Laws of the People's Republic of China

Notice of the State Administration of Foreign Exchange on Printing and Distributing the Measures for the Administration of Foreign Exchange in Border Trade

HuiFa [2003] No. 113 September 22nd 2003

The branches / departments of the State Administration of Foreign Exchange in all provinces, autonomous regions, and municipalities directly under the Central Government, the branches in Shenzhen, Dalian, Qingdao, Xiamen and Ningbo Cities, and all designated foreign exchange (FX) banks controlled by Chinese fund:

For the purpose of promoting the development of border trade between China and its surrounding counties and regulating the FX administration in border trade, the State Administration of Foreign Exchange (SAFE) has formulated the Measures for the Administration of Foreign Exchange in Border Trade (hereinafter referred to as the Measures). The Measures are hereby printed and distributed to you, with the relevant matters notified as follows:

1.

The Measures are applicable to the foreign trade operations related to border trade in the border provinces (autonomous regions). The designated FX banks and enterprises outside the border provinces shall not be governed by the present Measures.

2.

The Measures are a normative document on FX administration in border trade of the whole nation. The SAFE branches in all border provinces (autonomous regions) shall, pursuant to the present Measures and other provisions on the administration of foreign trade and in response to the real situation of FX operations in border trade, formulate detailed implementation rules for FX administration in border trade within their respective jurisdictions. If a port SAFE sub-branch, as demanded by the real situation, is to formulate detailed implementation rules for FX administration in border trade under its jurisdiction, it shall submit the drafted rules to the SAFE branch of the province (autonomous region) where it is located, which shall carefully examine and submit them as well as the detailed implementation rules drafted for FX administration in border trade of the whole province (autonomous region) to the SAFE for approval.

3.

When submitting the drafted rules, the SAFE branches in all border provinces (autonomous regions) shall also submit the import & export circumstances, the settlement channels and writing-off of FX proceeds and payment concerning import & export of border trade within their respective jurisdictions and in all port areas under their respective jurisdictions, as well as the circumstances of FX administration in the neighboring countries.

4.

The designated FX banks in border areas shall, pursuant to the relevant provisions of the People's Bank of China and the SAFE and out of consultation on an equal footing, establish agency relations with banks in the border areas of the neighboring countries and open direct settlement channels between the banks. For a neighboring country whose central bank has concluded a bilateral agreement on home currency payment, the designated FX banks in the border areas shall establish agency relations with the commercial banks in the border areas of such country, open direct settlement channels between banks, increase outlets for FX settlement and sales and provide convenient and shortcut services to border trade enterprises.

Upon receiving the present Notice, all SAFE branches in border provinces (autonomous regions) shall transmit it as soon as possible to the port SAFE sub-branches and designated FX banks within their respective jurisdictions as well as the relevant organizations; and all designated FX banks controlled by Chinese capital shall transmit it as soon as possible to their branches. In case any problem occurs during the implementation of the present Notice, please feed back to the State Administration of Foreign Exchange in good time.

Attachment: Measures for the Administration of Foreign Exchange in Border Trade

Attachment: Measures for the Administration of Foreign Exchange in Border Trade Chapter I General Provisions

Article 1

For the purpose of promoting the sound development of border trade between China and its surrounding countries, improving the FX administration and regulating the capital settlement behaviors and account administration in border trade, the Measures have been formulated pursuant to the Regulations of the People's Republic of China on the Administration of Foreign Exchange as well as other provisions concerned.

Article 2

The term "border trade" as mentioned in the present Measures refers to the transactions between inhabitants on either side of the border, small-scale border trade and foreign economic and technical cooperation in border areas.

The transactions between inhabitants on either side of the border refer to the exchange of commodities between border inhabitants within the range of designated capital amount and quantities in the open sites within 20 kilometers from the border line to each side as approved by the governments or on the designated markets.

The small-scale border trade refers to the trade activities through state-designated land port on border between the enterprises with small-scale trade right approved in the border areas of China and the enterprises or other trade organizations in the border areas of the neighboring countries (hereinafter referred to as trade organization outside China).

