Laws of the People's Republic of China

the General Administration of Customs

Order of the General Administration of Customs of the People's Republic of China

No.113

The Measures of the Customs of the People's Republic of China on the Supervision of Processing Trade Goods, which were approved after deliberation at the executive meeting of the Administration on January 7th, 2004, are hereby promulgated and shall come into force as of April 1st, 2004.

Mu Xinsheng, the Director of the General Administration of Customs

February 26th, 2004

Measures of the Customs of the People's Republic of China on the Supervision of Processing Trade Goods

Chapter I General Provisions

Article 1

In order to promote the healthy development of processing trade, and to regulate the customs' administration of processing trade goods, the present Measures are formulated in accordance with the Customs Law of the People's Republic of China and other relevant laws and administrative regulations.

Article 2

The present Measures apply to the formalities for the filing for records, import and export customs declaration, processing, supervision, and the verification and writing-off of processing trade goods.

The filing for records, import and export customs declaration, processing, and the verification and writing-off of goods under processing trade shall be conducted through paper documents and electronic data.

Article 3

Meaning of the following terms used herein:

The term "processing trade" refers to the business activities in which the operating enterprise imports all or part of the raw or ancillary materials, spare parts, components, and packaging materials (hereinafter referred to as materials), and after processing or assembling, re-exports the finished products. It includes processing of supplied materials and processing of imported materials.

The term "processing of supplied materials" refers to the business activities in which the imported materials are supplied by the overseas enterprise, and the operating enterprise need not pay foreign exchange for the import, but just carries out processing or assembling in accordance with the requirements of the overseas enterprise, and charges for the processing, with the finished products being marketed by the overseas enterprise.

The term "processing of imported materials" refers to the business activities in which the operating enterprise pays foreign exchange for the import, and exports the finished products.

The term "goods under processing trade" refers to the imported materials, and finished processed products under processing trade, as well as the leftover materials, inferior products, and byproducts generated during the processing, etc.

The term "processing trade enterprises" shall include the operating enterprises and processing enterprises that have been registered with the customs.

The term "operating enterprise" refers to the various kinds of import and export enterprises and foreign-funded enterprises that conclude the contracts of processing trade import and export with foreign parties, as well as the foreign processing and assembling service companies that have obtained the license for processing of imported materials upon approval.

The term "processing enterprise" refers to the manufacturing enterprises that, upon entrustment by the operating enterprises, assume the processing or assembling of the imported materials and that have the status of legal person, as well as the factories without the status of legal person established by the operating enterprises, but employing relatively independent accounting and having obtained the business certificate (license) of industry and commerce.

The term "unit consumption quantity" refers to the quantity of the imported materials consumed per finished export product by the processing trade enterprise under normal production conditions, and it is referred to as "unit consumption" for short.

The term "deep processing and transfer" refers to the business activities in which the processing trade enterprise transfers the products processed by using bonded imported materials to another processing trade enterprise for further processing and re-export.

The term "undertaking enterprise" refers to the production enterprise that concludes the processing contract with the operating enterprise and undertakes the outward processing operations entrusted by the operating enterprise. The undertaking enterprise must register with the customs and have the corresponding production capacity.

The term "outward processing" refers to the act of the processing trade enterprise to, as a result of the restriction of its own production operations and upon approval of the customs and after finishing the relevant formalities, entrust the undertaking enterprise to process a certain operation procedure with respect to the processing trade goods, and transport back the processed goods back to the operating enterprise within a prescribed time limit for final re-export.

The term "inspection" refers to the act of the customs to check and verify whether the processing and production capacity, as well as the import, transport, storage, processing, assembling, assignment, transfer, sale or export of processing trade goods, etc., declared by the processing trade enterprise conform to the facts and are in compliance with the relevant laws, administrative regulations and rules, through such methods as verification of data, examination of documents, verification of goods against the relevant account books, etc.

The term "verification and writing-off" refers to the act of the customs, at the application of the processing trade operating enterprise for lift of control after completing the formalities for re-export or domestic sale etc., to lift the control if the application of the operating enterprise is genuine and complies with the relevant laws, administrative regulations and rules upon examination and inspection.

Article 4

Except there being other provisions by the State, if the imported materials under processing trade fall within import restrictions imposed by the State, the operating enterprise shall be exempted from submitting the import license to the customs; if the finished export products of processing trade fall within the export restrictions imposed by the State, the operating enterprise shall submit the export license to the customs.

