Institute for China Studies

Hainan Free Trade Port Expands "Zero Tariff" Policy for Drugs and Medical Devices

  • Date: 11 September 2024
  • Tags: China, Trade, Tariffs, Hainan Free Trade Port
  • Reading time: 5 minutes

In line with China’s ongoing efforts to boost the development of the Hainan Free Trade Port, a new “zero tariff” policy has been introduced to facilitate the import of drugs and medical devices. This policy, effective immediately, is designed to support the Hainan Boao Lecheng International Medical Tourism Pilot Zone by exempting relevant institutions from import duties and value-added tax (VAT) on qualified drugs and medical devices. 

This strategic initiative aims to strengthen Hainan’s role as a global hub for medical innovation, enhance healthcare services in the region, and contribute to China’s broader goal of positioning itself as a leader in medical research and development.

Key Elements of the “Zero Tariff” Policy:

Scope and Eligibility

Medical institutions, higher education medical training programs, and pharmaceutical research institutions registered in the Pilot Zone are eligible for this policy. These entities can import approved drugs and medical devices without being subject to import duties or VAT, as long as they meet the conditions set forth by the policy.

Qualified Products

The policy covers two types of products:

  • Approved drugs and medical devices: These are products already registered in China.
  • Licensed imports: This includes drugs (excluding vaccines) and medical devices that have not yet received registration in China but have been approved for use by the Hainan Provincial Government within the Pilot Zone.

Management and Supervision

The policy emphasizes strict supervision to ensure compliance. Before any imports, the Pilot Zone Administration must verify each product’s eligibility, coordinate with customs, and manage the entire process through a traceability system. Additionally, institutions are restricted to using the imported goods within the Pilot Zone and cannot resell them or transfer them outside the region.

Patient Access

Patients treated in medical institutions within the Pilot Zone can access duty-free drugs and medical devices based on a doctor’s prescription. These items must be for personal use and cannot be removed from the Pilot Zone. Reselling such goods or moving them outside the zone is strictly prohibited and subject to penalties.

Monitoring and Enforcement

To ensure compliance, the Hainan Provincial Government will oversee the implementation of this policy, regularly reviewing import, sales, and usage data. Violations, such as smuggling or unauthorized transfers, will lead to serious consequences, including financial penalties and possible criminal charges. Repeated violations could result in a ban on future access to tax-free products for individuals or institutions involved.

Long-Term Goals

The policy is part of a broader effort to position Hainan as a leading international destination for medical tourism and advanced healthcare. By reducing the cost of importing critical drugs and medical devices, the policy aims to attract global healthcare institutions and promote innovation in medical treatments and technologies. This move is expected to foster the growth of healthcare services in Hainan and enhance the island’s reputation as a center for high-quality medical care.

Implications for Businesses and Healthcare Providers

The zero-tariff policy represents a significant opportunity for international pharmaceutical companies and medical device manufacturers seeking to enter the Chinese market. By leveraging Hainan’s preferential trade policies, these companies can reduce costs and accelerate their market presence in China.

For healthcare providers, particularly those operating in the Boao Lecheng Pilot Zone, the policy enhances the ability to offer cutting-edge treatments and medical technologies at competitive prices. This could drive increased patient inflows from both domestic and international markets, further boosting Hainan’s status as a global medical tourism destination.

Conclusion

The introduction of the zero-tariff policy for drugs and medical devices in the Hainan Free Trade Port underscores China’s commitment to fostering a more open, innovative, and competitive healthcare environment. As the policy takes effect, it will not only support the development of medical institutions in Hainan but also pave the way for increased international collaboration and investment in China’s healthcare sector. Businesses and institutions operating within the Pilot Zone should take full advantage of this policy to expand their operations and enhance their service offerings in this rapidly growing market. 

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