Laws of the People's Republic of China

The Ministry of Foreign Trade and Economic Cooperation

Circular of the Ministry of Foreign Trade and Economic Cooperation on Printing and Distributing the Interim Measures for the Management of Examination and Approval of Processing Trade

WaiJingMaoGuanFa [1999] No.314

May 27, 1999

Foreign Trade and economic cooperation departments (commissions, bureaus) of the various provinces, autonomous regions, municipalitie directly under the Central Government and municipalities separately listed on the State plan, offices of special Commissioners assigned to the various localities by MOFTEC and the administration of quota and License affairs:

In order to carry out the Circular of the State Economic and Trade Commission and other departments on the Opinions of the of further Perfecting the bank Deposit Account System for Processing Trade (GuoBanFa [1999] No. 35) transmitted by the General Office of the State Council, and after consulting with the Customs General Administration, the Ministry has worked out the Interim Measures for the Management of Examination and Approval of Processing Trade. These Measures are printed and distributed to you, Please abide by.

Send to: General Office of the State Council, State Economic and Trade Commission, General Administration of Customs, Ministry of Finance, State Administration of Taxation commission, Bank of China, international cooperation offices of special Commissioners assigned to the various localities by MOFTEC, the administration of quota and License affairs, all import and export chamber of commerce, association of Foreign Investment Enterprises, EDI Center of MOFTEC Attachment:Interim Measures for the Management of Examination and Approval of Processing Trade

Chapter I General Provisions

Article 1

In accordance with the Foreign Trade Law of the People's Republic of China, the Customs Law of the People's Republic of China, the Written Reply of the State Council on Trying out the bank Deposit Account System to Imported Materials for Processing Trade (GuoHan [1995] No.109) and the Circular of the State Economic and Trade Commission and other departments on the Opinions Further Perfecting the Bank Deposit Account System for Processing Trade Transmitted by the General Office of the State Council hereinafter referred to as GuoBanFa [1999] No. 35 these Measures have been worked out for the purpose of further strengthening the management of processing trade, maintaining the normal operation order and guaranteeing the healthy development of the processing trade.

Article 2

Processing trade mentioned in these Measures refers to the business activity in which after all of or part of the imported raw materials, subsidiary materials, spare Parts, components and packing materials (hereinafter referred to as the imported materials) in bond are processed or assembled by domestic enterprises, the finished products are re-exported, and it also includes processing of materials provided by foreign clients and processing of imported materials.

Processing of materials provided by foreign clients refers to the processing trade in which foreign clients provide the imported materials and are responsible for selling the finished products, and operation enterprises collect the processing charge without paying for the imported materials with foreign exchange or processing charge.

Processing of imported materials refers to such processing trade in which the operation enterprises Pay for the import of relevant materials and export the finished products.

Article 3

The operation enterprises mentioned in these Measures refer to all types of import and export enterprises and enterprises with foreign investment which are responsible for signing import or export contracts for processing trade with foreign clients, as well as the service companies which have obtained the operation license for processing of materials provided by foreign clients and are dealing in processing and assembling trade with foreign clients.

The processing enterprises mentioned in these Measures refer to those manufacturing enterprises that are authorized by the operation enterprises to take the responsibility of processing or assembling imported materials and are the corporate bodies, and those factories that are not the corporate bodies, but are established by the operation enterprises and are implementing a relatively independent accounting system, and have obtained the business certificates (licenses)for industry and commerce.

Article 4

Before starting to be engaged in the processing trade, the operation enterprises must report the proposal to the competent department of foreign economic relations and trade for examination and approval. The Ministry of Foreign Trade and Economic Cooperation (hereinafter referred to as the MOFTEC) shall be responsible for the examination and approval of the processing trade of the whole country.

Chapter II Examination and Approval Organs and Examination and Approval by Different Levels

Article 5

The competent departments of foreign economic relations and trade at provincial level shall be responsible for the administration, examination and approval of the processing trade in the respective localities, and in light of the specific requirements, they shall grant some competent departments of foreign economic relations and trade at district (municipal) or county (municipal) levels the power for examining and approving of the processing trade, which must be reported in advance to the MOFTEC for file.

