Re:  Speculation over China’s final implementation of Circular Caishui 37’s (“Circular 37”) 6% VAT and how it will be applied.

Circular 37 is a proposed tax policy which includes VAT on the “transportation and modern services sector” and which was jointly issued by the Ministry of Finance (MOF) and the State Administration of Taxation (SAT) of the People’s Republic of China on 24 May 2013. The VAT tax policy will be expanded nationwide with effect from 1 August 2013. At the same time, the regulations of Circular 37 will replace any earlier regulations governing the VAT pilot reform program which was tested in selected cities in China throughout 2012 and early 2013.

The way Circular 37 is being interpreted right now is that all transportation services purchased in China will be subject to 6% VAT. This would mean that all local charges, ocean freight (if prepaid), air freight (if prepaid), etc. would be subject to 6% VAT.  This is not the way the pilot program worked, and it is not believed to be the intention of the policy to increase the price of goods and services by 6%.

For our customers shipping on a prepaid basis on US imports or on a collect basis on US exports, please be assured that Shapiro is standing by to offer you pricing and routing comparisons that will allow you to stay in control of your total product costs.   None of us know how this will shake out, and we are happy to offer you “preventative medicine” for the time being.   In this case, that medicine is information.

The new policy needs further explanation from the Chinese government, and we will keep you informed of updates as we receive them.

Please contact [email protected] or [email protected] with any questions about this legislation or your shipping costs.