The foreign economic and technical cooperation in border areas refer to the project contracting and labor services in the border areas of China's neighboring countries by enterprises with foreign economic and technical cooperation right approved in the border areas of China.

Article 3

The border trade enterprises as mentioned in the present Measures include the small-scale border trade enterprises and foreign economic and technical cooperation enterprises of China.

The small-scale border trade enterprises refer to the enterprises with small-scale trade right as approved by the departments in charge of commerce.

The foreign economic and technical cooperation enterprises refer to the enterprises with foreign economic and technical cooperation right on project contracting, labor services, etc. in the border areas of the neighboring countries, as approved by the commerce competent departments.

Article 4

When conducting border trade with trade organizations outside China, the border trade enterprises or individuals may use freely convertible currencies, home currencies of the neighboring countries or RMB for pricing and settlement, or conduct settlement through barter trade.

Article 5

When conducting border trade settlement with trade organizations outside China, the border trade enterprises or individuals shall carry out the reporting of balance of payment statistics pursuant to the Measures for Statistical Reporting on Balance of International Payments and other provisions concerned.

Article 6

The SAFE and the branches and sub-branches thereof are the authorities in charge of FX operations in border trade.

Article 7

After obtaining the small-scale border trade right or the foreign economic and technical cooperation right upon the approval of the commerce competent departments, a border trade enterprise shall go to the FX administration for record keeping by presenting the business license issued by the administration of industry and commerce, the approval document of the commerce competent department, the certificate of organizational code and the certification for registration with the customs.

Chapter II Account Administration in Border Trade

Article 8

A border trade enterprise shall open, use and close accounts with the designated FX banks (hereinafter referred to as the banks) in China's border areas under the Provisions on the Management of Domestic Foreign Exchange Accounts, the Detailed Implementation Rules for the Administration of Current Foreign Exchange Accounts of Domestic Institutions and other provisions concerned.

Article 9

A border trade enterprise may open with the banks in China's border areas the border trade accounts capable of settlement in the currency of a neighboring country. For a currency of the neighboring country in a situation that the central bank of the currency issuing country has not concluded with the People's Bank of China a bilateral agreement on home currency payment, when a border trade enterprise opens the border trade account in such currency, the scope of income is: the capitals transferred under border trade by the trade organizations outside China from the current FX accounts or the border trade accounts in the currency of the neighboring country opened with banks in China's border areas; and the scope of payout is: the capitals transferred under border trade by the trade organizations outside China to the current FX accounts or the border trade accounts in the currency of the neighboring country opened with the banks in China's border areas. For a currency of the neighboring country in a situation that the central bank of the currency issuing country has concluded with the People's Bank of China a bilateral agreement on home currency payment, the border trade accounts in such currency opened by a border trade enterprise shall be utilized pursuant to the aforesaid agreement and incorporated into the administration under the Foreign Exchange Accounts Administration Information System.

Article 10

Trade organizations outside China may open with banks in China's border areas the current FX accounts and the border trade accounts in the currency of the neighboring country. For a trade organization of the neighboring country whose central bank has not concluded with the People's Bank of China a bilateral agreement on home currency payment, the scope of income of the current FX accounts and the border trade accounts in the currency of the neighboring country is: the capitals transferred under border trade from the border trade FX accounts or the border trade accounts in the currency of the neighboring country opened by the domestic border trade enterprises and individuals; and the scope of payout is: the capitals transferred under border trade to the border trade FX accounts or the border trade accounts in the currency of the neighboring country opened by the domestic border trade enterprises and individuals. For a trade organization of the neighboring country whose central bank has concluded with the People's Bank of China a bilateral agreement on home currency payment, the current FX accounts and the border trade accounts in the currency of the neighboring country opened thereby shall be utilized in accordance with the said agreement.

Article 11

In the border areas with big volume of RMB settlement, a trade organization outside China may open an exclusive account for RMB settlement in border trade. Such account may not be used for any purpose other than receipt and payment of capitals under border trade settlement.