Article 6

The competent departments of foreign economic relations and trade at various levels (called examination and approval organs for processing trade for short, the same in the following article) which have been authorized to have the power for examining and approving of processing trade shall engrave the special purpose seals for examination and approval of processing trade in accordance with the uniform specifications and patterns set by the MOFTEC, which shall be reported by the competent departments of foreign economic relations and trade at provincial level to the MOFTEC for file.

Article 7

The name lists of examination and approval organs for processing trade at various levels and the special purpose seals (seal modes) for the examination and approval of processing trade shall be sent by the MOFTEC to the Customs General Administration for file.

Article 8

The examination and approval organs for processing trade at various levels shall satisfy the requirement for examining and approving of processing trade with computer management systems, be equipped with the corresponding computer management facilities, enter the China International E-Commerce Net, and be networked with the MOFTEC.

Article 9

The processing trades in which the imported materials are such goods as cotton, sugar, vegetable oil, wool, natural rubber, crude oil, end oil, etc. that are under the state aggregate balance management of import in processing trade shall be examined and approved of by the examination and approval organs for processing trade at provincial level where the operation enterprises (including the head offices of the previous ministries or commissions and the subsidiary companies) are registered. The examination and approval organs for processing trade at provincial level shall not delegate the power for examination and approval.

Other processing trades shall be examined and approved by the examination and approval organs for processing trade where the operation enterprises (including the head offices of the previous ministries or commissions and the subsidiary companies) are registered.

Chapter III Documents and Materials for Report

Article 10

The operation enterprise shall provide the following certificates and materials when applying for the development of processing trade.

(1)

Written application reports provided by the operation enterprise and Application Form for Processing Trade (see Attachment 1 for specific form) with the official seal of the operation enterprise.

(2)

Documents approving of the operation enterprise's right for dealing in import and export (or the ratification certificate for enterprises with foreign investment) and the business license (the duplicate) for industry and commerce.

(3)

The original of the certificate for proving the processing enterprise's production capability (see Attachment 3 for specific form) issued by the competent department of foreign economic relations and trade above county level where the operation enterprise is registered, and the business license for industry and commerce of the processing enterprise (the duplicate).

(4)

Import and export contracts signed by the operation enterprise with foreign clients (the original).

(5)

The original of the processing agreement (contract) signed by the operation enterprise with the processing enterprise.

(6)

Other certificates and materials regarded necessary by the examination and approval organ.

Article 11

In the case where the operation enterprise or the processing enterprise is the enterprise with foreign investment, besides the certificates or documents stipulated by Article 10 of these Measures, the relevant enterprise shall provide contracts and regulations which are approved by the competent department of foreign economic relations and trade and can specify its operation scope and scale, as well as the certificates which can acknowledge that the relevant enterprise has been established and put into operation, the funds from the investors' part have been put in order, and it has passed the annual joint check.

Article 12

Besides the certificates and documents required to be issued by Article 10 and Article 11 of these Measures, the relevant enterprise dealing in processing of the following specified goods shall provide other certificates and materials at the same time in accordance with the following provisions:

(1)

Documents issued by the State Environmental Protection Bureau for approving of import of materials shall, in accordance with the relevant provisions, be provided for the processing trade in which the imported materials are waste metals or articles.

(2)

Documents issued by the relevant departments for approving of import of materials or export of finished products shall, in accordance with the relevant provisions, be provided for the processing trade in which the imported materials or finished products for export are poisonous chemicals and chemicals for both military and civilian purposes.

Chapter IV Examination and Approval of Processing Trade (Contracts)

Article 13

In their examination and approval operations, the examination and approval organs at various levels shall, in strict accordance with the provisions stipulated in Article 10 , Article 11 and Article 12 of these Measures, examine and verify the relevant documents and materials provided by the operation enterprises, strictly forbid the "three withouts " (without factory, without processing equipment, without workers) enterprises to be engaged in the processing trade and prevent these enterprises from participating in such illegal activities as smuggling, etc. in the name of dealing in processing trade.