Article 5

Where the imported materials under processing trade are among those under bonded supervision, the customs shall, after the finished goods are exported, make verification and writing-off according to the verified quantity of the goods actually processed and exported. Where taxes are collected in advance pursuant to the provisions, the customs shall, after the finished goods are exported, return the collected taxes according to the verified quantity of the goods actually processed and exported.

Where export customs duties shall be levied on the export products under processing trade, the customs shall collect the export customs duties pursuant to the relevant provisions.

Article 6

The customs shall apply the system of guarantee with respect to processing trade goods pursuant to the provisions of the State.

Article 7

Processing trade goods may not be mortgaged, pledged, or placed under lien.

Article 8

The customs may, according to the needs of supervision, make inspections over the processing trade enterprises, which shall render cooperation. Customs inspections shall not affect the normal business activities of the enterprises.

Article 9

Processing trade enterprises shall, in accordance with the Accounting Law of the People's Republic of China and the relevant laws, administrative regulations and rules of the State, establish account books, statements, and other relevant documents that comply with the requirements of customs supervision to record the information of import, storage, assignment, transfer, sale, processing, use, wearing-off, and export, etc., relating to its processing trade goods, keep accounts and make assessments on the basis of legal and valid certificates.

A processing trade enterprise shall, pursuant to the provisions, submit to the customs the annual statements of the business operations of the previous year and other relevant documents.

Chapter II Putting Processing Trade Goods on File

Article 10

An operating enterprise shall go through the formalities for putting processing trade goods on file with the customs of the place where the processing enterprise is located.

Where the operating enterprise and the processing enterprise are not within the jurisdiction of the same customs directly under the General Administration of Customs (GAC), the formalities for putting goods on file shall be carried out pursuant to the provisions of the customs on the administration of processing trade in different places.

Article 11

When going through the formalities for putting processing trade goods on file, an operating enterprise shall faithfully report the trade method, unit consumption, ports of import and export, as well as the commodity names, commodity numbers, specifications and types, prices, and origins, etc., of the imported materials and export products.

Article 12

When going through the formalities for putting processing trade goods on file, an operating enterprise shall submit the following documents:

1)

Valid documents issued by the competent authority approving the operation of processing trade;

2)

Certificate of Production Capacity of Processing Enterprise in Processing Trade issued by the competent authority, if the operating enterprise itself has the capacity of processing;

3)

Contract of entrusted processing and the Certificate of Production Capacity of Processing Enterprise in Processing Trade of the processing enterprise issued by the competent authority, if the operating enterprise entrusts the processing to the processing enterprise;

4)

Contract concluded by the operating enterprise with the foreign party; and

5)

Other certificates and materials that the customs deems necessary to be submitted.

Article 13

If the documents are complete and valid and comply with Articles 10 to 12 herein upon examination by the customs, the customs shall put the record on file within 5 workdays from the day of receipt of the application filed by the enterprise, and shall issue the manual of processing trade.

Where it is necessary to handle the formalities for guarantee, the customs shall issue the manual of processing trade after the operating enterprise finishes the formalities for guarantee pursuant to the provisions.

Article 14

Under any of the following circumstances, the customs shall refuse to put the record on file and notify the operating enterprise in writing:

1)

The imported materials or export products fall within those prohibited by the State from import and export;

2)

The products to be processed fall within those prohibited by the State from being processed and produced within China;

3)

The imported materials are those for which the customs is unable to apply bonded supervision;

4)

The operating enterprise or processing enterprise is one that is not permitted to carry out processing trade as provided for by the State; or

5)

The operating enterprise applies to the customs for filing for record without reporting and surrendering the manual of processing trade, upon its expiration, to the customs within the prescribed time lime.

Article 15

Where the operating enterprise or processing enterprise is under any of the following circumstances, the customs may put on record for it after the operating enterprise provides guarantee of the same value as that of the payable taxes or provides a letter of indemnity from the bank;

1)

Being suspected of smuggling or rule breaking, and the customs has put the case on file for investigation and the case has not been concluded yet; or

2)

Being required by the customs to make rectification as a result of poor management and the rectification has not ended yet.

If the operating enterprise or processing enterprise is under any of the following circumstances and the customs has good reason to believe that there is high risk in supervision, the customs may handle the case by analogy with the preceding paragraph and notify the relevant enterprise in writing:

1)

Leasing the factory or equipment;

2)

Engaging in the processing trade for the first time;

3)

Having applied for an extension of the Manual of Processing Trade for twice or more; or

4)

Having filed for a record of processing trade in different places.

