Laws of the People's Republic of China

State Administration of Foreign Exchange

Notice of the State Administration of Foreign Exchange on Printing and Distributing the Measures for the Administration on Verification and Cancellation of the Payment Balances of Foreign Exchange for Imports

No. 116 [2004] of the State Administration of Foreign Exchange

December 3, 2004

The branches or the foreign exchange administrative departments of the State Administration of Foreign Exchange (hereafter referred to as the SAFE) of all provinces, autonomous regions and municipalities directly under the Central Government, and the SAFE¡¯s branches of Shenzhen, Dalian, Qingdao, Xiamen and Ningbo:

For the purpose of further improving the administration on verification and cancellation of the payments of foreign exchange for imports, regulating the operation of verification and cancellation of the payment balances of foreign exchange for imports and enhancing the efficiency of the administration on verification and cancellation of the payments of foreign exchange for imports, the SAFE has formulated the Measures for the Administration on Verification and Cancellation of the Payment Balances in Foreign Exchange for Imports (hereinafter referred to as the ¡°Measures¡±, for which please see the annex), which are hereby printed and issued to you with the relevant matters clarified as follows:

1.

The balance verification and cancellation management of the examination on the verification and cancellation of the payment balances of foreign exchange for imports, as effective measures for supplementing the existing provisions of the administration on verification and cancellation of imports, aims at solving the problem that the formalities for handling the verification and cancellation of payments of foreign exchange for imports can not be gone through because of the difference between the amount of an importer¡¯s payment of foreign exchange for imports and the delivered price due to any objective factor, which may further promote trade facilitation and lighten the burden of work of both importers and foreign exchange bureaus. All the SAFE¡¯s branches and sub-branches (hereinafter referred to as the ¡°foreign exchange bureaus¡±) shall make publicity and explanation to importers and insure smooth implementation of the Measures.

2.

When going through the investigation procedures of verification of the payment balances in foreign exchange for imports for importers, the foreign exchange bureaus shall carefully verify the materials relating to the verification of balances and keep record thereof.

3.

Every foreign exchange bureau shall, in the light of its respective regional conditions, establish an internal control system of level-by-level authorization of balance verification.

4.

The Measures shall go into effect as of February 1, 2005, before which, the SAFE shall modify and upgrade the computer system for the verification and cancellation of the payment balances of foreign exchange for imports and make the upgraded computer system have the functions to search, count and supervise the data of the verification and cancellation of balances. The date for upgrading the computer system will be notified separately by the SAFE.

After receiving this Notice, every foreign exchange bureau shall promptly transmit it to the central sub-branches in their jurisdictions. Any problem arisen during the process of implementing this Notice shall be reported timely to the SAFE. Annex:Measures for the Administration on Verification and Cancellation of the Payment Balances in Foreign Exchange for Imports

Article 1

For the purpose of further improving the administration on verification and cancellation of the payments of foreign exchange for imports, regulating the operation of verification and cancellation of the payment balances of foreign exchange for imports and enhancing the efficiency of the administration on verification and cancellation of the payments of foreign exchange for imports, these Measures are formulated according to the Interim Measures for the Supervision and Administration on the Verification and Cancellation of Payments of Foreign Exchange for Trade Imports and other relevant provisions.

Article 2

The term ¡°balance subject to verification and cancellation¡± as mentioned in these Measures refers to the balance between the amount of payment of foreign exchange reported for verification by an importer and the actually delivered amount (namely the product of the unit price of the goods indicated in the declaration entry form and the quantity of the goods).

The verification and cancellation of balances may be either a balance due to more delivered goods or a balance due to less delivered goods. When the amount of the actually delivered goods is more than that of the payment of foreign exchange reported for verification, there is a balance due to more delivered goods; when the price of the actually delivered goods is less than the amount of the payment of foreign exchange reported for verification, there is a balance due to less delivered goods.

Article 3

These Measures shall apply to the verification and cancellation of payments of foreign exchange for imports reported for verification under the following circumstances:

(1)

one payment of foreign exchange, one delivery and one submission for verification under a single contract;

(2)

one payment of foreign exchange, multiple deliveries and one submission for verification under a single contract;

(3)

multiple payments of foreign exchange, one delivery and one submission for verification under a single contract; and

(4)

multiple payments of foreign exchange, multiple deliveries and one submission for verification under a single contract.

The verification and cancellation of importers¡¯ balances to be examined shall be conducted based on different contracts. In the case of multiple submissions for examination under a single contract, the importer shall apply for the verification and cancellation of a balance at the last submission for examination when the contract is completely fulfilled.