Article 14

The Approval Certificate for Processing Trade (see Attachment 2 for the specific form) is the valid document by which departments such as the Customs, etc. handle the relevant formalities for bank guarantee deposit accounting of processing trade. In the case where the operation enterprises can provide the relevant certificates and materials as stipulated and have the capacity for re-export after processing, the examination and approval organs for processing trade shall examine and verify the relevant certificates and materials, and issue to them the Approval Certificate for Processing Trade with the special purpose seal for examination and approval of processing trade.

Article 15

The examination and approval organs shall earnestly fill out the Detailed List for Application for Filing of Imported Materials and the Detailed List for Filing of Finished Products for Export and Consumption of the Corresponding Imported Materials (see Attachment 2 for the specific form) with the special purpose seals for examination and approval of processing trade.

Article 16

The examination and approval organs shall conduct the examination and approval of processing trade in strict accordance with uniform state standard for consumption per unit worked out and announced in turn by the General Customs Administration and the State Economic and Trade Commission together with the State Bureau of Engineering Industry concerned. In the case where there is no uniform state standard for consumption per unit, the examination and approval organs shall strictly examine and verify the consumption per unit reported by the enterprises, and examine and approve of the processing trade after asking for the opinions of the competent department for production and the competent Customs. The Customs shall put the relevant case on file according to the Approval Certificate for Processing Trade issued by the examination and approval organs. In the case where the consumption per unit is found to be inconsistent with the standard during Customs supervision, the Customs shall inform the original examination and approval organ of the opinion by mail, the original examination and approval organ shall be responsible for the adjustment, and the Customs shall go through the formalities for alteration of the relevant items.

Article 17

The examination and approval organs for processing trade must earnestly examine and verify the Certificate Testifying the Production Capacity of the Processing Enterprises for Processing Trade during their examination and approval operations. The Certificate Testifying the Production Capacity of the Processing Enterprises for Processing Trade is valid for one year.

The competent department of foreign economic relations and trade above county level where the processing enterprise is registered shall issue the Certificate Testifying the Production Capacity of the processing Enterprises for processing Trade after strict examination of the production capacity and management situation of the processing enterprise, and if necessary, shall solicit the opinions of the competent department for production.

Article 18

The State has classified the imported goods for processing trade into those which are forbidden, those which are restricted and those which are permitted, and the enterprises engaged in processing trade into the categories A, B, C and D (the specific classification principles and classified catalogues shall be announced later to the outside and undergo dynamic adjustment in accordance with the provisions of the document GuoBanFa [1999] No. 35 ); the State manages the processing trade in restricted goods and the processing trade conducted by the C type enterprises under the "real transfer" of the bank guarantee deposit accounting system.

The examination and approval organs for processing trade shall strictly examine and verify the imported goods in processing trade and the type of the enterprises, in case of processing trade in the restricted goods or conducted by the C type enterprises, the examination and approval organs for processing trade shall add words "real transfer" in the remark column of the Approval Certificate for Processing Trade.

Article 19

Examination and approval organs for processing trade at various levels shall not permit the D type enterprises in processing trade (including the operation enterprises and the processing enterprises) to be engaged in processing trade or permit any operation enterprises to be engaged in the processing trade in which the imported materials are forbidden goods.

Article 20

Enterprises under category A shall not implement the bank deposit account system in their processing trade, however, their processing trade contracts shall be reported in advance to the examination and approval organs for examination and approval.

Chapter V Alteration of Approval Certificate and Postponement of Examination and Approval

Article 21

The duration for the countermarketing of the finished products for export stipulated in the Approval Certificate for Processing Trade shall be in principle examined and approved of in accordance with the period of validity for the export contract of the relevant enterprise, and in general the duration shall not exceed one year. The duration for the countermarketing of finished products in processing trade for sugar, cotton, vegetable oil, wool and natural rubber shall not exceed six months in principle.