Article 16

Where the customs has found that the documents submitted by the operating enterprise for putting on record processing trade goods are not in conformity with the facts, it shall deal with the case pursuant to the following provisions:

1)

Where the goods have not been imported, the customs shall write off the record thereof; or

2)

Where the goods have been imported, the enterprise may apply for returning them or may continue to perform the contract after providing the customs with a cash deposit of the same value as that of the payable taxes or providing a letter of indemnity from the bank.

Article 17

An operating enterprise that has put on record the processing trade goods may apply to the customs for the sub-volume or follow-up volume of the Manual of Processing Trade.

Article 18

Where there is any alteration in the record of the processing trade goods, the operating enterprise shall go through the formalities for alteration within the valid term of the manual of processing trade. Where it is necessary to report to the original examining and approving organ for approval, such a report shall be made.

Chapter III Import, Export and Processing of Goods Under the Processing Trade

Article 19

Where an operating enterprise imports goods under processing trade, it may either import them from foreign counties, areas under special supervision by the customs, or bonded warehouses, or transfer them into China by way of deep processing and transfer. Where an operating enterprise exports goods under processing trade, it may export the goods to foreign countries, areas under special supervision by the customs, or bonded warehouses, or transfer them out of China by way of deep processing and transfer.

Article 20

An operating enterprise shall make import and export customs declaration of processing trade goods by taking with it such relevant documents as the manual of processing trade, and the special customs declaration form for import and export processing trade goods, etc.

Article 21

The goods imported and exported by operating enterprises by way of processing trade shall be included in the customs statistics.

Article 22

An operating enterprise, upon approval of the competent authority, may carry out deep processing and transfer, and shall go through the relevant formalities pursuant to the provisions of the customs on the administration of deep processing and transfer of processing trade goods.

Article 23

An operating enterprise may carry out outward processing business upon approval of the customs. Outward processing trade shall be carried out within the valid term of the manual of processing trade.

When contracting out the processing trade, an operating enterprise may not sell the processing trade goods to the undertaking enterprise. The undertaking enterprise may not contract the processing of the processing trade goods to any other enterprise again.

Article 24

An operating enterprise shall transport back to itself such processing trade goods as the finished products, leftover materials, residual materials, inferior products, and byproducts, etc., generated in the outward processing.

Article 25

Under any of the following circumstances, the customs shall not approve the outward processing operation:

1)

The operating or undertaking enterprise is suspected of smuggling or rule breaking, and the case has been put on file by the customs for investigation and has not been concluded;

2)

The operating enterprise contracts the major operation out to others for processing; or

3)

The management of production and operation of the operating enterprise or undertaking enterprise is not in conformity with the requirements of customs supervision.

Article 26

The operating enterprise and undertaking enterprise shall both subject themselves to the customs supervision. The operating enterprise shall, in accordance with the customs requirements, faithfully report the consignment, processing, unit consumption, and storage, etc., of the goods contracted out for processing.

Article 27

In the case of urgent need for the processing of export goods, the operating enterprise may, upon ratification of the customs, interchange bonded materials with non-bonded materials.

The interchange between bonded materials with non-bonded materials shall be limited to the same enterprise, and shall stick to the principle of being the same type, same specification, same quantity, and not for profit.

Bonded imported materials for processing of supplied materials may not be interchanged with non-bonded materials.

Article 28

If the operating enterprise must use some non-bonded materials due to the needs of processing techniques, it shall first faithfully declare to the customs the proportion, category, specification, type, and quantity of the non-bonded materials to be used, and the customs shall write off those non-bonded materials from the total materials consumed for the export products.

Article 29

Where an operating enterprise needs to return to or change the imported materials with the original supplier as a result of quality problem, or non-conformity of the imported materials with the specification or type with that stipulated in the contract, it may go through the formalities for customs declaration directly with the port customs. Bonded imported materials that have already been processed may not be returned or changed.

Chapter IV Verification and Writing-off of Processing Trade Goods

Article 30

The operating enterprise shall process and re-export the imported materials within the prescribed time limit, and shall report to the customs for verification and writing-off within 30 days from the day of export of the last batch of finished products under the Manual of Processing Trade or the day of expiration of the Manual of Processing Trade.

Where the contract concluded by an operating enterprise with the foreign party is terminated before expiration, the enterprise shall report to the customs for verification and writing-off within 30 days from the day of termination of the contract.

