Beware of the Jung Labor Director System... KITA Publishes 'Report on This Year's Changed Regulations'

Tariff Reduction on Raw Materials for Electric Vehicle Batteries... China Secures Scarce Resources
Beware of 'Tariff Bomb' on Exporting 12 Taiwanese Imported Chemicals to China
New Regulations on Drones and Patent Applications Established... Income Tax Deduction for Equipment Purchases

From this year, employee representatives of Chinese companies can participate in the board of directors. The Company Law has been amended to require companies with 300 or more employees to have worker directors on the board. Import tariffs on core equipment and parts for advanced industries, such as lithium chloride, will be reduced. Lithium chloride is a substance that, after refining, is converted into lithium hydroxide, a raw material for electric vehicle batteries.

The Korea International Trade Association's Beijing branch announced on the 24th that it jointly published a report titled "Major Changes in China's Economic and Trade Regulations in 2024" with the Chinese law firm Du Zheng (度正). The report includes various regulatory changes such as the Chinese labor director system and tariff reductions on advanced industry parts. It covers annual tariff adjustments effective this year, changes in patent and intellectual property regulations, amendments to laws such as the Company Law and the Foreign State Immunity Law, and updates to the list of dual-use goods and technologies.

Samsung Electronics Xi'an Semiconductor Factory Overview. [Photo by Samsung Electronics Newsroom]

First, Chinese authorities amended the Company Law this year. The amendments include significant changes affecting corporate management activities, such as employee representatives participating in the board of directors, changes in board resolution methods, setting deadlines for registered capital payment, strengthening the duties and responsibilities of controlling shareholders and executives, and enhancing shareholders' right to know. These changes also apply to Korean companies operating in China, including Samsung Electronics, SK Hynix, Hyundai Motor Company, and POSCO.

The China Customs Tariff Commission adjusted the annual tariffs, changing some product categories and rates. Provisional rates lower than the Most Favored Nation (MFN) rates will be applied to 1,010 products. In particular, import tariffs on core equipment and parts such as lithium chloride and raw materials for fuel cells have been reduced. Lithium chloride is a substance that, after refining, is converted into lithium hydroxide, a raw material for electric vehicle batteries. This measure aims to import core equipment and parts that are scarce in China.

An SK Innovation researcher holding lithium hydroxide extracted from used batteries. Lithium chloride is converted into lithium hydroxide at a refining plant. Lithium hydroxide is used as a raw material for electric vehicle batteries.
[Photo by SK Innovation]

When exporting 12 Taiwan-origin chemical products such as propylene and vinyl chloride to mainland China via Taiwan, caution is needed regarding tariff surcharges. Since the 1st of this month, the Chinese government has begun suspending tariff reductions under the Economic Cooperation Framework Agreement (ECFA) for these chemicals. Regulations on medical devices, pharmaceuticals, and special medical purpose formulated foods have been strengthened. Product certification and standards-related norms have been simplified.

New regulations related to unmanned aerial vehicles (drones) have been established to strengthen quality control. The "Unmanned Aerial Vehicle Flight Management Interim Regulations" specify production conditions such as design, manufacturing, maintenance, and assembly of drones, as well as flight conditions. The "Patent Application Conduct Norms" have been introduced. The patent law rules have been amended to add special provisions for international applications of industrial designs. Under the "Patent Application Conduct Norms," administrative penalties have been established for institutions and individuals conducting abnormal patent application activities.

On December 12 last year, King Willem Alexander of the Netherlands, Geoffrey van Leeuwen ASML Minister of Commerce, Peter Wennink ASML President and CEO, Christoph Puke ASML Vice President, President Yoon Suk-yeol, Ahn Deok-geun Director General for Trade Negotiations, Lee Jae-yong Chairman of Samsung Electronics, and Choi Tae-won Chairman of SK took a commemorative photo in the extreme ultraviolet (EUV) cleanroom at the ASML factory in Veldhoven, Netherlands.
EUV is a core piece of equipment banned from being imported into China. China is encouraging corporate facility investment by providing tax benefits such as income tax deductions for companies purchasing new equipment.
[Photo by Reuters Yonhap News]

Tax benefits are granted to companies purchasing new equipment and those involved in environmental protection. Income tax deductions are provided for companies purchasing new production equipment below a certain amount. Preferential corporate income tax rates are applied to companies engaged in pollution supervision and control that meet certain conditions. Tax incentives have been increased to encourage corporate equipment investment.

Shim Yoon-seop, head of the KITA Beijing branch, said, "As China is reorganizing various systems, the local business environment is rapidly changing. Korean companies need to fully understand the changes in the Chinese business environment and promote their local operations accordingly."

This content was produced with the assistance of AI translation services.