Article 22

An operation enterprise shall process and countermarket the finished products, and go through formalities for cancellation after verification within the period set by the Approval Certificate for Processing Trade. In the case where Prolongation of the deadline for countermarketing of the finished products is necessary due to objective factors, the operation enterprise shall, within the allotted time for countermarketing of finished products, report the case to the original examination and approval organ for approval, and the Customs shall handle the formalities for postponement by the approval document.

Article 23

In general, the duration of postponement for each time shall not exceed twice, and the period for each postponement shall not exceed six months.

Article 24

An operation enterprise must deal in processing and export in accordance with the provisions of the Approval Certificate for Processing Trade, and in the case where there is the need for alteration of part of the items due to objective factors, the relevant operation enterprise shall report the case to the original examination and approval organ for approval within the period stipulated by the Approval Certificate for Processing Trade, and the Customs shall handle the alteration formality according to the approval document.

Chapter VI Management of Quota and Licenses

Article 25

The imported materials for processing trade, in principle, shall not be under the quota and license management, except for that otherwise stipulated.

Article 26

The State exercises control of aggregate balance and quota license over the import of sugar, cotton, vegetable oil, wool, natural rubber, crude oil and end oil, etc. for processing trade. The aggregate quota shall be fixed by the State Council, and the specific measures for management of distribution shall be implemented in accordance with the relevant provisions.

Article 27

The import quota for processing trade shall be valid during the current year, and shall not be used beyond the year. Offices of staff specially appointed by the MOFTEC and the Quota License Bureau shall be responsible for issuing the import licenses for processing trade in accordance with the import quota for processing trade and the Approval Certificate for Processing Trade issued by the examination and approval organs for processing trade at provincial level.

The period of validity of an import license for processing trade shall not exceed the allotted time for countermarketing of finished products stipulated by the Approval Certificate for Processing Trade, and in the case where the period of validity of the import license needs to be carried over to the next year, it shall not exceed the end of February of the next year.

Article 28

Offices of staff specially appointed by the MOFTEC shall, through China International E-Commerce Net, report day by day the data concerning import licenses issued for processing trade to the Quota License Bureau which is responsible for providing the MOFTEC with the data concerning the issuance of import licenses for processing trade of the whole country (including their data about the issuance of import licenses for processing trade). The MOFTEC shall carry out regular of nonregular examination of the issuance of the import licenses, and such issuance acts as those in excess of authority, without quota or in excess of quota which have violated the relevant provisions shall be strictly forbidden.

Article 29

An operation enterprise shall, in accordance with the export quota and the Approval Certificate for Processing Trade, apply for the export license for the finished products in processing trade which are under the control of export quota, and the Customs shall check the finished products before acceptance by the valid export license.

Article 30

In the case where the imported materials or the finished products for export in the Processing trade are Poisonous chemicals and chemicals for both military and civilian purposes, the Customs shall handle the formalities for putting the case on file in accordance with the Approval Certificate for Processing Trade and the approval documents for import of materials or export of finished products issued by the relevant departments.

Chapter VII Supervision of Statistics and Tracking Management T

Article 31

Examination and approval organs for processing trade at various provincial levels shall day by day collect the data concerning the examination and approval of the local processing trade and cancellation of the due processing trade after verification, which shall be reported to the MOFTEC through China International E-Commerce Net.

Article 32

Examination and approval organs for processing trade at various levels shall strengthen the supervision and tracking management of the cancellation of the local processing trade after verification, and demand that operation enterprises shall, within 30 days after export cancellation after verification, submit the letter of notice for cancellation after verification issued by the Customs to the original examination and approval organ for cancellation and file. Reasons for that an enterprise fails to go through formalities for cancellation and file within the allotted time shall be thoroughly investigated, and approval of the enterprise concerned to carry out processing trade shall be suspended.