Article 12

During the opening of a current FX account, border trade account in the currency of the neighboring country or exclusive account for RMB settlement in border trade with a bank in China's border areas, a trade organization outside China shall file an application thereof to the FX administration of the locality where such opening takes place by presenting the business license certification of its home country (in the case of an individual, valid identity certification such as passport) and such materials as border trade contract, and go through the account-opening procedures by presenting the approval document of the FX administration. A account-opening bank shall handle the account-opening procedures for the trade organization outside China in accordance with the present Measures and indicate with special marks the account numbers of the current FX accounts and the border trade accounts in the currency of the neighboring country opened by the trade organizations outside China so as to incorporate such numbers into the administration under the "Foreign Exchange Accounts Administration Information System".

For a current FX account, a border trade account in the currency of a border country or exclusive account for RMB settlement in border trade opened by a trade organization outside China with a bank in China's border areas, all foreign-related income and payment transactions taking place outside China of such account shall be subject to the procedures of statistical reporting on the balance of international payments in accordance with the relevant provisions of China on FX administration.

Article 13

In case a trade enterprise collects export proceeds by arranging a domestic resident individual as the payee, it shall report in advance the name, account number, etc. of such resident individual proposed to the local FX administration for archival purposes. The account-opening bank shall process account-opening procedures upon the certification issued by the FX administration and indicate such account with a special mark. The scope of income for an account of such category is: the FX payments remitted from outside China for goods under the border trade export. The enterprise receiving the payments shall conduct FX settlement with the bank immediately after entering such payments into the account, and the bank shall issue to such enterprise the FX settlement voucher used exclusively for the writing-off of export FX proceeds. The FX transactions in the accounts of such category shall be settlement under trade; when submitting the Monthly (Ten-day) Report on Bank Statistics of Foreign Exchange Settlement and Sales to the FX administration, the bank shall include such transactions under the title of "101 Trade Proceeds".

Chapter III Administration of Foreign Exchange Proceeds and Payments in Border Trade

Article 14

As to the freely convertible currencies earned under current account by a border trade enterprise, for those within the quotas of current FX accounts as approved by the FX administration, the enterprise may conduct settlement or retain the FX by depositing it in the current FX account; for those exceeding the approved quotas, the enterprise shall conduct settlement as provided for. For the currency of the neighboring country received under current account by a border trade enterprise, the enterprise may deposit such currency in the border trade account in the currency of the neighboring country or sell them at the free will of the banks for purchase.

Article 15

The foreign payments under current account by a border trade enterprise shall, in accordance with the Provisions on the Administration of Foreign Exchange Settlement, Sales and Payments and other provisions concerned, be made from the current FX account, border trade account in the currency of the neighboring country or RMB account or be honored at the bank by presenting the designated valid certificates and commercial documents.

Article 16

If direct FX collection or payment arises with a border trade enterprise or individual from the current FX account, border trade account in the currency of the neighboring country or exclusive account for RMB settlement in border trade opened with a bank in China's border areas, such enterprise or individual shall be regarded as making FX collection from or payment to outside China. The border trade enterprise and individual shall go through the procedures for statistical reporting on the balance of international payments with the bank and take the designated valid certificates and business documents to go through the collection or payment procedures concerned, in accordance with the Measures for Statistical Reporting on Balance of International Payments, the Provisions for the Administration of Foreign Exchange Settlement, Sales and Payment and other provisions concerned.ке

Chapter IV Administration of Proceeds and Payments Writing-off in Border Trade

Article 17

If foreign payment by a border trade enterprise under import in border trade is settled in a freely convertible currency or the currency of the neighboring country, no matter the payment is made to outside China or to the current FX account or border trade account in the currency of the neighboring country opened in a bank of China's border areas by a trade organization outside China, such enterprise or individual shall fill out the Form on the Writing-off of Foreign Exchange Payment Under Import in Trade (Substitute Reporting Form) and go through the writing-off procedures for the FX payment in accordance with the Interim Measures for the Supervision and Administration of Foreign Exchange Payment Under Import Trade and other provisions concerned.

