China’s Special Customs Supervision Zones: Types, Functions, and Policies

China’s Special Customs Supervision Zones (SCSZs) are the best-suited locations for foreign investors engaged in export-oriented trade and production.

China Briefing introduces the different types of SCSZs in China and analyzes their functions, preferential policies, and the broader policy trends affecting them.

Special Customs Supervision Zones (SCSZs) are a type of economic development zone in China, which were first set up in the 1990s as the country opened up to foreign investment and bonded processing trade.

Bonded processing trade is the business activity of importing raw and auxiliary materials and re-exporting the finished products after processing – the materials and finished products can be exempted from import-export duties and taxes when taking place in specially regulated areas.

Upon approval by the State Council, China’s cabinet, SCSZs are set up under the supervision of customs authorities. They are usually surrounded by an iron mesh enclosure, making them segregated areas. Thus, while the SCSZ is in the territory of China, enterprises in the SCSZs are treated as “overseas”.

Goods entering SCSZs from abroad are not categorized as imports and enjoy preferential bonded policies. Similarly, goods from domestic out-zone areas entering some SCSZs may enjoy export rebates.

SCSZs, therefore, tend to be the best-suited locations for foreign investors engaged in export-oriented trade and production in China. In fact, while SCSZs occupy only 1/20,000th of China’s land, they generated around one-sixth of the country’s total foreign trade in 2018.

In this article, we introduce the different types of SCSZs in China and highlight the preferential policies and functions of Comprehensive Bonded Zones (CBZs), which could become the dominant type of SCSZ in the future due to current policy trends.