On July 23, 2025, China announced that the full customs closure of the Hainan Free Trade Port will take effect on December 18, 2025. This marks a key step in China's reform agenda, establishing Hainan as a customs-supervised free trade zone with zero tariffs, simplified import procedures, and global-standard investment rules.
For international brands in cosmetics, personal care, food, and other FMCG sectors, Hainan is becoming a strategic gateway into China, offering preferential tax policies, supply chain flexibility, and streamlined regulatory access.
Over the past decade, China has pursued a more targeted, rules-based trade policy, with the Hainan Free Trade Port representing its most comprehensive example. Designed as a high-standard global trade and investment platform, the port aims to test deeper liberalization within a clearly defined institutional framework.
At the core of this vision is the "customs closure" , built on a "first line"("一线") and "second line" （"二线"）model:
The first line manages goods flow between Hainan and overseas markets under simplified procedures;
The second line controls movement between Hainan and other Chinese provinces, applying stricter regulatory oversight.
This structure enables Hainan to function as a separate customs territory within China's sovereign borders, while aligning with international trade rules.
Crucially, "customs closure" does not mean closing off the island. Instead, it establishes greater openness under well-defined institutional rules. Hainan will act as a pilot zone for advanced regulatory models spanning trade, investment, data governance, and sustainability.
Cosmetics have been a flagship sector and economic pillar for Hainan. Since 2011, offshore duty-free sales have surpassed RMB 250 billion with over 45 million shoppers. Beauty products consistently make up more than 50% of total sales, driving the island's consumption and growth.
The upcoming full customs closure will further accelerate this momentum by delivering several major benefits:
Zero Tariffs on Imports
Imported cosmetic products such as skincare, fragrances, shampoos, oral care, and cleansing items—previously subject to 1% to 6.5% import duties—will now enjoy zero-tariff access when entering Hainan. This directly reduces costs for global beauty brands and cross-border traders.
Preferential Policy for Value-Added Processing
A duty-free processing policy will apply to goods that undergo more than 30% value addition within Hainan. These goods can then enter the Chinese mainland without paying import duties, requiring only VAT and consumption tax. As of March 2025, this policy has generated RMB 75.46 billion in processed goods and saved RMB 601 million in tariffs, according to Haikou Customs.
Free In-Island Circulation
Processed products and imported goods eligible for zero-tariff treatment may circulate freely among qualified enterprises within Hainan, without triggering retroactive tax payments. This will strengthen local supply chain integration and foster a clustered beauty manufacturing ecosystem.
Major global players have been quick to seize this opportunity:
While cosmetics remain a flagship sector in Hainan's development, the upcoming full customs closure will also benefit a broad range of FMCG categories. These industries will enjoy expanded zero-tariff product lists (from 1,900 to approximately 6,600 tariff lines), simplified cross-border investment procedures, and improved logistics and import efficiency.
Hainan offers overseas FMCG brands and manufacturers a low-barrier, high-potential gateway—not only facilitating market entry and expansion but also attracting investments in local production and cross-border e-commerce operations.
More broadly, the full customs closure marks a platform for China's next phase of global economic integration. Hainan provides international brands with unique opportunities to optimize cost structures, diversify supply chains, and strengthen market access—within a transparent, internationally aligned policy framework.
