Laws of the People's Republic of China

The State Administration of Foreign Exchange

Circular of the State Administration of Foreign Exchange for Printing and Distributing the Interim Measures for Disposing the Behaviors of Failing to Go through the Verification Procedures for Import Payments and Export Proceeds within Time Limit

HuiFa [2003] No.40

March 13, 2003

Branches and Foreign Exchange Administration Offices under the State Administration of Foreign Exchange at levels of provinces, autonomous regions and municipalities directly under the Central Government, and branch administrations of Shenzhen, Dalian, Qingdao, Xiamen, Ningbo:

For the purpose of further improving and perfecting the administration of the verification of import payments and export proceeds within the administrations of foreign exchange, clearing up the unverified transactions in time, standardizing the transfer procedures for overdue transactions unverified, disposing the behaviors of failing to go through the verification procedures according to relevant provisions, and urging importers and exporters to carefully implement the verification procedures to improve the rates of verifications of import payments and export proceeds in foreign exchanges, the State Administration of Foreign Exchange, in accordance with the Regulations of the People's Republic of China on Administration of Foreign Exchange, the Operating Procedures of the State Administration of Foreign Exchange on Operating Procedures for Transferring Cases as well as relative provisions, has formulated the Interim Measures for Disposing the Behaviors of Failing to Go through the Verification Procedures for Import Payments and Export Proceeds within Time Limit, and print and distribute it hereby to you for implementation.

Attachments:

1. Interim Measures for Disposing the Behavior of Failing to Go through Verification Procedures for Import Payments and Export Proceeds in Foreign Exchanges within Time Limits

2. Registration Form of Transfer of Overdue Unverified Export Proceeds & Import Payments in Foreign Exchanges (omitted)

3. Notice of Verification (omitted)

Attachment 1:Interim Measures for Disposing the Behavior of Failing to Go through Verification Procedures for Import Payments and Export Proceeds in Foreign Exchanges within Time Limits

Article 1

These Measures are formulated for the purpose of standardizing the operations within the administrations of foreign exchange, including clear-up, transfer, audit and disposal of the behaviors of failing to go through verification procedures for import payments and export proceeds in foreign exchange, and urging importers/exporters to carefully implement the verification procedures to improve the rates of verifications of import payments and export proceeds in foreign exchange, according to the Regulations of The People's Republic of China on Administration of Foreign Exchange (hereinafter referred to as the "Regulations") and the Operating Procedures of the State Administration of Foreign Exchange on Operating Procedures for Transferring Cases as well as relative provisions.

Article 2

The "Overdue unverified import payments and export proceeds in foreign exchange within time limits" mentioned in these Measure include "Unverified import payments in foreign exchange within time limit" and "Overdue unverified export proceeds in foreign exchange within time". The "Overdue unverified import payments in foreign exchange within time limit" mean that the importers fail to go through verification procedures for the import payments within one month after the customs declarations; and the "Overdue unverified export proceeds in foreign exchange within time limit" mean that the exporters fail to go through verification procedures for the export proceeds in foreign exchange within one month after the customs declarations.

Article 3

For any overdue unverified import payment or export proceeds in foreign exchange, the verification department under the administration of foreign exchange (hereinafter referred to as the "VD") shall, in a timely manner, collect the related information and urge the importer or exporter to go through the verification procedures. The VD shall promptly transfer the cases of failing to go through the procedures even after being urged to the audit department (hereinafter referred as the AD) for disposal.

Article 4

The VDs shall regularly clear up unverified import payments and export proceeds in foreign exchange, at a frequency of at least once a month. For the importers or exporters with multiple unverified transactions or and biggish unverified amounts, the VDs shall organize to clear-up in a timely manner. After clearing up, the VDs shall record and summarize such clear-ups.

Article 5

The VD shall issue a Notice of Verification (see Attachment 2) to the importer/exporter that has behavior(s) of failing to go through the verification procedures, in a delivering way suitable to local situation. However, Records of receipts signed by the importers/exporters as well as the records on the urges shall be made. The time limits and the times of urges shall be determined according to local specific circumstance, and the urging work shall be finished within 90 days after the day of issuing the Notice of Verification.

Article 6

After the end of the urging work, the VDs shall immediately transfer the information on the unverified import transactions of any case of the following to the VDs for disposal:

(1)

Failing to go through the verification procedures after being urged to do so;

(2)

Failing to explain the reasons for failing to go through the verification procedures within 90 days after the day of receiving the Notice of Verification, or its reasons have not been approved by the VDs;

(3)

The importer could not be contacted with for the fault of importer; or

(4)

Refusing to receive the Notice of Verification.

Article 7

For the following cases, the VDs shall defer to transfer the cases of failing to go through the verification procedures within the time limit. Such cases shall be transferred only after the problems are settled down:

(1)

The importer has gone through the procedures by presenting the paper-based customs declaration form sealed with the "Checked and Verified" by the Customs, but there is no electronic record in the Import/Export Customs Declaration Checking System;

(2)

The importer has applied for deferring the verification due to missing of customs declaration form for import goods, by presenting the import contract, import invoice and tax payment documentation issued by customs, and such application has been approved by the VD; or

(3)

The importer is unable to declare for verification for special reasons and the VD has approved such deferring.

