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Does 3D printing need to pay customs duties?

According to a 2017 report issued by ABN AMRO Bank and Financial Services Corporation (ING), by 2060, 50% of manufactured products can be 3D printed and 25% of world trade will be eliminated. Other agencies predict that 40% to 50% of international trade volume will disappear.

The development of e-commerce has made cross-border purchases and transactions through the Internet easier and more common. When the transaction object becomes a 3D printed design draft, the transaction can be completed through the Internet. So, will the customs be useless?

No, the customs has already been studying countermeasures.

Yao Jiayuan, director of media operations of the International Union of Customs Schools, accepted an exclusive interview with a reporter from China Business News and answered relevant questions.

Question: If you use 3D printing to do trade, the customs clearance may only be a design drawing. How to measure the value of this commodity?

Yao Jiayuan: For this issue, we must first clarify the four basic functions of the customs. The “Customs Law” stipulates that the functions of China Customs are not only taxation, but also supervision, smuggling and statistics. Regardless of the trade method, as long as the actual cross-border trade occurs, the customs clearance process is essential.

The emergence and popularization of 3D printing technology poses new challenges to customs supervision and customs clearance.

3D printing technology-related trade can be divided into three types, one is the trade of 3D printing consumables, the other is the trade of 3D printers, and the third is the trade of virtual goods such as 3D printing drawings.

At this stage, the customs has regulations on the classification of products and related tax rates for 3D printers, and there are no clear regulations on 3D printing consumables. Generally, customs supervision refers to their materials for supervision. For virtual goods such as drawings and software, generally, the trading party needs to provide physical carriers for them, and then tax and supervise them based on their actual transaction prices.

The customs valuation challenge brought by 3D printing technology is that the types of 3D printed products are uncontrollable during the customs clearance process, and regardless of general taxation, it will have a huge impact on the goods subject to the sliding tax rate. In the future when 3D printing technology is popularized on a large scale, the key to reasonable valuation and guaranteeing tariff income lies in the differentiated tax management of 3D printers of different specifications and functions. This can be done by referring to the tax rate of cosmetics in postal items, and the function is more important. More and more professional printers impose higher tax rates.

Question: After customs clearance of 3D printed drawings, the actual number of printed products may be different from the number of customs declarations. How to supervise this? Do I need to levy tariffs?

Yao Jiayuan: The management of printed products involves the concept of customs rules of origin. If the printing process takes place within the country, according to the principle of substantial changes in the rules of origin, through 3D printing, consumables are transformed into products, which constitutes a change of origin. It does not constitute a condition for reimbursing tariffs.

Of course, if 3D printing technology is used for bonded processing trade, the supervision and verification of the use of consumables is also one of the customs’ supervision work. If the difference between consumables and products exceeds the reasonable loss, the customs will impose corresponding penalties. At the same time, since the use and loss of 3D printing consumables are smaller than the existing processing trade, the existing definition of loss also needs to be modified accordingly.

Q: Last year, Defense Distributed, a 3D printed firearms group in the United States, announced a settlement with the US Department of Justice, which made it possible for anyone to create an untraceable gun. Is it necessary to develop a system to track what and how much is printed in 3D printing?

Yao Jiayuan: The establishment of a system for supervision requires the cooperation of multiple departments, not only customs, but also market management and public security departments need to participate. Based on the existing technology, it is conceivable to use the blockchain to implement record management of 3D printing equipment, and to carry out two-way tracking of the number of 3D printing drawings and users based on websites and printers. With reference to the current UAV management method, real-name management of 3D printer owners is carried out. After all, relative to taxation, safety is the biggest challenge brought by 3D printing technology.

Question: In the 1990s, the WTO stipulated that electronic transactions are not subject to tariffs. How should the customs supervise this?

Yao Jiayuan: Electronic transactions and e-commerce are different concepts. For cross-border e-commerce, my country has now carried out the construction of three batches of experimental zones, formed an internationally leading cross-border e-commerce supervision model, and implemented preferential tax policies for cross-border e-commerce inbound and outbound goods. However, there are still no effective supervision methods for the transactions of electronic property and virtual goods. Currently, supervision is carried out mainly after the parties provide physical carriers. With the further deepening of trade globalization, the development trend of international trade is global free trade and zero tariffs. Therefore, I do not think that the implementation of taxation on electronic properties similar to actual goods is an urgent problem to be solved.

Question: How does the customs industry view the changes that may be brought about by new technologies?

Yao Jiayuan: On the one hand, new technologies provide convenience to customs management. New technologies such as artificial intelligence and blockchain have been put into use in customs supervision, which have good effects on the accuracy, efficiency and standardization of customs enforcement. On the other hand, challenges brought by new technologies are inevitable, and new forms of trade and production methods have brought new challenges to taxation and security. The more intelligent and information-based customs also puts forward new requirements for customs talents, changing from customs professional technical talents to comprehensive talents with programming and response capabilities.

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