Article 18

For a border trade enterprise that needs to make settlement in RMB during import, if the other party is an enterprise located in a country that have signed a bilateral agreement on home currency payment, the first mentioned enterprise shall fill out the Form on the Writing-off of Foreign Exchange Payment Under Import Trade (Substitute Reporting Form) during the payment for goods and go through the writing-off procedures for the FX payment in accordance with the Interim Measures for the Supervision and Administration of Foreign Exchange Payment Under Import Trade and other provisions concerned.

Article 19

Where a border trade enterprise needs to make payment to an exclusive account for RMB settlement in border trade opened by a trade organization outside China with a bank in China's border areas, the beneficiary's bank shall process the account entry procedures at the presentation of the contract provided by the trade organization outside China, the customs declaration of imports by the border trade enterprise and other designated certificates. After the completion of account entry procedures, the beneficiary' s bank shall write off the corresponding customs declaration of imports on the China E-port Foreign Exchange Payment System and conclude the case thereabout in good time, or make a submission to the local FX administration for the writing-off and case conclusion.

Article 20

After processing the writing-off procedures for import FX payment, the FX administrations and the banks shall write off the corresponding customs declaration of imports on the China E-port Foreign Exchange Payment System and conclude the case thereabout in good time under the provisions concerned.ке

Article 21

A border trade enterprise conducting export under border trade shall apply for the export Foreign Exchange Proceeds Writing-off Form and go through the procedures for export customs declaration, FX proceeds, etc. The writing-off of FX proceeds shall be handled under the following provisions:

(1)

For exchange settlement in a freely convertible currency, the border trade enterprise shall go through the export FX proceeds writing-off procedures in accordance with the Administrative Measures for the Writing-off of Export Foreign Exchange Proceeds, the detailed implementation rules thereof and other provisions concerned.

(2)

For cash settlement in a freely convertible currency, the border trade enterprise shall go through the export FX proceeds writing-off procedures by presenting the customs declaration of imports, the export FX proceeds writing-off form, the bank-issued FX cash settlement voucher and the purchase invoice.

(3)

For settlement in the currency of a neighboring country, the border trade enterprise shall go through the export FX proceeds writing-off procedures by presenting the customs declaration of imports, the export FX proceeds writing-off form, and the customs-verified declaration on carrying currency cash of a neighboring country or the bank-issued inward remittance certification.

(4)

For settlement in RMB, the border trade enterprise shall go through the export FX proceeds writing-off procedures by presenting the customs declaration of imports, the export FX proceeds writing-off form, and the RMB inward remittance certification (where the trade organization has opened an exclusive account for RMB settlement in border trade, the enterprise may present the domestic RMB transfer certification).

(5)

For payment collected from the current FX account or the border trade account in the currency of a neighboring country opened by a trade organization outside China with a bank in China's border areas, the border trade enterprise shall go through the export FX proceeds writing-off procedures by presenting the customs declaration of imports, the export FX proceeds writing-off form, and the capital transfer certification issued by the payer's bank.

(6)

For FX payment collected by remittance of domestic resident individual, the border trade enterprise shall go through the export FX proceeds writing-off procedures by presenting the customs declaration of imports, the export FX proceeds writing-off form, and the exclusive settlement voucher for writing-off of export FX proceeds.

(7)

For settlement through barter trade, the border trade enterprise shall go through the export FX proceeds writing-off procedures by presenting such documents as the export FX proceeds writing-off form, and the customs declarations of exports and imports respectively.

Article 22

After processing the export FX proceeds writing-off procedures, the FX administrations shall issue the "special page for writing-off and drawback of export FX proceeds" to the border trade enterprises and indicate the type of currency and the capital amount in the column of remarks.

Article 23

The FX administrations shall, in accordance with the Administrative Measures for the Writing-off of Export Foreign Exchange Proceeds, the detailed implementation rules thereof and the present Measures, distribute the export FX proceeds writing-off forms and process the export FX proceeds writing-off procedures, and conduct appraisal of the circumstances concerning the export FX proceeds of such enterprises.

Article 24

The FX administrations shall strengthen statistics and analysis of border trade and gather information about border trade within their jurisdictions in good time. All SAFE sub-branches shall submit the Statistical Form on Import & Export and Writing-off Circumstances of Small-amount Border Trade of the last month to the SAFE within first ten office days of each month.

