Trade Liberalization and facilitation are a common feature of international advanced free trade ports, hence an important goal for the development of Hainan Free Trade Port. On Apr.19, the Ministry of Commerce among some 20 departments released the Circular on Several Measures to Promote Trade Liberalization and Facilitation of Hainan Free Trade Port, which introduced a series of trade liberalization and facilitation policies and measures in terms of trade in goods and trade in services, including: relaxation of trade qualification and quota management of such commodities of crude oil, refined oil, sugar in accordance with requirements of free flow through the first front and efficient control at second front, meanwhile, both access and operation qualification is allowed in the area of trade in service, and technology import and export could be operated without requirement for registration as a foreign trade operator, etc.   

Trade Liberalization and Facilitation (Policy Interpretation - Part I)

Recently, the Ministry of Commerce and other 19 departments jointly issued and implemented the Circular on Several Measures to Promote Trade Liberalization and Facilitation of Hainan Free Trade Port. On the interpretation of relevant policies on promoting trade liberalization and facilitation of Hainan Free Trade Port, we hereby provide a series of posts on policy interpretation.

1. What are the main considerations for formulating and issuing the Circular?

There are mainly “three considerations”. First, to refine the requirements for the implementation of the Master Plan and promote the systematic integration and innovation of the policies and systems for trade freedom and convenience. Second, to meet the requirements for the construction of the Hainan FTP and respond to the actual demands of the market players. Third, to promote the quality trade development in the Hainan FTP to achieve the stage goals before 2025 with high standards.

Based on the above considerations, the Circular focuses on free and convenient trade in goods and services. It specifies 28 policy measures, 13 institutional arrangements for promoting free and convenient trade in goods, and 15 design policy measures focusing on free and convenient trade in services. The Circular is full of valuable information and, in general, has “three characteristics”.

First, focusing on trials and attempts. The Master Plan proposes to finish the preparations for the independent customs operations before 2025 and start the island-wide independent customs operations in due course. Therefore, the Hainan FTP should the policy system design of “easing control on the first line” and “having effective and efficient control on the second line” as well as related supporting measures in a specific scope and in some areas first, so as to conduct stress tests for the island-wide independent customs operations in the future.

As for the areas subject to “easing control on the first line” and “having effective and efficient control on the second line”, the Circular proposes to relax the restrictions in a targeted manner to promotes the release of the development potential. For example, pilot projects will be launched in Yangpu Bonded Port Area, where the crude oil and refined oil will be imported and exported through the “first line”, no corporate qualification and quantity management will be implemented, imported sugar will not be included in the total tariff quota management, and import through the “second line” will be managed according to the current regulations. For another example, in areas subject to “easing control on the first line” and “having effective and efficient control on the second line”, the automatic import license management will be canceled in principle, and mechanical and electrical import license management measures will be canceled for entering the “first-line”, while importing through the “second-line” will be managed according to current import regulations. These policies and measures will explore paths and accumulate experience for the island-wide independent customs operations in the future.

Second, highlighting the characteristics of Hainan. General Secretary Xi Jinping demanded that the construction of the Hainan FTP should conform to Hainan's development orientation. Focusing on the strategic positioning of “three zones and one center” in Hainan, the Circular focuses on developing tourism, modern service and high-tech industries and puts forward practical measures.

For example, delegating the bonded oil license for sailing on international routes in Hainan Province to the People's Government of Hainan Province will strongly support Yangpu to become an international shipping hub with strong service functions and radiation capabilities. For example, supporting Hainan to develop new offshore international trade, digital trade, technology trade, cultural trade and platform projects, supporting the construction of a regional international convention and exhibition center, supporting the establishment of a national cultural export base and a national base of international cultural trade, and encouraging innovative international cooperation models in service trade will accelerate the cultivation of advantageous industries with Hainan’s characteristics and promote the continuous optimization of the soft environment for Hainan's trade development.

Third, overall development and security. It is required to adhere to both “easing control” and “having effective and efficient control”, pay attention to innovative supervision modes and strengthen the construction of risk prevention and control systems.

For example, it is required to implement the hierarchical approval mode whereby the General Administration of Customs is responsible for the approval or authorizing Haikou Customs for the approval, improve the early warning and rapid response supervision abilities for quality and safety risks of import and export commodities; it is also required to improve the statistical monitoring system of service trade, strengthen the monitoring and analysis of cross-border service trade in the Hainan FTP, and build an early warning system of industrial security that matches the open market environment, as well as a trade adjustment and assistance mechanism that matches the open economy of the free trade port.

As we all know, trade freedom and convenience are the universal characteristics of advanced international free trade ports, and also the core content of the policy system of the Hainan FTP. Our most intuitive understanding of a free trade port is that it can realize free and convenient trade, the agglomeration of various market players and the prosperity and development of the economy and the society. The Ministry of Commerce and other 19 departments have issued and implemented the Circular reflecting the consensus of all parties. The Circular will help the Hainan FTP to expand its trade flow and upgrade from “a promising port” into a “prosperous port” as early as possible.

