In terms of total output, China is now the world’s second largest economy, second only to the United States. The quick rate at which China has moved towards a free market economy has allowed many multi-national companies to enjoy rapid growth not only by using China as the centre point of their manufacturing and distribution activities but by also tapping into the growing domestic demand for goods . However a more dynamic business environment has bought with it an increase in regulatory complexity at every level. This may now be leading companies to temper their growth outlook due to concerns about transparency and the fairness of the playing field.
The regulatory environment in China is complex and continually evolving. The decentralised structure of Customs and CIQ creates local interpretation, resulting in a gap between the national regulations and the local practices. For example, standard operating practice for Processing Trade is different in Southern China when compared to the rest of the country. Meanwhile, business models often evolve at a much faster pace than the regulations. Companies can conduct self-assessments, implement best-in-class procedures, and adopt other customs automation strategies in order to ensure compliance and avoid unwanted surprises.
It is our experience that companies with a “best in class” customs programme typically started from a low baseline. In many cases companies have been subject to a Customs investigation (including employee detention) and significant financial, operational and reputation exposures resulted. Consequently a new approach to resourcing the customs function and elevating its priority in company strategy has significantly improved their compliance record in China.