In international trade, import and export goods often suffer from damage, shortage, poor quality or non-conformity to specifications due to various reasons. In response to such situations, a regulatory method called “free compensation goods” came into being, providing importers and exporters with a convenient way to return and exchange goods. This article will introduce the definition, declaration process and related tax issues of free compensation goods in detail to help readers better understand and use this mechanism.
1. Definition and characteristics of free compensation goods
Free compensation goods refer to goods that are the same as the original goods or meet the contract requirements and are compensated or replaced free of charge by the shipper, carrier or insurance company after the customs release of imported and exported goods due to damage, shortage, poor quality or non-conformity to specifications. The characteristics of this regulatory method are its freeness and replaceability, which provides importers and exporters with an economical and efficient solution.
2. Declaration process of free compensation goods
Declaring free compensation goods requires following a certain process. First, importers and exporters should apply to the customs for import and export procedures for free compensation goods within the claim period specified in the original import and export contract, and no more than 3 years from the date of import and export of the original goods. Secondly, a series of documents need to be submitted when declaring, including the original import and export goods declaration form, tax payment certificate or tax exemption certificate, claim agreement signed by the buyer and seller, etc. If the customs deems it necessary, it is also necessary to submit the inspection certificate issued by the commodity inspection agency or other relevant supporting documents. Finally, the customs will review the declaration materials, and the goods that meet the conditions will enjoy the treatment of free compensation.
3. Taxes and fees on free compensation goods
Regarding the tax and fees of free compensation goods, according to the relevant provisions of the “Administrative Measures for the Collection of Taxes on Import and Export Goods of the Customs of the People’s Republic of China”, no import tariffs and import-link taxes are levied on imported free compensation goods, and no export tariffs are levied on exported free compensation goods. This policy has greatly reduced the tax burden of importers and exporters and promoted the smooth progress of international trade.
4. Situations where the provisions of free compensation goods are not applicable
Although free compensation goods provide convenience for importers and exporters, they are not applicable in all cases. For example, in the trade of processing with supplied materials and processing with imported materials, when imported materials and finished export products need to be returned due to damage, shortage, poor quality or non-conformity with specifications, specific supervision methods for the return of materials or finished products should be applied. In addition, other supervision methods should be used when the original import and export goods related to the import and export goods with no-cost compensation are returned out of the country.
As a special import and export supervision method, no-cost compensation goods provide importers and exporters with a convenient and economical way to return and exchange goods. By following the declaration process, understanding tax policies and paying attention to applicable conditions, importers and exporters can make better use of this mechanism to reduce risks and improve efficiency.