Laws of the People's Republic of China

The State Administration of Foreign Exchanges

Circular of State Administration of Foreign Exchanges on Issues Relating to Administration of Verification and Sales of Collection of Foreign exchanges Under Export Factoring Services

HuiFa [2003] No.79

July 1, 2003

The branches and the departments of foreign exchange administration (hereinafter referred to as departments) of the State Administration of Foreign Exchange (SAFE) in the provinces, autonomous regions, and municipalities directly under the Central Government, and the branches in Shenzhen, Dalian, Qingdao, Xiamen, and Ningbo, as well as banks designated to foreign exchange services:

In order to standardize the verification and sales of foreign exchanges under export factoring, support the development of foreign trade, and encourage banking innovation, here is to notify you of the matters relating to the verification and sales of foreign exchanges under export factoring as follows:

1.

The export factoring services herein (export factoring) refer to comprehensive settlement and financing services of minimum two items of receivable management and credit risk control, collection services, bad account guarantee and trade financing provided by designated banks of foreign exchanges (merchants of export factoring) for the short-term credit sales of export units (exporters).

2.

Under export factoring, if the merchant of export factoring has not provided the exporters with financing services or provided financing services with recourse, the merchant of export factoring shall handle with the formalities for settlement or entry of foreign exchanges and issue to the exporters the duplicate for verification and sales of foreign exchanges from export according to the relevant provisions upon collection of the commodity prices from outside China.

3.

Under export factoring, if the merchant of export factoring has provided the exporters with financing services without recourse, the merchant of export factoring may provide the exporters with the financed fund and shall issue to the exporters the duplicate for verification and sales of foreign exchanges from export based on the financed amount according to the relevant provisions upon handling with the formalities for settlement and entry of the financed amount, thus formulating the special code for verification and sales of foreign exchanges on the special duplicate (for detailed formulating code, please refer to the Circular of the State Administration of Foreign Exchanges on the Issues Relating to the Management of the Special Duplicate for Verification and Sales of Foreign Exchanges from Export (HuiFa [2003] No. 11). At the same time, the Special Duplicate for Verification and Sales of Foreign Exchanges from Export shall be indicated as "export factoring financing services".

Upon the collection of the commodity prices by the merchant of export factoring from outside China on behalf of the exporter, the merchant of export factoring will deduct the financed fund and the interests and issue the special duplicate for verification and sales of foreign exchanges of export for the balance. Meanwhile, the Special Duplicate for Verification and Sales of Foreign Exchanges from Export shall be indicated as "balance from export factoring", the relevant expenses under the item of factoring, the financing interests, the code of submission of foreign-related incomes, and the original special code for verification and sale of foreign exchanges of exports.

Upon the collection of the commodity prices by the merchant of export factoring from outside China on behalf of the exporter, the merchant of export factoring and the exporter shall handle with the submission for statistics of international payment according to Article 28 and the relevant provisions of the Procedures for business Operation of Submission for Statistics of International Payment Through Financial Institutions.

4.

Under the export factoring, the exporter shall handle with the formalities for verification and sales of foreign exchanges of export with the branches and sub-branches of the state administration of foreign exchanges (hereinafter referred to as the administration of foreign exchanges) against the export factoring contract and the specified vouchers of verification and sales within the time specified according to the Measures for the Management of Verification and Sales of Foreign Exchanges of Export and the Implementation Rules and the relevant provisions.

When handling with the formalities for the verification and sales of foreign exchanges of export under export factoring for an exporter, if the difference between the collection of foreign exchanges and the total transaction price indicated on the Customs declaration bill for export commodities exceeds USD500 (inclusive), the administration of foreign exchanges may handle with the verification and sales of the difference based on the factoring fees indicated on the factoring contract and the special duplicate for verification and sales of foreign exchanges o0f export, and issue the exporter the special duplicate for tax refund of the bill of verification and sales of foreign exchanges of export.

5.

In case the merchant of export factoring fails to collect the foreign exchanges from outside china due to the disputes over the trade parties to the trade when the merchant of export factoring provides the exporter with the financing services without recourse, the merchant of export factoring shall notify the exporter when deducing the amount, and within ten business days upon receipt of such notice, the exporter shall provide the merchant of export factoring with the Certificate on Set-off of Verification and Sales of Foreign Exchanges of Export issued by the administration of foreign exchanges. In case the exporter fails to provide such certificate, the merchant of export factoring shall send a written report to the administration of foreign exchanges, and shall not issue for such enterprise any special duplicate for verification and sales of foreign exchanges under export factoring in the future.

6.

Under export factoring, when providing the exporter with financing services or in case of losses from the operation of export factoring services, the merchant of export factoring shall make use of its own fund of foreign exchanges or against its operation capital, and shall not buy foreign exchanges at its own discretion or set off any amount with the capital settled by the clients.

In case of insufficient capital of foreign exchange or operation capital of foreign exchanges, the merchant of export factoring may make up for them by applying for purchase of foreign exchanges with the administration of foreign exchanges according to the relevant provisions.

7.

The merchant of export factoring shall set up the ledger for registration of each item of export factoring services undertaken for check and review by the administration of foreign exchanges.

8.

The Circular will come into force as of the date of its promulgation.

Upon receipt of the Circular, the branches shall distribute them to their subordinate sub-branches and banks designated to foreign exchange services (inclusive of foreign-invested banks) as soon as possible, and Chinese-invested banks designated to foreign exchange services shall distribute them to their subordinate branches and sub-branches. In case of any problems in execution, please immediately feedback to the Management Department of Current Accounts of the State Administration of Foreign Exchanges.