On September 26, 2016, the General Administration of Customs promulgated the Measures for Implementing the Regulations of the People’s Republic of China Customs Inspections (the “Measures”) to refine and regulate the operating procedures and the rights and obligations provided in the Regulations of the People’s Republic of China on Customs Inspections (the “Regulation”), which came into effect on October 1, 2016. The Measures formally went into effect on November 1, 2016. This article primarily seeks to interpret the Measures in three aspects, such as the disclosure requirements for enterprises, the requirement to retain a professional institution for a professional conclusion and the rules on the inspection process.
First, the Measures set out detailed provisions regarding the new active enterprise disclosure regime in the Regulations, specifying what constitutes an active disclosure, the disclosure procedure and the relevant legal obligations involved so as to increase the operability of the system. The Measures eliminate three situations that do not constitute voluntary disclosure: matters that the customs authority was already aware of before the disclosure, if the enterprise was already notified by the customs authority before the disclosure to submit to an inspection, and if the contents of the disclosure contained material inaccuracies or other unlawful conduct such as concealment of illegal activity. In addition, the Measures require the enterprise making the active disclosure to guarantee the veracity, accuracy and completeness of its supporting materials. For enterprises making active disclosures after violating customs supervisory and administrative requirements, the customs authority may impose lighter or reduced administrative penalties. For a mild legal violation that may be timely corrected so that no harm is done, the Measures specifically provide that administrative penalties do not need to be imposed. This provision will greatly enhance the willingness for inspected enterprises to actively make disclosures.
Secondly, the Measures provide additional details to the new requirement under the Regulations for retaining a professional institution to make professional conclusions. The Measures specifically provide on top of the grounds laid out in the Regulation that the professional conclusions reached by the professional institution must be recognized by the customs authority before they can be relied on as evidentiary material for fact-finding. Meanwhile, the inspected party also has the right to retain a professional institution to reach its own professional conclusions, which may serve as references for customs inspection if recognized. The Measures also stipulate that if a professional institution makes falsifications, conceals facts or violates confidentiality obligations, it may be reported to the relevant authorities or trade associations.
Thirdly, the Measures further detail the inspection procedures and set out rules regarding the inspection work carried out by the customs authorities. For example, the inspection certificate should be displayed during a customs inspection. After copies of the relevant materials of the inspected party are made, the inspected party should verify the contents, and after confirmation, the customs authority should note details such as the source and the total number of pages of such copies. The Measures also provide for the circumstances where the customs authority may terminate the inspection. If the whereabouts of the inspected party are unknown, or if the inspected party has been terminated without any party to assume its rights and obligations, the inspection may be terminated with the approval of the commissioner of the customs authority or an authorized affiliated customs commissioner. If the inspected party rejects the inspection notice, the customs authority may conduct constructive service by inviting a witness to be present or taking a photograph or video of the process.