Zero-Tariff Goods Are Free Until They Leave: Costing the Second Line
Since closure on 18 December 2025, roughly 74% of tariff lines enter Hainan duty-free. The number that decides whether that helps a given business is not 74% — it is 30%.
HainanInc Regulatory Advisory
· 4 min read
The headline from island-wide closure is generous and widely quoted: duty-free treatment expanded from about 21% of tariff lines to roughly 74%, covering around 6,600 categories rather than 1,900. For a business importing into Hainan to sell into Hainan, that is the whole story. For the much larger group importing into Hainan to reach the Chinese mainland, it is the beginning of one, because the relief attaches to goods entering the island and is settled again when they leave it.
One line in, another line out
Island-wide independent customs operation began on 18 December 2025, built on the design of freer access at the first line, controlled access at the second line, and free circulation within the island. The first line is the boundary between Hainan and outside the customs territory; the second is the boundary between Hainan and the mainland. The tax treatment across both is set by the Notice on Tax Policies for Goods Entering and Leaving the "First Line" and "Second Line" and Circulating within the Island (财关税〔2025〕12号), issued by the Ministry of Finance, the General Administration of Customs and the State Taxation Administration, which superseded the notices that had governed the position since 2020.
Under that notice, qualifying entities import goods outside the import taxation catalogue free of import duty, import value-added tax and consumption tax. When those zero-tariff goods then move across the second line into the mainland, the beneficiary entity pays import duty, import value-added tax and consumption tax calculated on the imported materials. The relief was a deferral for those goods, not a forgiveness.
Where the tariff figures come from
- Notice on Tax Policies for Goods Entering and Leaving the 'First Line' and 'Second Line' and Circulating within the Island (财关税〔2025〕12号) — Ministry of Finance, General Administration of Customs and State Taxation Administration — effective on island-wide closure; supersedes the 2020 to 2025 notices.
- State Council policy briefing on island-wide independent customs operation — launch date 18 December 2025; zero-tariff coverage moved from a positive list to a negative list, reaching approximately 6,600 tariff lines or about 74%, against 21% and roughly 1,900 previously; ten second-line ports; second-line declaration fields reduced from 105 to 42.
- Interim Measures of the Customs on Tax Administration of Value-Added Processing Duty-Free Goods in the Hainan Free Trade Port (海关总署公告2025年第159号) — General Administration of Customs — administration and calculation of the value-added processing relief.
- Announcement publishing the Hainan Free Trade Port prohibited and restricted import and export lists (商务部公告2025年第43号) — Ministry of Commerce.
- All positions above verified against the issuing bodies' published texts in September 2026.
Thirty per cent is the number that changes the answer
The exception is processing. Goods produced by an encouraged-industry enterprise that either contain no imported materials, or contain imported materials but have gained value in the Free Trade Port of 30% or more, enter the mainland across the second line exempt from import duty — import value-added tax and consumption tax remain payable in the ordinary way. The calculation published by the General Administration of Customs takes the domestic sale price of the goods, subtracts the imported materials and the domestically purchased materials, and divides that figure by the total of those same material costs; a result of 30% or more qualifies.
Read as a business question rather than a customs one, this says something specific: Hainan rewards genuine transformation and is largely neutral towards pure transhipment. A business whose Hainan step adds little value pays on the way out roughly what it saved on the way in, minus the cost of the detour. A business whose Hainan step is real manufacturing or substantial processing crosses a threshold and stops paying duty on the mainland leg altogether.
The island does not reward goods passing through. It rewards goods that change while they are there.
What still restricts what can be brought in
Wider does not mean unrestricted. Trade management was loosened by making opening arrangements for part of the nationally prohibited and restricted import categories, while prohibitions grounded in security, ecological protection and international obligations remain. The operative lists are published by the Ministry of Commerce, and the practical discipline is to screen a product against the current list rather than against a general impression that Hainan is now open. The move from a positive list to a negative list changed the default, not the existence of exclusions.
The readiness questions worth answering before the first shipment
- Where does this product actually end up — Hainan, the mainland, or export — because the tax answer differs at each destination.
- If the mainland, does the Hainan step plausibly reach 30% value added on the published calculation, and can that be evidenced per consignment.
- Is the entity an encouraged-industry enterprise, since the value-added processing relief is tied to that status.
- Is the product on a current prohibited or restricted list, checked against the published lists rather than assumed.
- Are the second-line declaration and record-keeping obligations resourced, given that they arise on every mainland movement rather than once at import.
Modelling the destination before the first shipment
Zero-tariff and customs readiness work is the modelling of that destination question before commitments are made — the duty position at each leg, whether the value-added threshold is reachable for the actual process, and what evidence the calculation will require consignment by consignment. Where the analysis shows the 30% threshold is out of reach for a given product, that is a finding worth having before a lease is signed, and it usually reframes the site and park question rather than ending it.
This is general commentary on published policy, not advice on a particular importation or customs position. Figures cited are drawn from the instruments listed above and were verified against the issuing bodies' published texts in September 2026. Confirm currency and product-specific treatment before relying on any figure.