5	150
3304.2000	Eye make-up preparations	5	150
3304.3000	Manicure or pedicure preparations	5	150
3304.9100	Make-up or skin care powders, whether or not compressed	5	150
3304.9900	Other beauty or make-up preparations and preparations for the care of the skin	1	150
34.01: Soap; organic surface-active products and preparations for use as soap, etc. in the form of bars, cakes, moulded pieces or shapes, whether or not containing soap; organic surface-active and preparations for washing the skin, in the form of liquid or cream and put up for retail sale, whether or not containing soap; paper, wadding, felt and nonwovens which are impregnated, coated or covered with soap or detergent
3401.1100	Soap and organic surface-active products and preparations, in the form of bars, cakes, moulded pieces or shapes, and paper, wadding, felt and nonwovens which are impregnated, coated or covered with soap or detergent, for toilet use	6.5	130
3401.1910	Washing soap	6.5	80
3401.1990	Other soap and organic surface-active products and preparations, in the form of bars, cakes, moulded pieces or shapes, and paper, wadding, felt and nonwovens which are impregnated, coated or covered with soap or detergent, for other use	6.5	130
3401.2000	Soap in other forms	6.5	130
3401.3000	Organic surface-active products and preparations for washing the skin, in the form of liquid or cream and put up for retail sale, whether or not containing soap	6.5	130

Given that different HS code directly corresponds to different tariff classification and customs declaration process, any mistakes or inconsistencies with the code are likely to cause disputes or non-compliance issues, which will ultimately result in time and financial loss at the customs clearance.

Clarified Regulatory Requirements for Facial Cleansers

To facilitate enterprises to correctly declare commodity classification matters, reduce commodity classification disputes, and align the customs commodity classification with international trading partners, China’s GAC published the “Commodity Classification Decisions of 2020” on September 15 ^[1]. The specifics of the announcement includes the release of 4 new decisions, the adjustment of 99 decisions based on WCO’s opinions as well as the repeal of 3 decisions. All these amendments have taken effect as of October 1, 2020.

Among the 99 revised decisions, decision No. W2020-11 and W2020-12 clearly indicated that liquid and cream cleansing products such as facial cleansers and exfoliators should be classified under HS Code 3401.3000.In the wake of the above adjustments, the customs declaration requirements for facial cleansers are also clarified ^[2].

1. Import Duties

According to the 2020 edition of the "Operation Manual of Chinese National Import and Export Tariff", for facial cleansers under HS Code 3401.3000, the imported most-favored-nation (MFN) tariff rate is 6.5%, the ordinary tariff rate is 130%, the value-added tax (VAT) rate is 13%, the consumption tax is zero and the export rebate rate is 13%.

HS Code	MFN Tariff	VAT	Consumption Tax	General Tariff	Export Rebate
3401300000	6.5%	13%	0	130%	13%

2. Elements for Customs Declaration

The “Customs Declaration Element” is part of the declaration documents, serving as a supplement to the information of import products. According to the "Catalog and Interpretation of Customs Import and Export Commodities Declaration of the People's Republic of China (2020)", enterprises should clearly declare the following six elements during customs declaration:

Customs Declaration Elements for 3401300000

1. Product name; 2. Ingredient content; 3. Appearance; 4. Packaging specifications; 5. Brand; 6. Model (article number)

3. Requirements for Import Inspection and Quarantine

As per the Administrative Measures on Inspection and Quarantine of Import and Export Cosmetics (2018 Edition) and the “GAC’s Announcement on Adjusting the Supervision Requirements for Certain Import and Export Goods (2020 No. 99)”, the import inspection and quarantine are subject to the following new requirements.

Imported cosmetics shall declare that they have obtained the pre-market approval—either administrative license or notification certificate when handling customs declaration procedures. The approval certificate can be exempt from submission;
For cosmetics that are not subject to import registration or notification, the regulatory requirements for providing safety assessment documents issued by the qualified institutions for substances with potential safety risks are cancelled. Only the submission of product safety commitment is required.

Stakeholders of facial cleansers who fail to classify products properly prior to GAC's announcement shall revise the HS Code, make up relevant taxes, and adjust the customs declaration matters following the regulatory requirements of 3401.3000. Otherwise, they may be subject to criminal or civil penalties.