Article 33

The MOFTEC shall carry out regular or non-regular check onthe examination and approval of the processing trade in various places, and such examination and approval acts as those in excess of authority, without quota or in excess of quota which have violated the relevant provisions shall be strictly forbidden.

Article 34

Examination and approval organs for processing trade at various level shall actively cooperate with such departments as the Customs, taxation, bank and foreign exchange, etc. in order to strengthen the inter-departmental information exchange and coordination and to enhance the overall supervision of processing trade.

Chapter VIII Supplementary Provisions

Article 35

All of the imported materials in bond for processing trade shall be processed and re-exported. In the case where the imported materials in bond (or the finished products of the imported materials) need to de sold domestically or used for production of products for domestic sale due to some special reasons, the case shall be handled in accordance with the relevant provisions of the Interim Measures for Examination and Approval of Imported Materials in Bond for Processing Trade for Domestic Sale.

Article 36

The State permits the carry-over to deep processing and re-export business in processing trade. But operation enterprises must report in advance the relevant case to the competent department of foreign economic relations and trade for approval. Specific management measures shall be worked out later.

Article 37

The bank deposit account system is not necessary to be implemented for the processing trade conducted by the enterprises in bonded areas, instead, the Measures for Supervision by the Customs in Bonded Areas shall be implemented for the case.

Article 38

Operation enterprises may organize by themselves the import under the item of processing trade (not including crude oil or end oil) which shall not be restricted by the provisions concerning the management of import under normal trade with division of labor.

Article 39

The MOFTEC shall circulate a notice of criticism for the examination and approval organ that has violated these Measures, and shall suspend or cancel its power over examination and approval of processing trade; the MOFTEC shall circulate a notice of criticism for the organ issuing certificates and suspend or cancel its right for issuing certificates for import.

Article 40

The MOFTEC shall circulate a notice of criticism for the processing enterprise in violation of these Measures and inform the Customs that its violation of the relevant provisions once be recorded. And if the case is serious, the management right of the enterprise concerned for processing trade shall be suspended or cancelled; in the case where criminal law is violated, the case shall be handed over to the judicial departments for settlement.

Article 41

These Measures shall come into effect as of the date June 1, 1999.

Article 42

These Measures shall be subject to the interpretation by the MOFTEC. Five documents issued before this (see Attachment 4 for the detailed list) such as the Circular of the Ministry of Foreign Trade and Economic Cooperation on Issuing the Provisions about Relevant Matters concerning External Processing and Assembling ([89] No. 212 issued by MOFTEC), etc. shall be annulled at the same time; in the case where the provisions of other documents issued before this are inconsistent with these Measures, these Measures shall be taken as the standard.

Attachment I: Application Form of Approval Certificate for Processing Trade (omitted)

Attachment II: Approval Certificate for Processing Trade (omitted)

Attachment III: Certificate Testifying the Production Capacity of the Processing Enterprises for Processing Trade

Attachment IV: Catalogue of Five Documents to Be Annulled Since June 1(5 Documents in All)

1. Circular of the Ministry of Foreign Trade and Economic Cooperation on Issuing the Provisions about Relevant Matters concerning External Processing and Assembling ([89] No. 212 issued by MOFTEC)

2. Circular on Entrusting the Competent Departments of Foreign Economic Relations and Trade of Provinces, Autonomous Regions, Municipalities Directly under the Central Government and cities with Independent Planning with Examination, Approval and Management of Processing of Materials Provided by Foreign Clients Conducted by Corporations Directly under Ministries and Commissions ([1997] No. 798 issued by the MOFTEC)

3. Circular on Unified Use of the Processing Trade (Contracts) Approval Certificates ([1998] No. 21 issued by the MOFTEC)

4. Catalogue of Classified Guidance on Items about Processing and Assembling of Materials Provided by Foreign Clients ([1998] No. 193 issued by the MOFTEC)

5. Circular on Relevant Matters Concerning the Examination and Approval of Processing Trade ([1999] No. 64 issued by the MOFTEC)