If you’re in the logistics, transportation, or tourism sector, you’ve likely heard the buzz: Hainan Free Trade Port (FTP) has officially launched its island-wide customs operation, often called “Feng Guan,” as of December 18, 2025. While this historic move opens a new chapter for trade and investment, it introduces a complex, rules-based environment—especially concerning one of its most attractive perks: zero-tariff vehicles and vessels.
For businesses eyeing Hainan as a strategic base, understanding the precise operational freedoms and, more importantly, the strict limitations attached to these tax-free assets is critical. Missteps can lead to significant financial penalties and operational disruptions. This guide breaks down the policy essentials, highlights the key compliance pitfalls, and offers practical advice for navigating this new landscape.
What “Feng Guan” Really Means for Transportation Assets
First, let’s demystify the term. “Feng Guan” or customs closure does not mean “closing off” the island. Instead, it designates the entire Hainan island as a special customs supervision zone with a unique policy framework: “First line” liberalized, “Second line” controlled, and free flow within the island.
- The “First Line”: This is between Hainan FTP and overseas (including Hong Kong, Macao, and Taiwan). Here, policies are highly liberalized.
- The “Second Line”: This is between Hainan FTP and Mainland China. Here, movement is managed to prevent tariff leakage.
- The Core Benefit for Transport: Eligible enterprises can import vehicles, ships, aircraft, and yachts for operational use with zero import tariffs, import VAT, and consumption tax at the “first line.” This represents massive upfront cost savings, potentially around 20% for imported equipment according to official estimates.
Who Qualifies for Zero-Tariff Transportation Equipment?
Not every company can enjoy this benefit. The policy (as outlined in document Cai Guan Shui [2025] No. 12) is strictly targeted:
Qualified enterprises must be:
- Registered in Hainan FTP with independent legal person status.
- Engaged in the transport or tourism industries.
This clearly targets logistics companies, freight carriers, bus operators, tourist shuttle services, shipping lines, and tourism cruise operators. Individual consumers or companies in unrelated sectors cannot purchase these zero-tariff vehicles or yachts for personal use.
Operational Restrictions: The Fine Print You Can’t Afford to Miss
This is where the details matter most. The tax exemption is not unconditional; it’s a contract with the state tied to specific operational patterns. Violating these conditions triggers a requirement to pay back all the exempted import taxes.
Here are the critical restrictions, distilled from the official policies:
For Zero-Tariff Vehicles (Trucks, Buses, etc.):
- Permitted Operations: They can be used for passenger or cargo transport between Hainan and the Mainland.
- The Key “At Least One End” Rule: For any journey, the origin OR the destination must be within Hainan. You cannot operate a vehicle tax-free on a route wholly within the Mainland (e.g., Guangzhou to Shanghai).
- The 120-Day Mainland Cap: The cumulative time all your zero-tariff vehicles spend in the Mainland cannot exceed 120 days per calendar year (calculated in natural days).
- The Important Exemption: “Point-to-point” direct trips from Hainan to the Mainland and immediate return are exempt from the 120-day calculation. This is crucial for ferry-based logistics and tour groups.
For Zero-Tariff Ships and Aircraft:
- Registration/Home Base: They must be registered or have their primary operational base in Hainan.
- Route Requirement: They must operate international or domestic routes that originate from or stop in Hainan.
For Zero-Tariff Yachts:
- Their navigation area is confined to Hainan Province.
The High Stakes of Non-Compliance: Back Taxes and Penalties
The policy documents are unequivocal. If you breach the above conditions—for example, if your vehicle’s GPS data shows it operating entirely within the Mainland for a month, or if your fleet collectively exceeds the 120-day mainland stay limit—you are liable.
The consequence is not a minor fine but the retroactive payment of all import duties, VAT, and consumption tax that were waived at the time of import. For a fleet of high-value trucks or vessels, this could be a devastating financial blow, potentially erasing the initial cost-saving advantage and incurring substantial additional liabilities.
Furthermore, the authorities, led by Hainan Customs, are building a sophisticated “smart supervision” system. This involves electronic ledger management for all zero-tariff goods and integrated data sharing platforms. It’s designed to track the movement and usage of assets like vehicles in near real-time, making accidental breaches unlikely to go unnoticed.
Mitigating Risks: Due Diligence and Proactive Management
For foreign or domestic businesses looking to partner with Hainan-based transport companies or invest in the sector, this regulatory environment makes due diligence more important than ever.
- Vet Your Partners Rigorously: Before contracting a Hainan logistics firm that uses zero-tariff vehicles, ask about their compliance systems. How do they track and manage their fleet’s mainland days? A reputable partner will have clear protocols. Obtaining a professional business credit report can reveal a company’s operational history, regulatory compliance record, and financial stability, helping you assess if they are a reliable, low-risk partner.
(Note: ChinaBizInsight offers detailed Standard Business Credit Reports that can aid in this crucial vetting process.) - Internal Compliance is Key (For Operators): If you are the operator, invest in robust fleet management software with geofencing and dwell-time analytics. Implement strict internal policies and train your dispatchers and drivers on the rules. Regularly audit your own compliance data.
- Stay Updated on the List: The “Zero-Tariff” policy is tied to the Hainan FTP Import Taxable Commodity Catalog (Negative List). Only items not on this list are eligible. Always refer to the latest official list, as it is subject to adjustment.
Essential Resources for Your Reference
To make fully informed decisions, we recommend reviewing the primary source documents:
- Official Tax Policy Notice: Notice on the Tax Policies for Goods Entering and Exiting the “First Line” and “Second Line” of Hainan Free Trade Port and Circulating Within the Island (Download Here).
- The Negative List: Hainan Free Trade Port Import Taxable Commodity Catalog (Download Here).
- Prohibited & Restricted List: Hainan Free Trade Port List of Goods and Items Prohibited or Restricted from Import and Export (Download Here).
Conclusion
Hainan’s zero-tariff policy for vehicles and vessels is a powerful tool designed to build a competitive transport and tourism hub. However, its value is unlocked only through meticulous compliance. The rules are specific, the monitoring is intelligent, and the cost of non-compliance is severe.
For businesses, this means moving beyond mere excitement about cost savings. It demands a strategic approach grounded in a deep understanding of the regulatory framework, a commitment to internal compliance systems, and thorough due diligence on potential partners operating in this space. By doing so, you can confidently harness Hainan’s new opportunities while steering clear of its potential pitfalls.