Recently, the National Development and Reform Commission issued an announcement stating that the first batch of cotton import quotas with preferential tariff rates beyond the tariff quotas in 2022 will be issued in the near future. The quantity is 400,000 tons, all of which are non-state-owned trade quotas and are limited to imports through processing trade.
According to the “2022 Cotton Import Tariff Quota Application and Allocation Detailed Rules” published by the National Development and Reform Commission Announcement No. 7 on September 26, 2021, the total import tariff quota is 894,000 tons, of which 33.3% is state-owned trade quota.
Based on this calculation, the total import tariff quota for non-state-owned trade in 2022 is about 600,000 tons. Adding in the sliding tax quotas for non-state-owned trade this time, the total amount of tariff quota + sliding tax quota for non-state-owned trade is about 100 tons. Thousands of tons.
In 2021, the National Development and Reform Commission also issued a sliding tax quota for cotton imports of 700,000 tons, all of which are also non-state trade quotas.
The total cotton import tariff quota in 2021 is also 894,000 tons, of which 33% is state-owned trade quota.
The total amount of non-state trade tariff quotas this year is the same as last year, and the sliding tax quota is currently 300,000 tons less.
However, unlike previous years, the announcement also pointed out that this is the first batch of import sliding tax quotas released, and additional quantities may be issued later based on market demand. Judging from the entire announcement, the country is very determined to ensure supply and stable prices.
The 400,000 tons of this sliding tariff are limited to imports through processing trade. This allocation method is the same as in 2020, and there is no change in the 400,000 tons in 2021 that are limited to imports through processing trade. However, a total of 700,000 tons of sliding tax quotas will be issued in 2021, except for the 400,000 tons that are limited to imports. The other 300,000 tons are imported through processing trade, and the other 300,000 tons are not limited to trade methods. Companies that have obtained quotas in 2021 can choose to determine the trade method when applying for quota certificates: companies can apply separately for processing trade quotas or quotas that do not limit trade methods, or they can Apply at the same time.
The National Development and Reform Commission announced that it will submit application materials to the entrusting agency (provinces, autonomous regions, municipalities directly under the Central Government and cities under separate state planning, and the Xinjiang Production and Construction Corps Development and Reform Commission) at the place of registration from March 14 to 25. The cotton imported by the enterprise through the use of the sliding cotton import tax quota obtained by the enterprise shall be processed and operated by the enterprise and shall not be resold. Enterprises that forge, alter or trade the “Cotton Quota Certificate for Imported Cotton with Preferential Tariff Rates Beyond Tariff Quotas” will be held criminally responsible in accordance with relevant laws and regulations.
Looking at the cotton market situation in the past two years, both domestic cotton prices and international cotton prices are currently at a historical high in the past ten years. As can be seen from the data in the table above, in 2022, the price of Xinjiang cotton in the domestic market will rise by 6,500-6,900 yuan/ton, or 40.00%-41.57%, and the price of imported cotton will rise by 6,650-6,950 yuan/ton, or 36.14%-47.16%. Textile companies are facing high prices for cotton, and the cost of cotton has increased significantly.
Since the fourth quarter of 2021, the domestic textile market has weakened, order follow-up has been weak, and high cotton prices have made the cotton consumption problem of yarn companies more and more prominent. After the Spring Festival in 2022, upstream and downstream price transmission was poor, and yarn inventory continued to increase. At the same time, high cotton costs and reduced yarn prices due to increased inventory have significantly compressed textile profits.
Textile companies are in urgent need of low-priced cotton to cope with the current difficulty in using cotton. The state’s issuance of sliding tax quotas for cotton imports has alleviated this situation to a certain extent, ensuring the cotton demand of textile companies and adjusting the industrial structure.
Cotton import tariffs
According to the “2022 Tariff Adjustment Plan”, cotton is one of the eight categories of commodities subject to tariff quota management, and a sliding tax will be imposed on a certain amount of cotton imported outside the quota.
The specific tax rates are as follows:
Ordinary tax rate 125%
Most-favored-nation tax rate of 40% (a certain amount of cotton imported outside the quota will be subject to a temporary tariff in the form of sliding tax)
Tariff quota rate 1%
According to Announcement No. 7 of 2021 of the National Development and Reform Commission, 894,000 tons of cotton can be imported at a tariff rate of 1%. The 400,000 tons issued this time belong to the preferential tariff rate import quota outside the tariff quota, and sliding import tariffs are applicable.
Sliding tax calculation method
1. When the duty-paid price of imported cotton is higher than or equal to 14.000 yuan/kg, a specific tax of 0.280 yuan/kg will be levied;
2. When the duty-paid price of imported cotton is less than 14.000 yuan/kg, the tentative ad valorem tax rate is calculated as follows:
Ri=9.0/Pi+2.69%×Pi-1
The calculation result of the above formula is rounded to 3 decimal places. Ri is the provisional ad valorem tax rate. When the value calculated according to the above formula is higher than 40%, Ri takes the value of 40%;
Pi is the customs duty paid price, the unit is yuan/kg.
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