2. To delegate the license of bonded oil refueling of vessels on international vogages in Hainan Province to the Hainan Provincial Government, what is its significance for increasing trade flows of the Hainan FTP?

Bonded oil for vessels sailing on international routes refers to oil products for vessels sailing on international routes, which are approved by the State Council, enjoy bonded policies, are exempt from customs duties, import value-added tax and consumption tax, do not occupy import quotas, and are supplied under customs supervision. In China, the bonded oil business is designated by the state. Previously, the State Council granted five enterprises the license for bonded oil business nationwide, and granted Zhoushan City, Zhejiang Province and Shenzhen City, Guangdong Province the license for local bonded oil business. This breakthrough of policy lies in that Hainan Province is the first region to obtain the local business license of bonded oil within the provincial scope.

Bonded oil business is the core essential function of import ports and an important guarantee for the development of sea transportation and foreign trade. Yangpu Port, as a container hub port of the new land-sea trade channel in western China, is an important node of the southbound navigation channel. The delegation of the power to license local bonded oil to the People's Government of Hainan Province has the following benefits. First, it is conducive to expanding the scale of oil supply enterprises, reducing the cost of fuel oil, and facilitating sea transportation operators to carry out route scheduling and port operations; Second, through the innovative management system, it can mobilize local enthusiasm, stimulate market vitality, and gradually establish a mature and efficient system for the supply and marketing of bonded oil; Third, it can give full play to the location and institutional advantages of Yangpu Port, promote the development of the economic and industrial of the port chain, improve maritime service capacity and level, promote the building of Yangpu Port into an influential bonded oil supply base in Southeast Asia, and promote the construction of the Hainan FTP.

3. What will Hainan do to effectively implement the policies, promote high-level opening up, and effectively control risks?

The Circular on Several Measures to Promote Trade Liberalization and Facilitation of Hainan Free Trade Port issued by the 20 ministries and commissions shows that the state attaches great importance to and fully supports the construction of the Hainan FTP. In the early stage, Hainan will work closely with the central ministries and commissions to make full preparations for the prevention and control of policy risks and the design and development of relevant support systems. After a number of measures are issued, Hainan will earnestly fulfill its main responsibility of building a free trade port, implement the policies in a down-to-earth manner, and seize the great opportunity of policy implementation. To accelerate the establishment of a free trade port policy system focusing on trade freedom and convenience, Hainan shall focus on the following aspects:

First, we will comprehensively and accurately understand the policy connotation of the Several Measures, and lose no time formulating and promulgating various implementation rules. The Several Measures are rich in content, with powerful measures and strong pertinence. Hainan will organize relevant forces to pay close attention to research and further refine the measures in Several Measures at the operational level. Detailed implementation rules will be formulated and promulgated as soon as possible. Hainan will fully assess the risks in matters such as relaxation of access and cancellation of licenses, and prepare for post-event supervision and risk prevention. For matters on power delegation, Hainan will make preparations for taking over the powers, and work hard to formulate relevant approval systems and management measures to ensure that the licensing authority is in place.

Hainan will pay close attention to defining players and scope of the pilot projects and formulating work plans for the pilot projects. In the implementation of the Several Measures, we will further strengthen communication with relevant departments will be ed and progress will be feedbacked and reported in time.

Second, during the implementation of the Several Measures, we will further strengthen institutional integration and innovation. Hainan will always bear in mind the guiding gist of General Secretary Xi Jinping’s instruction of “putting institutional integration and innovation in a prominent position, emancipating the mind and boldly innovating”, take advantage of the implementation of the Several Measures, closely focus on trade liberalization and facilitation, and positively plan for institutional integration and innovation in implementing the negative list for cross-border services trade, formulating the list of goods and articles prohibited and restricted by the free trade port, so as to speed up the construction of an new open economic system and achieve a new round of high-quality development, shoulder the responsibilities of Hainan and contribute the experience of Hainan.

Third, we should foster and introduce market players through effective policy publication. We will strengthen policy publicity through various media channels, comprehensively interpret the contents of policies and initiatives, and inform the progress of policy implementation in a timely manner, so that the market players can fully understand the policies, actively participate in policy implementation and fully enjoy the convenience and benefits brought by the Several Measures.

Fourth, we will ensure effective the risk prevention and control. According to the opening-up measures in Several Measures, we will fully demonstrate the possible trade risks and industrial impacts brought by the opening-up measures, and discover, judge, warn and evaluate major risks in related fields in a timely manner. We will give full play to the role of the trade risk prevention and control mechanism of the Hainan FTP, strengthen joint prevention and control, and ensure “effective and efficient control” of risks in the trade field.

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