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In just one month, the Hainan Free Trade Port (FTP) will officially commence its highly anticipated "island-wide customs closure" operation.
Recently, a comprehensive joint drill was simultaneously conducted across Hainan's 10 "Second-Tier" checkpoints. But what does "customs closure" truly mean? How will it impact the island and beyond? Let's explore the facts as final preparations fall into place.
First, "Closure" Does Not Mean "Isolation"
It's crucial to clarify that "customs closure" is not about isolating Hainan. Instead, it represents a sophisticated policy system designed to liberalize and facilitate trade and investment. The core objective is to transform the entire Hainan island into a special customs surveillance zone, operating under the principle of "’First-Tier' Liberalization, 'Second-Tier' Control, and Free Flow Within the Island".
"First-Tier" Liberalization: Refers to the boundary between the Hainan FTP and other countries/regions outside China's customs territory. Here, a series of free and convenient entry and exit measures will be implemented, significantly easing the flow of goods, capital, and people.
"Second-Tier" Control: Refers to the boundary between the Hainan FTP and China’s Mainland. Based on what is liberalized at the "First-Tier", targeted and precise controls will be applied here to prevent potential risks and ensure regulatory compliance.
Free Flow Within the Island: Inside Hainan, various production factors like goods, capital, and personnel can circulate relatively freely, creating a highly efficient and dynamic business environment.
In essence, the "First-Tier" connects Hainan globally with freedom, while the "Second-Tier" manages its connection with the Chinese mainland with precision. This dual-line system ensures the FTP can "open up effectively" while remaining "securely managed."
Preparations are Largely Complete
According to the General Administration of Customs, preparations for the customs closure operation are now essentially ready. The "Second-Tier" checkpoints have begun 24/7 hot-running operations.
"The necessary hardware and software conditions for the customs closure operation are ready," stated Gao Ruifeng, Director of Haikou Customs. "Four key customs support projects, including the International Travel Healthcare Center and technical center laboratories, are all operational. The 10 'Second-Tier' checkpoints have passed national inspection, and their supervision facilities are ready for use. The Customs Smart Supervision Platform is already online, functioning comprehensively and smoothly, fully meeting the supervision needs for the closure operation."
How "First-Tier Liberalization" and "Second-Tier Control" Work
A key question is the practical application of these policies.
At the "First-Tier": Policies like zero-tariff imports, processing value-added goods, and relaxed trade restrictions are implemented. This means a significantly wider range of goods – expanding from the current 1,900+ tariff lines to over 6,600 – can enter Hainan tariff-free, provided they are not on a negative list or subject to trade remedies. It's important to note that eligibility for zero-tariff benefits is primarily for qualified enterprises, not individual consumers.
At the "Second-Tier": When goods that entered Hainan under preferential policies (like zero-tariff) need to leave the island for the mainland, they undergo corresponding customs checks and may incur applicable tariffs at this point. However, goods produced locally or already circulating domestically within China pass through non-customs supervised channels, ensuring minimal disruption to normal domestic trade flows between Hainan and the mainland. This ensures precise control over preferential goods while maximizing convenience for general circulation.
A Closer Look at "Zero-Tariff"
The zero-tariff policy is a cornerstone of the Hainan FTP. Its implementation directly ties back to the core principle.
Entering via the "First-Tier": Goods that are not on a designated negative list and imported by eligible enterprises can enter Hainan with zero import tariffs.
Leaving via the "Second-Tier": If these zero-tariff goods subsequently enter the Chinese mainland, they are subject to customs control. Import tariffs may be levied unless specific exemptions apply.
For instance, a major incentive exists for goods produced by encouraged industries within Hainan: if these goods contain imported materials and achieve over 30% value-added processing within Hainan, they can enter the mainland exempt from import tariffs (though VAT and Consumption Tax may still apply).
"Free Flow Within the Island" in Practice
This principle allows for flexible business operations within Hainan. For example, a qualified enterprise that imports zero-tariff raw materials in excess of its needs can sell the surplus to other eligible enterprises on the island. This enhances operational efficiency and resource utilization for businesses operating in the FTP.
Hainan's customs closure marks a significant milestone in China's opening-up strategy, positioning the island as a pivotal hub for international trade and investment. The world is watching as Hainan takes this bold step towards becoming a globally influential free trade port.
Source: Adapted from CCTV, with additional information.
*The opinions expressed in the article are solely those of the author.*
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