Laws of the People's Republic of China

The State Administration of Foreign Exchange

Circular of the State Administration of Foreign Exchange Concerning Printing and Distributing the Operational Procedures for the Sales of and Payments in Foreign Exchange and Verification of Export Receipts and Import Payments under the Item of Transfer-between-factories during Further Processing

Huifa [1999] No.78

March 5,1999

(The circular is omitted here) Attachment:Operational Procedures for the Sales of and Payments in Foreign Exchange and Verification of Export Receipts and Import Payments under the Item of Transfer-between-factories during Further Processing

In order to standardize the administration of the sales of and payments in foreign exchange under the item of transfer between factories during further processing, relevant specific operational procedures are hereby stipulated as follows:

1.

In the case of supplied materials approved by Customs to be replaced by imported materials, the transferring-in enterprises are supposed to conduct the sales of and payments in foreign exchange through DFEBs. DFEBs are supposed to make the sales of and payments in foreign exchange for transferring-in enterprises against the following documents and to keep properly the documents evidencing the sales of and payments in foreign exchange for five years for future examination:

(1)

Original declaration form of import goods attached with anti- falsification tag and affixed with Customs' "proof seal" with the country (region) of dispatch marked as "People's Republic of China(142)" and the mode of trade marked as "further processing with imported materials (0654)", which is verified as authentic;

(2)

Copy of the transferring-out enterprise's original declaration form of export goods attached with anti-falsification tag and affixed with Customs' "proof seal" with the country (region) of destination marked as "People's Republic of China (142)" and the mode of trade marked as "transfer of supplied materials (0255)";

(3)

Transfer-between-factories contract;

(4)

Verification form of import payments of exchange.

The transferring-in enterprises and transferring-out enterprises are supposed to carry out their procedures of verification of import payment and export receipts of exchange respectively.

2.

In the case of the imported materials approved by Customs to be replaced by imported materials, DFEBs are supposed to process relevant procedures of the sales of and payments in foreign exchange or of domestic remittance of exchange for transferring-in enterprises against the following documents and to keep properly the documents evidencing the sales of and payments in foreign exchange and the remittance for five years for future examination:

(1)

Original declaration form of import goods attached with anti- falsification tag and affixed with Customs' "proof seal" with the country (region) of dispatch marked as "People's Republic of China(142)" and the mode of trade marked as "further processing with imported materials (0654)", which is verified as authentic;

(2)

Copy of the transferring-out enterprise's original declaration form of export goods attached with anti-falsification tag and affixed with Customs' "proof seal" with the country (region) of destination marked as "People's Republic of China (142)" and the mode of trade marked as "further processing with imported materials (0654)";

(3)

Copy of the transferring-out enterprise's original verification form of export receipts of exchange affixed with Customs, "proof seal";

(4)

Transfer-between-factories contract;

(5)

Verification form of import payment of exchange.

The transferring-in enterprises and transferring-out enterprises are supposed to carry out their procedures of verification of import payment and receipts of exchange respectively.

3.

In the case of the processing with supplied materials being changed as goods for domestic sale, DFEBs are supposed to carry out relevant procedures of sales of and payments in foreign exchange for enterprises withdrawing export goods for domestic sale against following documents and to keep properly the documents evidencing the sales of and payments in foreign exchange for five years for future examination:

(1)

Original declaration form of import goods attached with anti- falsification tag and affixed with Customs' "proof seal" with the country (region) of dispatch marked as "People's Republic of China(142)" and the mode of trade marked as "supplied materials and components for domestic sale (0425)" or "finished products made of supplied materials withdrawn for domestic sale (0345)", which is verified as authentic;

(2)

Approval documents for domestic sale issued by the competent authority of foreign economic and trade;

(3)

Relevant contract(s);

(4)

Verification form of import payments of exchange.

4.

DFEBs are supposed not to conduct out sales of and payments in foreign exchange and domestic remittance of exchange under the further processing transfer-between-factories for their customers in other means.

5.

When DFEBs carry out settlement in respect of transfer-between- factories for enterprises with foreign investment, they are supposed to make the external payments or the domestic remittance of exchange first with the exchange in own foreign exchange accounts of enterprises with foreign investment and to sell exchange to FEES for the deficiency only if the payments exceed the balance of accounts of enterprises with foreign investment.

6.

With respect to the exchange remitted domestically, the deposit bank of the transferring-in enterprise is supposed to mark the expression of "domestic remittance in transfer-between-factories" when remitting out exchange, the deposit bank of transferring-out enterprises of materials and components, upon receipt of exchange remitted domestically into its account, is supposed to carry out purchase of exchange or to keep it in the customer's accounts in accordance with "Rules for the Implementation of Regulations on Verification and Cancellation of Foreign Exchange Export Proceeds Collection" and other relevant regulations against the enterprise's original verification form of foreign export proceeds collection affixed with Customs' "proof seal", and to issue "special copy for verification of foreign exchange export proceeds collection" as well as to mark the expression of "domestic remittance for transfer between factories" and the name of the transferring-in enterprise in the "Memorandum" column.

Transferring-out enterprise is supposed to carry out the procedures of verification in SAFE and its branches with the above "special copy for verification of foreign exchange export proceeds collection". SAFE, upon verifying, is suppose to check carefully the name of the transferring-in enterprise in the "special copy for verification of foreign exchange export proceeds collection" against the name of the transferring-in enterprise in the declaration form and to make clear whether they are consistent with each other.

In the event enterprises make verification by the way of offsetting, SAFE is supposed to check the declaration forms of import or export goods against Customs' electronic data and, if there is no discrepancies, to affix the seal of "verified" into the declaration form of import goods, and carry out the verification of foreign exchange export proceeds collection and to keep the declaration forms along with the documents for the verification of foreign exchange export proceeds collection for five years for future examination.

7.

SAFE is supposed to inspect the enterprises engaged in the trade under the item of transfer-between-factories during further processing on an irregular basis and to give penalties in accordance with relevant provisions to those enterprises violating this Operational Procedures and other regulations of foreign exchange administration.

8.

These Operational Procedures shall enter into force as of March 15, 1999, and the interpretation hereof is supposed to be rested with SAFE.