Laws of the People's Republic of China

the State Administration of Foreign Exchange

Circular of the State Administration of Foreign Exchange (SAFE) on Further Simplifying the Formalities for Verification and Write-off of Export Proceeds in Foreign Exchange

Hui Fa [2005] No. 73

The branches and foreign exchange departments of the SAFE in all provinces, autonomous regions and municipalities directly under the Central Government, SAFE branches in the cities of Shenzhen, Dalian, Qingdao, Xiamen and Ningbo and all the designated Chinese-funded foreign exchange banks:

With a view to further improving the administration of the foreign exchange under current accounts and promoting the facilitation for trade, the SAFE has decided to further simplify the formalities for verification and write-off of export proceeds in foreign exchange. The relevant matters are hereby notifies as follows:

1.

When an exporter makes a report on the verification and write-off of export proceeds in foreign exchange from export under "barter trade", "compensation trade", "leasing trade", "less-than-one-year leasing" or "external contracting", the provision that the relevant certificates , such as the relevant contracts of barter trade, compensation trade and leasing or agreements or contracts of project contracting as well as the documents of verification on external contracting as produced by the administrative department of commerce, shall be submitted to the SAFE shall be abolished. An exporter shall go through the formalities for verification and write-off upon the strength of such materials as the export declaration form, verification form, and exclusive page of the verification form or the corresponding import declaration form.

2.

If an exporter that adopts the means of "corresponding imported materials", "deep processing of imported materials" or "processing of imported materials by three types of foreign-funded enterprises" for export needs to go through any verification and write-off for the deduction of imported materials, the provision that an exporter shall report the export to the SAFE for record as well as examination and approval beforehand shall be abolished. An exporter shall go through the formalities for verification and write-off upon the strength of such materials as the contracts of processing trade (needs to be provided at the first time of verification and write-off for deduction) approved by the competent commerce department, export declaration form, verification form, the exclusive page of the verification form for balance as well as the corresponding import declaration form.

3.

Where an exporter that adopts the means of "samples and advertisement products A" for export goes through any verification and write-off for the samples and advertisement products A of a equivalent value of more than $ 500 in a single deal, which is not collected in foreign exchange, the provision of providing the contracts as concluded by both trading parties shall be abolished. The SAFE shall directly handle the verification and write-off as the balance not collected in foreign exchange.

4.

Where an exporter that has handled the foreign exchange collection on export as declared under the item of international balance applies for making up the exclusive page of the verification form due to such reasons as any loss or damage, it may not be subject to the examination and approval of the SAFE any more or have to obtain the approval documents issued by the State Administration of Foreign Exchange. An exporter may directly make up the exclusive page of verification form with the original issuing bank upon the strength of the relevant materials such as a written report and the declaration form of foreign-related income.

5.

The scope for the verification and write-off of foreign exchange balance on export shall be adjusted. For the amount of collected foreign exchange or import value indicated on a verification form for a single dealing, which does not exceed the declared value by an equivalent value of more than $ 5, 000, or is below the declared value by an equivalent value of no more than $ 5, 000, an exporter may directly go through the formalities for verification and write-off upon the strength of the relevant certificates of verification as prescribed in Articles 38 and 39 of the Detailed Rules for Implementing the Verification and Write-off of Export Proceeds in Foreign Exchange (Hui Fa [2003] No. 107). As for the export beyond the above scopes, an exporter shall report the verification and write-off of foreign exchange balance. In the case of any verification by batches, the balance between export and collected foreign exchange or import may be calculated according to the average balance of all dealings as indicated on the verification form.

6.

Where there is any inconsistency between an entity collecting foreign exchange and an entity assuming the responsibility of verification and write-off due to any exclusive sale of goods, change of any contract clause or approved relationship between an parent company and its branch (subsidiary company), if the entity collecting foreign exchange applies for handling the "transfer of foreign exchange collected from abroad", the provision of providing the export declaration form or verification form shall be abolished. An entity collecting foreign exchange may go through the formalities for such transfer on the strength of the relevant materials such as an application for transfer of collected foreign exchange, relevant agreements, a photocopy of the export contract as well as the exclusive page of the verification form.

7.

The present Circular does not apply to an enterprise in a special economic zone under close customs surveillance, such as bonded zone and export processing zone.

8.

The present Circular shall go into effect as of November 1, 2005. If there is any discrepancy between any previous provision and the present Circular, the present Circular shall prevail.

All SAFE branches shall, after receiving the present Circular, transmit it to the central sub-braches, foreign-funded banks and relevant entities as soon as possible. All the designated Chinese-funded foreign exchange banks shall, after receiving the present Circular, transmit it to their subordinated branches and sub-braches as soon as possible. In the case of any problem arising from the implementation of the present Circular, please timely report it to the department of current accounts management of the SAFE.

State Administration of Foreign Exchange

October 14, 2005