On December 24, the Customs Tariff Commission of the State Council of the People’s Republic of China issued the Notice of the Customs Tariff Commission of the State Council on the Adjustment Plan for Provisional Import and Export Tariff Rates in 2019 (SWH[2018] No. 65) (hereinafter referred to as the Notice) and decided to adjust import and export tariffs on goods such as diamonds, colored gemstones, jadeites, organic gemstones and jewellery originating in countries of important diamonds and gem products including Australia, India and Sri Lanka from January 1, 2019 (see China to Further Reduce Tariffs on Gem and Jade Goods from 2019), marking greatly reduced comprehensive import tax rates for gem and jade products to be imported from these countries (including customs duties, import VAT and consumption tax). This is another major tariff reduction action following reduced tariffs on jewellery goods on July 1 and November 1 of the year (see Import Tariffs on Jewelry Goods to Reduce 67.75% on Average from July 1). Guangzhou Diamond Exchange (GZDE) is the first to help you learn about updates of the Notice.
0 provisional tariff rates for black pearl maintained while conventional tariff rates for other pearl goods originating in some countries reduced as low to 0
According to the Notice, “provisional import tariff rates for 706 items will be applied from January 1, 2019”. This includes an overall reduction of import tariff rates for black pearl (natural or cultured) from 21% to 0 (starting from 2017). So zero tariffs will be kept in place if you purchase imported precious black pearls originating in Tahiti and other regions. Conventional tariff rates for pearls originating in Australia will be reduced to 0%.
Different reductions for diamonds and jewellery goods from different countries and regions
According to the Notice, conventional tariff rates between China and New Zealand, Peru, Costa Rica, Switzerland, Iceland, South Korea, Australia, Georgia and APTA countries will be further reduced from January 1, 2019. As per the Agreement on Trade in Goods under the Mainland/Hong Kong, Macau Closer Economic Partnership Arrangements (hereinafter referred to as the Agreement), 0 tariffs will be fully applied to products originating in Hong Kong and Macao, except for those products for which special commitments have been made by Mainland China in international agreements, from the effective date of the Agreement.
1. This tariff reduction covers all categories, including all diamonds and gem goods.
2. This tariff reduction covers countries and regions include New Zealand, Peru, Costa Rica, Switzerland, Iceland, South Korea, Australia, Georgia, APTA countries (including Bangladesh, India, Laos, South Korea, Sri Lanka and Mongolia), Hong Kong, and Macao, China. Among them are the following countries that should be mentioned especially: Australia, an important country of origin of diamonds and opal, Sri Lanka, a country of origin of sapphire, and India, a major diamond and gem processer in the world.
3. Reduced tariffs will only be granted to goods originating in the said countries and regions. Origin is the place of production, collection, production, raise, extraction, processing and manufacture where a product comes from. There are certain rules and standards used to determine the country where a product is produced or determined, separate customs territories or regional trade group consisting of countries and separate customs territories. Goods of origin must go through final substantial processing or production in the exporting country so that such goods will have their own unique characteristics before such exporting country can be considered the origin of such goods. Examples are given as follows:
(1) Rough diamonds produced in South Africa and exported to Dubai have its country of origin in South Africa;
(2) When traded in Dubai and exported to India, as there is no substantial processing of rough diamonds, the country of origin is still South Africa other than the exporting country Dubai;
(3) After such rough diamonds are polished into finished diamonds in India and exported to Hong Kong, China, the country of origin is changed to India;
(4) After such finished diamonds are traded in Hong Kong, China and then sorted and exported to Mainland China, the country of origin is still India other than the exporting region Hong Kong in that simple sorting involves no substantial processing of diamonds;
(5) Such finished diamonds are inlaid as part of jewelry in China and the country of origin becomes China.
In short, only mining, cutting and polishing, inlaying, etc. are considered as substantial processing, while trading, simple sorting, etc. are not considered as substantial processing since there is no change of origin. Therefore, if diamonds originating in Africa are traded to Hong Kong and then imported from Hong Kong to Mainland China, this tariff reduction policy will not apply, with tariffs levied based on where they are produced. However, if diamonds originating in Australia are traded to Hong Kong and then imported from Hong Kong to Mainland China, this tariff reduction policy to Australia will apply.
4. There are different reductions for different goods from different countries and regions, as shown below:
(1) All tariffs on diamonds, gem and jade goods originating in New Zealand, Peru, Costa Rica, Iceland, Australia, Hong Kong and Macau are reduced to zero, with a significant reduction of tariff rates for pearls from 21% to 0.
(2) In addition to a reduction from 3% to 1.8% for raw materials such as ruby & sapphire, emerald, crystal, tourmaline, jade, and nephrite originating in Georgia, tariffs on other diamonds, gem and jade goods are reduced to 0.
(3) As to goods originating in Bangladesh, India, Laos, South Korea, Sri Lanka and Mongolia (APTA countries), reduced tariff rates are from 4% to 0% for finished diamonds; from 3% to 2% for raw materials such as ruby & sapphire, emerald, crystal, tourmaline, jade, and nephrite; 4% to 2% for finished stones such as ruby & sapphire, emerald, crystal, tourmaline, jade, and nephrite; from 4% to 2.8% for gem-quality synthetic diamonds; from 4% to 3.6% for gem-quality synthetic gemstones; from 8% to 5.2% for gold jewelry; from 10% to 6.5% for other metal jewelry such as platinum.
(4) Different conventional tariff rates are applied for some diamonds, gem and jade goods originating in Switzerland and South Korea. But there is negligible impact in that the two countries hardly produce or process diamonds or gem and jade goods.
(5) The rest remain unchanged.
5. After this tariff reduction, comprehensive import taxes (including customs duties, import VAT, and consumption tax on some goods) will be further reduced. It is worth mentioning that tariffs on finished diamonds originating in India are reduced to zero, meaning that margins for those diamonds to be exhibited and traded through GZDE will drop from 20.64% to 16%; those on colored gemstones and jade (raw materials or stones) originating in India and Sri Lanka uniformly reduced to 2%, meaning a reduction of general comprehensive taxes on such goods imported from the two countries from 34.044% to 31.467%; those on Opal and Pearl originating in Australia reduced to zero, meaning that a reduction of comprehensive taxes from 33.013% to 28.889% on Opal and 39.718% to 28.889% on pearl.
This year, three tariff reductions have been made for various raw materials and finished products of diamonds and gemstones, a record year in terms of frequency and size. Considering, also, for a unified reduction of VAT (from 17% to 16%), comprehensive import taxes on various raw materials and finished products of diamonds and gemstones have fallen over 50% in one year. In a manner of speaking, 2018 is a year of preferential policies on jewellery.
Annex: Schedule of Comprehensive Tax Rates for Imported Diamonds and Gem Goods
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