Article 31

The operating enterprise shall, when reporting for verification and writing-off, faithfully declare the information about the imported materials, the finished products, for export leftover materials, residual materials, inferior products, byproducts, and unit consumption, etc, and shall submit to the customs the Manual of Processing Trade, the special customs declaration form for import and export of processing trade goods, as well as the other documents that the customs requires.

Article 32

The customs shall accept the report for verification and writing-off if the documents are complete and valid upon examination. If the customs rejects the application, it shall notify the enterprise of the reasons in writing, and the enterprise shall report for verification and writing-off again pursuant to the provisions.

Article 33

The customs may make the verification and writing-off through paper documents or electronic data, and may go to the factories to make inspections if necessary, and the enterprise shall render cooperation.

The customs shall make the verification and writing-off within 30 days from the day of the acceptance of the report. Where it is necessary to extend the period due to special circumstances, it may be extended for 30 days upon approval of the director of the customs directly under the GAC or the director of the subordinate customs authorized thereby.

Article 34

Where the imported materials or finished products under processing trade are instead sold on the domestic market due to certain reasons, the customs may, on the strength of the valid document of approval for domestic sale issued by the competent authority, collect taxes on the bonded imported materials according to law and collects additional interest for late tax collection. Where the imported materials fall within the import restrictions imposed by the state, the operating enterprise shall also submit the import license to the customs.

Article 35

Where the operating enterprise returns the imported materials under processing trade out of China, the customs shall make the verification and writing-off on the strength of the relevant certificate of returning.

Where the operating enterprise abandons the processing of goods upon approval of the customs, the provisions of the customs on the administration of abandoned import goods shall be followed. And the customs shall make the verification and writing-off on the strength of the relevant certificates of acceptance of the abandoning.

Article 36

The leftover materials, residual materials, inferior products, and byproducts generated by the operating enterprise in the production process, and the bonded goods suffering losses from disasters shall be dealt with in accordance with the provisions of the customs on the administration of such materials and goods. The customs shall make the verification and writing-off on the strength of the relevant documents.

Article 37

If an operating enterprise loses its manual of processing trade, it shall report to the customs in good time.

The customs shall write off the lost manual of processing trade after handling the case in accordance with the relevant provisions.

Article 38

With respect to the Manual of Processing Trade that is allowed to write off upon verification, the customs shall issue the Notification of the Conclusion of Verification and Written-off to the operating enterprise.

Article 39

Where the operating enterprise has provided guarantee, the customs shall discharge the guarantee pursuant to the provisions after the verification and writing-off is concluded.

Article 40

The records of processing trade goods and the written-off documents shall be kept for 3 years from the day of conclusion of the verification and writing-off of the manual of processing trade.

Article 41

Where a processing trade enterprise is split, merged, or becomes insolvent, it shall report to the customs in good time and finish the customs formalities.

Where the processing trade goods are sealed by the people's court or the relevant law enforcement department, the processing trade enterprise shall report to the customs within 5 workdays from the day of the sealing of those goods.

Chapter V Legal Liabilities

Article 42

If any party, in violation of the provisions hereof, commits smuggling or any other acts against customs control, the customs shall deal with the offender in accordance with the relevant provisions of the Customs Law of the People's Republic of China and the Implementation Rules of Administrative Punishment of the Customs Law of the People's Republic of China. And if a crime has been constituted, the offender shall be subjected to criminal liabilities.

Chapter VI Supplementary Provisions

Article 43

Where a bonded factory carries out processing trade, the provisions on the administration of bonded factories in the processing trade shall be followed.

Article 44

Where a bonded group in the processing of imported materials carries out processing trade, the provisions of the customs on the administration of bonded groups in the processing of imported materials shall be followed.

Article 45

Where a processing trade enterprise subject to computer network supervision carries out processing trade, the provisions of the customs on the administration of computer network control of processing trade enterprises shall be followed.

Article 46

Where a processing trade enterprise carries out processing trade in such areas under special customs supervision as bonded zones or export processing zones, the provisions of the customs on the administration of areas under special customs supervision such as bonded zones and export processing zones shall be followed.

Article 47

The declaration and verification of unit consumption shall be carried out in accordance with the provisions of the customs on the administration of unit consumption of processing trade.

Article 48

Separate provisions shall be formulated with respect to the administration of the tax refund by the customs after the export of processing trade goods on which taxes have been collected upon import.

Article 49

The power to interpret the present Measures shall remain with GAC.

Article 50

The present Measures shall come into force as of April 1st, 2004.