Chapter V Administration of Settlement and Conversion of Currencies in Border Trade

Article 25

The banks in border areas shall, in accordance with the relevant provisions of the People's Bank of China, establish agency relations with the commercial banks in the border areas of the neighboring countries and open direct settlement channels between banks.

Article 26

In accordance with the Notice of the People's Bank of China on Relevant Issues Concerning the Administration of Foreign Currency Cash (YinFa [2001] No.376), the Supplementary Notice of the People's Bank of China on Relevant Issues Concerning the Administration of Foreign Currency Cash (YinFa [2001] No. 384), the Interim Measures for the Administration of Foreign Exchange Settlement and Sales in Designated Foreign Exchange Banks (Order No. 4 [2002] of the People's Bank of China), and the Detailed Implementation Rules for the Administration of Foreign Exchange Purchase by Domestic Resident Individuals, all commercial banks in the border areas engaged in foreign currency deposit operations upon the approval of the banking regulatory departments may apply for individual FX settlement operations upon the approval of the local FX administrations, and all commercial banks in border areas engaged in FX settlement and sales or conversion of foreign currencies upon the approval of the banking regulatory departments or the FX administrations may apply for individual FX sales operations and increase outlets for FX settlement and sales upon the approval of the local FX administrations.

Article 27

The banks in the border areas shall, in accordance with the Notice of the People's Bank of China on Relevant Issues of Adjusting Administrative Policies for Foreign Currency Cash (YinFa [2002] No. 283), adjust the purchase and sale prices of foreign currency cash within the designated floating range. The FX administrations shall assist the banks in conducting individual FX settlement and sales operations by fluctuating in line with the market conditions under the provisions concerned and guide them in handling well the risk management and capital balance.

Article 28

The banks in the border areas may put up exchange rates between RMB and currencies of the neighboring countries and self-determine the difference between purchase and sale prices, with the currencies of the neighboring countries accepted being handled on their own.

Article 29

The banks in the border areas shall set up foreign currency conversion outlets to process the conversion between RMB and freely convertible currencies or currencies of the neighboring countries in accordance with the provisions concerned of the banking regulatory authority and the SAFE.

Chapter VI Supplementary Provisions

Article 30

The banks, border trade enterprises and individuals shall carry out the relevant FX operations of border trade pursuant to the present Measures and other provisions concerned on FX administration. For violators of the present Measures or other provisions concerned on FX administration, the FX administrations will mete out punishment pursuant to the laws and regulations such as the Regulations of the People's Republic of China on FX Administration.

Article 31

Other matters concerning FX administration unspecified in the present Measures shall be implemented pursuant to the laws and regulations concerned on FX administration.

Article 32

The banks shall earnestly perform the provisions on the reporting of wholesale and doubtful capital transactions in strict compliance with the Provisions on Anti-Money Laundering in Financial Institutions and the Administrative Measures for the Reporting of Wholesale and Doubtful Capital Transactions in Financial Institutions. In case of any doubtful situation, a bank shall timely submit to the next higher-level bank as well as the people's bank, FX administration and public security department in the place where it is located, take initiatives to cooperate with the people's bank, FX administration and public security department in handling well the relevant work, and prevent and combat illegal FX trading activities such as using border trade payment or settlement to commit money-laundering.

Article 33

A SAFE branch in a province (autonomous region) where the border areas belong may, in accordance with the present Measures and other laws and regulations on FX administration and on catering to the real circumstances of the locality, formulate corresponding detailed implementation rules, which shall be promulgated and implemented upon the approval of the SAFE.

Article 34

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

Article 35

The present Measures shall be implemented as of October 1st 2003, on which the Interim Measures for Foreign Exchange Administration as promulgated on January 23rd 1997 and the Notice of the State Administration of Foreign Exchange on the Foreign Exchange Administration of Small-scale Border Trade Between China and Russia and Other Members of the Commonwealth of Independent States as promulgated on September 16th 2002 will be repealed at the same time.

Attachment: Statistical Form on Import & Export and Writing-off Circumstances of Small-amount Border Trade (omitted)