Call for Comments: Draft Notice on Standards and Policies for Domestic Products in Government Procurement in China

China’s Ministry of Finance (MOF) has released a draft open for public comments regarding standards and implementing policies for domestic products in government procurement. The full text of the Notice on Matters Relating to Domestic Product Standards and Implementation Policies in the Field of Government Procurement《关于政府采购领域本国产品标准及实施政策有关事项的通知（征求意见稿）》is available in Chinese on the Ministry of Finance’s website.

We provide below an unofficial translation into English of the Notice (Attachment 1, here in Chinese). Further background explanation is available in Chinese in the Attachment 2.

Send us your comments

We invite European small and medium-sized enterprises (SMEs) and business support organisations (BSOs) who would like to comment to contact our Advocacy Manager Ester Cañada Amela by email at ester.canada.amela@eusmecentre.org.cn by Friday 27 December 2024 COB. Please send us your comments in English and in Chinese, using the template included in attachment.

All comments will be consolidated and submitted to China’s Ministry of Finance in the name of the EU SME Centre and the European Chamber. All individual company comments will remain anonymous.

Notice on Domestic Product Standards and Implementation Policies in the Field of Government Procurement (Draft for Public Comments)

Please note that this is an unofficial translation provided by the EU SME Centre. To read the official text in Chinese, please refer to the Notice on the Ministry of Finance’s website.

To establish a unified, open, and orderly government procurement market system and ensure equal participation of all types of business entities in government procurement activities, in accordance with the Government Procurement Law of the People’s Republic of China, the Foreign Investment Law of the People’s Republic of China, and other relevant laws and regulations, the following Notice is issued regarding domestic product standards (hereinafter referred to as “domestic product standards”) and related implementation policies in the field of government procurement:

I. Domestic Product Standards

A domestic product refers to a product that meets the following criteria:

1. The product is manufactured in China
   The product must be manufactured within China’s territory. The product must undergo a transformation of its attributes, from raw materials or components into a finished product.
   A transformation of attributes refers to the creation of a completely new product through processes such as manufacturing, processing, or assembling, resulting in a product that is fundamentally different in name, characteristics, and purpose from its raw materials or components. Transformation of attributes does not include the following minor operations:
   • Operations intended to maintain the product in a certain state during its transportation or storage;
   • Packaging or displaying the product for transportation or sale;
   • Affixing or printing branding elements, trademarks, labels, or other distinguishing marks on the product or its packaging;
   • Simple painting, polishing, or repackaging;
   • Other operations that do not constitute a transformation of attributes.
     
     
     
2. The cost proportion of components manufactured in China meets the specified requirements
   The proportion of component costs manufactured in China must meet specified requirements, which are calculated using the following formula:

The Ministry of Finance, in conjunction with relevant departments, will determine the specific cost proportion requirements for components manufactured in China on a product-by-product basis, based on the development conditions of each industry and after broad consultation. Until the cost proportion requirements for specific products are published, products manufactured in China will be treated as domestic products for government procurement purposes.

3. Compliance with requirements for key components and key processes of specific products.
   For certain products, in addition to meeting the above criteria, the Ministry of Finance, together with relevant departments, will also specify requirements for key components to be manufactured in China and key processes to be completed in China.
   
   

II. Scope of Application of Domestic Product Standards

The domestic product standards apply to goods, including those in government procurement goods projects and service projects involving the procurement of goods. Goods subject to domestic product standards specifically refer to items classified as “goods” in the Government Procurement Item Classification Catalogue. This excludes land, buildings and structures, cultural relics and exhibits, books and archives, specialised flora and fauna, agricultural, forestry, animal husbandry, and fishery products, minerals, electricity, urban gas, steam and hot water, water, food, beverages, and tobacco raw materials, and intangible assets.

III. Government Procurement Support Policies for Domestic Products

1. In government procurement activities where both domestic and non-domestic products compete, a 20% price deduction will be applied to the bidding price of domestic products for evaluation purposes.
2. For procurement projects or packages containing multiple products, if the total cost of products meeting domestic product standards accounts for 80% or more of the total cost of the supplier’s products in the bid, the entire range of products provided by the supplier will be granted the 20% price deduction for evaluation purposes.
   
   

IV. Policy Implementation Requirements

1. Relevant Supporting Documents
   Procurement entities and agencies must explicitly require suppliers to provide a declaration of conformity with domestic product standards (see Attachment 1, hereinafter referred to as the “Declaration”) or other supporting documents specified by the Ministry of Finance in the procurement documents. Products supported by a valid Declaration or other documents will be considered domestic products and will be eligible to relevant support policies. Procurement entities and agencies must not require additional evidence of domestic product status. If a supplier provides a false Declaration, this will be treated as a submission of fraudulent documents to obtain a bid or contract, and liability will be pursued in accordance with the Government Procurement Law of the People’s Republic of China and other national regulations.
   Procurement entities and agencies must disclose the Declaration or supporting documents provided by the winning bid along with the procurement results.
   
2. Rules for Calculating the Cost of Components Manufactured in China
   The calculation of the cost of components manufactured in China must follow the Rules for Calculating the Cost of Components Manufactured in China (see Attachment 2). The cost of components and the cost of components manufactured in China must be based on relevant accounting data, procurement contracts, purchase records, etc.
   
3. Equal Treatment of All Types of Business Entities
   State-owned enterprises, private enterprises, and foreign-invested enterprises are all entitled to equal treatment under government procurement support policies for domestic products. Procurement entities and agencies must ensure equal treatment in the publication of procurement information, qualification criteria, qualification reviews, evaluation standards, and other aspects, thereby safeguarding fair competition among all types of business entities. Discrimination based on ownership type, organisational structure, equity structure, investor nationality, product brand, and other unreasonable criteria are prohibited.
   
4. Compliance with International Agreements
   If international treaties or agreements to which China is a party include provisions differing from these domestic product policies, such provisions shall take precedence.
   
   

V. Dispute Resolution

1. Disputes Regarding Domestic Manufacturing of Products or Components
   For disputes involving whether products or components are manufactured in China during government procurement complaints or supervision, the following principles will apply:
   • For assembled products or components, suppliers must provide procurement contracts, purchase records, manufacturing, processing, or assembly records, and other supporting documents proving that the products or components were manufactured in China.
   • For products or components directly manufactured or processed from raw materials (e.g., steel, ceramics, glass), suppliers must provide information such as the production plant address marked on the product or packaging, confirming that the production plant is within China.
     
2. Disputes Regarding Compliance with Cost Proportions or Domestic Component Costs
   Suppliers must provide accounting data, procurement contracts, purchase records, etc., to verify compliance with domestic production cost requirements as stipulated in this notice and related documents.
   
3. Disputes Regarding Key Processes Being Completed in China
   Suppliers must provide records or other supporting documents demonstrating that key processes were completed in China. Products meeting these requirements will be deemed compliant.