Article 8

After the urging work is completed, the VDs shall, in a timely manner, transfer the cases of export proceeds within the time limit to the ADs, except for the following:

(1)

The cases meeting with the requirements for margin verifications and being disposed;

(2)

The cases meeting with the requirements for verification for future reference and being disposed;

(3)

The cases that he foreign changes have been received but could not be verified due to technical conditions and being disposed by relevant department;

(4)

The cases failing to be verified within the stipulated time limit but having presented the explanations on the situations to the VDs and having got the approval from the VDs.

Article 9

When the VDs transfer the information on unverified import payments and export proceeds in foreign exchange to the ADs, they shall fill in a Form of Transferring Overdue Unverified Import Payments and Export Proceeds in Foreign Exchanges (see Attachment 3) for each importer/exporter, and transfer the following documents to the ADs:

(1)

Notice of Verification and relative records of urging work;

(2)

List of overdue unverified import payments or export proceeds in foreign exchange; and

(3)

Relative original warrants.

Article 10

After the VDs transferred the information on overdue unverified import payments or export proceeds in foreign exchange to the ADs, they shall help to provide relative warrants, information required by the ADs for disposing the cases. The VD shall handle the overdue unverified cases transferred to them and give a notice on the disposals to the ADs within 2 days after handling the cases.

Article 11

The ADs shall accept with signature the cases of failing to go through the procedures for verification according to the Operating Procedures of the State Administration of Foreign Exchange on Operating Procedures for Transferring Cases and audit the cases. Case filing shall be made for the cases within 7 days, except for the following:

(1)

The ADs shall, within 5 days, return those cases with uncompleted documents to the ADs for completion.

(2)

For the cases which importers/exporters have cancelled registration with the administrations of industry and commerce or which registrations with the administrations have been cancelled automatically due to failing to registering for over two years, the ADs shall not file them and return the relative documents to VDs.

(3)

The ADs shall not file the cases which importers/exporters could not found through on-site investigation though their registrations with the administration of industry and commerce have not been cancelled, but record the cases for future references and return the documents to the VDs. If such importers/exporters apply for verification next time, the VDs shall renew the relative data of such importers/exporters and transfer the cases again to the ADs; or

(4)

The cases with other proper reasons.

Article 12

For the filed cases of failing to go through procedures for unverified import payments and export proceeds in foreign exchange within the time limit, the ADs shall carefully audit the relative documents and analyze the causes for the failures. For the behaviors involving large amount and failing to provide relevant proofs and with obvious suspicion of escaping and deceiving foreign exchanges, investigations shall be extended.

Article 13

For any behavior of failing to go through the verification procedures for import payments and export proceeds in foreign exchange, punishment shall be imposed for each case. According to Article 27 of Law of the People's Republic of China on Administrative Punishment, if the case is a minor illegal act, which single unlawful sum is below $250,000, the punishment may be mitigated according to the situation. If the single unlawful sum is above $250,000, the administration of foreign exchange shall give a warning, circulate a notice of criticism and confiscate any illegal gains and impose a fine of no less than RMB 50,000 and no more than RMB 300,000 according to Article 48 of the Regulations of The People's Republic of China on Administration of Foreign Exchange. If the offense constitutes a crime, criminal liability shall be pursued according to laws. The standard for a single fine is RMB 1,000 for each $5,000. A sum of a single fine on an act of failing to go through verification procedures for import payment and export proceeds in foreign exchange shall be no more than RMB 300,000. For the act of failing to have the export proceeds in foreign exchange verified, which meets the conditions of Article 39 of Rules of Implementation of Administration Measures on Export Proceeds in Foreign Exchanges, the sum of a single fine shall be no more than RMB 30,000.

Article 14

For any of the following importers/exporters, the punishment may be mitigated if they present written applications and such applications have been approved by the case auditing committee after discussion:

(1)

The overdue unverified export proceeds in foreign exchange have been disposed as bad debts with approval from the financial administration at the level of municipality or above;

(2)

The importer/exporter has gone through the verification procedures for the items under relative imports/exports prior to the issue of Decision of Administrative Sanction.

(3)

The importer has transferred back the equivalence of sum of money from abroad which has been paid to initiatively reduced harmful results; and

(4)

Other cases meeting the conditions for mitigating penalties according to the Law of the People's Republic of China on Administrative Penalty.

Article 15

After closing the cases for disposing unverified import payments or export proceeds in foreign exchanges, the ADs shall timely feedback the disposal results to the VDs.

Article 16

These Measures is formulated and interpreted by the State Administration of Foreign Exchange.

Article 17

These Measures shall go into effect as of April 1, 2003. If previous provisions are inconsistent with these Measures, these Measures shall prevail.