Laws of the People's Republic of China

The Ministry of Commerce, the State Administration of Foreign Exchanges

Circular of the Ministry of Commerce and the SAFE on Issues Relating to Simplifying the Examination and Approval Procedures for the Projects of Overseas Processing Trade and Delegating the Authority

ShangHeFa [2003] No.126

June 26, 2003

For further carrying out the spirits of the 16th National Congress of the CPC and the 2nd plenipotentiary session of the 16th Committee of the CPC, further implementing GuoBanFa [1999] No.17 Document, encouraging and promoting the development of overseas processing trade, and speeding up the strategy of "going out", the Ministry of Commerce and the SAFE have adjust the examination and approval Procedures for the projects of overseas processing trade and the delegating of the authority in compliance with the adjustment of the institutions and functions of the relevant organs of the State Council and the requirements deepening the reforms on the system of administrative examination and approval. The relevant issues are hereby notified as follows:

I.

The projects of overseas processing trade with investment by Chinese parties no more than USD3m (inclusive) will be reviewed and ratified by the local competent department of foreign economics and trade of the provinces, autonomous regions and municipalities directly under the Central Government and municipalities on the state plan (including the Foreign Economic and Trade Bureau of Xinjiang Production and Construction Regime, hereinafter referred to as local competent department) where the investment subjects are located. The projects of overseas processing trade with investment by Chinese parties more than USD3m should be submitted by the local competent department for review and approval by the Ministry of Commerce.

The projects of overseas processing trade invested and sponsored by the enterprises under the central government and their affiliated enterprises should be submitted by the headquarters of the central enterprises for review and approval by the Ministry of Commerce.

II.

Procedures for application and submission of the projects of overseas processing trade

(I)

For the projects of overseas processing trade to be reviewed and ratified by the local competent department, the local competent department shall upon receipt of the relevant application review and decide on whether to grant ratification after consent by the economic and commercial office of our embassy (consular) in foreign countries.

(II)

For the projects of overseas processing trade to be reviewed and ratified by the Ministry of Commerce, the local competent department or the headquarters of the central enterprises shall report the case for review and ratification by the Ministry of Commerce after consent by the economic and commercial office of our embassy (consular) in foreign countries.

(III)

For the projects of overseas processing trade to be reviewed and ratified by the local competent department or to be submitted for review and ratification, joint signature should be obtained from the local competent department of economics and trade. The local competent department of economics and trade should put forth opinions within five working days.

(IV)

For the projects of overseas processing trade requiring for domestic purchase of foreign exchanges and remittance to foreign countries, review and examination should be made by the local administration of foreign exchanges or the department of foreign exchange administration on the capital sources of foreign exchanges for overseas investment according to the relevant provisions of the Circular of the General Administration of Foreign Exchanges on Issues Relating to Simplifying the Review and Examination of the Capital Sources of Foreign Exchanges for Overseas Investment (HuiFa [2003] No. 43) before submission to the local competent department. The review and examination on the capital sources for the projects of overseas processing trade with investment by Chinese parties no more than USD3m (inclusive) will be handled with by the local administration of foreign exchanges or the department of foreign exchange administration where the investment subjects are located. The review and examination on the capital sources for the relevant projects with investment by Chinese parties more than USD3m will be initially handled with by the local administration of foreign exchanges or the department of foreign exchange administration where the investment subjects are located before final review and examination by the SAFE.

III.

Key point in review of the projects of overseas processing trades

When various levels of competent department reviews and ratifies the projects of overseas processing trade, the main materials to be reviewed and examined include: survey of the projects of overseas processing trade (Especially the qualifications of the investment subjects and the product exports brought forth); contract and articles of associations of the enterprises of overseas processing trade, business licenses of the investment subjects (duplicate), reply upon review and examination by the administration of foreign exchanges on the capital sources of foreign exchanges for overseas investment, proposals on no further review and approval of projects of overseas processing trade and the feasibility study report.

IV.

Approval certificates of the overseas enterprises of processing and assembling with brought-out materials

The Approval Certificate of the Overseas Enterprises of Processing and Assembling with Brought-out Materials (hereinafter referred to as the Approval Certificate) is a legal documents uniformly printed by the Ministry of Commerce for certifying that the projects of overseas processing trade has been finally verified and ratified by the competent state department of foreign investment. After ratifying the projects of overseas processing trade, the local competent department shall fill in the Form of Registration and Filling of Overseas Processing Trade Enterprises (format attached below) and cover its official stamp thereon, which should be submitted together with the review and ratification documents, the opinions provided by the economic and commercial office of our embassy (consular) in foreign countries and the opinions on examination of the capital sources of foreign exchanges issued by the administration of foreign exchanges for registration and filing by the Ministry of Commerce before obtaining the approval certificates. Upon the maturity of online issuance of the certificates, the approval certificates will be issued by the local competent department by proxy.

Within 60 days upon obtaining the approval certificates, the investment subjects shall handle with the registration of foreign exchanges for overseas investment at the local administration of foreign exchanges or the department of foreign exchange administration where the investment subjects are located. The formalities for purchase and remittance of foreign exchanges will be handled with against the approval certificates and the reply on the review and examination of the toe capital sources of foreign exchanges.

V.

When investing in overseas processing trade, the investment subjects shall firstly make use of their own capital of foreign exchanges, and incase their own capital of foreign exchanges is insufficient, domestic loans of foreign exchanges may be adopted or foreign exchanges may be purchased.

VI.

Without permission by the Ministry of Commerce, the local competent departments shall not delegate their authority for review and ratification of the projects of overseas processing trade to their subordinate units.

VII.

Since the promulgation and distribution of the Circular of General Office of the State Council on transferring the Opinions of the MOFTEC, the State Economic and Trade Commission and the Ministry of Finance on Encouraging Enterprises in Developing Overseas Processing and Assembling Business with Brought-out Materials (GuoBanFa [1999] No.17), the overseas processing trade has played an important role in promoting he development of foreign relationship, expanding exports, furthering the adjustment of industrial structure, and cultivating the transnational companies of our country. For a pretty long term in the future, such business is still an important direction to be encouraged in our overseas investment. Each and every unit shall in the spirits of GuoBanFa [1999] No.17 Document keep on doing well in the organization and promotion of such business, and pay attention to find problems and summarize experiences during the actual works, and closely communicate with the economic and commercial office of our embassy (consular) in foreign countries, thus strengthening the organization, management and coordination in the projects of overseas processing trade and avoiding blind overseas deployment, repeated construction and disorder competition.

In case of any issues in work upon the distribution of the Circular, each unit is required to report to the Ministry of Commerce (the Department of Cooperation) and the SAFE (the Department of Capital) in a timely way.

Hereby is the notification.