Principal from the Department of Finance under the Ministry of Commerce of China Answered Questions on the Cancellation of Export Drawback on Some Commodities

On June 22, the Ministry of Finance of China and the State Administration of Taxation of China jointly issued the Notice on the Cancellation of Export Drawback on Some Commodities (CAISHUI [2010] No. 57), deciding to cancel the export drawback rate as of July 15, 2010 on commodities under 406 HS Codes such as part of steels and nonferrous metal processing materials.

Recently, a principal from the Department of Finance under the Ministry of Commerce of China said in an interview that, this adjustment is a fine-tuning upon the structure of export drawback rate, aiming at controlling the export of products with "high energy consumption and high pollution" and ensuring the realization of the targets for reducing emissions and conserving energy in the "Eleventh Five-Year Plan". It will not bring a great impact on the foreign trade and will help promote the transformation of development patterns for foreign trade in the long term. As per his remarks:

First, this adjustment does not mean China's policy shift in foreign trade. In 2010, China's main focus in foreign trade is "opening new markets, adjusting trade structure and promoting trade balance". The key emphasis for the entire year will be maintaining the continuity and stability of the policies concerning the overseas market demand. It does not mean the "withdrawal" of foreign trade policies by canceling the export drawback rate on products under 406 HS Codes, controlling the excessive growth in some agricultural exports and maintaining a relatively stable price for domestic agricultural products. It is believed that some enterprises will overcome the temporary difficulties.

Second, this adjustment will not affect the growth in the recovery of foreign trade. According to the statistics, the 406 HS Codes involved in the export-drawback cancellation only account for about 3% of the total number of HS Codes; In 2009, the export value of the products involved was USD 11.0 billion, accounting for only about 1% of the total export value in that year. The export-drawback cancellation policy may have an impact on the market in the short term, but shall not cause a sharp decline in export, or change the overall situation of foreign trade development.

Third, this adjustment will help promote the transformation of development patterns for foreign trade. The cancellation of export drawback rate on some products reflects China's policy intent to speed up industrial restructuring and promote the transformation of development patterns for foreign trade, which is beneficial to guide enterprises to optimize the product structure and improve the quality and grades of exports, and improve the deep processing stages for enterprises, promoting the export of products with low-carbon emissions, energy conservation and environmental protection. Next, the Ministry of Commerce of China will, based on the export situation, continue perfecting the structure of export drawback rate, strive to maintain the continuity and stability of export drawback policy, and try to create a relatively stable policy environment for the foreign trade development.