Article 4

In case a balance to be verified and cancelled, under a single contract, does not exceed the equivalent of 5,000 US dollars (inclusive) or does not exceed 2% (inclusive) of the contract price though exceeding the equivalent of 5,000 US dollars, the SAFE¡¯s branches or sub-branches (hereinafter referred to as the ¡°foreign exchange bureaus¡±) may handle the verification and cancellation of the balance directly on the strength of the importer¡¯s statement on the balance, import contract and other verification-related documents.

Article 5

In case a balance to be verified and cancelled, under a single contract, is more than the equivalent of 5,000 US dollars and 2% of the contract price, the importer shall apply for the verification and cancellation of the balance by providing other relevant materials according to Articles 7 and 8 hereof.

Article 6

The cumulative balance that an importer submits (reports) for verification and cancellation for a month (including balances either above or below the above-mentioned amount, with balances due to more delivered goods being counted as negative numbers) shall not exceed the equivalent of 100,000 US dollars (inclusive) in principle. Every foreign exchange bureau may make an appropriate adjustment of the quota pursuant to the local conditions.

Article 7

To apply for the verification and cancellation of an balance payment of foreign exchange for imports under a single contract, which is more than the equivalent of 5,000 US dollars and exceeds 2% of the contract price due to less delivered goods, the importer shall, in addition to the relevant verification and cancellation documents, provide the import contract and a statement on the balance with both the signature of the legal representative and the corporate seal of the importer on it, and provide the relevant certificate documents respectively according to the following different circumstances:

(1)

a certificate issued by the relevant chamber of commerce or a quotations list as certified by the relevant exchange or by any member of such an exchange, in the case of a balance caused by the price movement in foreign markets;

(2)

the relevant letters and telegrams with the exporters and a certifying document issued by the relevant commodity inspection agency, in the case of a balance caused by the problem of quality of the imported goods. If no commodity inspection document can be provided due to any objective factor, a corresponding document certifying the quality of the goods and a guarantee letter shall be provided instead;

(3)

the relevant letters and telegrams with the exporters and a certifying document issued by the relevant commodity inspection agency, in the case of a balance caused by any deterioration, rottenness, abnormal death or spoilage of the animal or fresh goods. If no commodity inspection document can be provided due to any objective factor, a corresponding document certifying the quality of the goods and a guarantee letter shall be provided instead;

(4)

a certifying document issued by the commercial office of the embassy or consulate of China to the country of the exporter, in the case of a balance caused by force majeure such as a natural disaster, war, national emergency policy and etc.;

(5)

the relevant news reporting materials or a certifying document issued by the commercial office of the embassy or consulate of China to the country of the exporter or the relevant legal document, in the case of a balance caused by the bankruptcy, closure or dissolution of the exporter;

(6)

the current exchange rate quotation of the paying bank, in the case of a balance caused by the exchange rate movement;

(7)

a commodity inspection certificate, the bill of lading or shipping document, in the case of a balance caused by over or short shipment;

(8)

the import contract, taxation certificate, the receipt of freight insurance premium and the relevant commercial documents (excluding the case where the amounts of the freight insurance premium and incidental expenses are indicated in the declaration form of imported goods), in the case of a balance caused by any incidental expenses such as freight insurance premium and sundry fees where such incidental expenses are included in the total price of the contract;

(9)

the import contract, a certificate issued by the customs with regard to the declaration form of imported goods, an overdue tax payment certificate and the relevant commercial documents, in the case a balance taking place under the import of any mental ore in sand form or any other bulk cargo; or

(10)

the valid certificates as may be required by the foreign exchange bureaus in the case of a balance caused by any other factor.

Article 8

When applying for the verification and cancellation of a balance due to more delivered goods, the importer shall state the balance under the declaration form of the imported goods in the Verification and Cancellation Form on the Arrival of Goods and the Payments of Foreign Exchange, and indicate ¡°reserved¡± or ¡°cancelled¡± in the ¡°notes¡± column.

To apply for the verification and cancellation of a payment balance of foreign exchange for imports under a single contract, which is more than the equivalent of 5,000 US dollars and exceeds 2% of the contract price due to more delivered goods, the importer shall provide to the foreign exchange bureau a statement letter on the balance with its corporate seal on it.

Article 9

When handling the verification and cancellation of an importer¡¯s balance due to more delivered goods, the foreign exchange bureau shall, in the Foreign Exchange Payment System for Imports of China Electronic Port, shall verify and cancel the original e-account of the importer¡¯s declaration form of imported goods indicated as ¡°cancelled¡±.

Article 10

These Measures shall not, for the time being, apply to the automatic verification and cancellation of foreign exchange payment for imports under a transaction in the form of remittance on delivery or to the examination on verification and cancellation of any foreign exchange payment for imports conducted against an exchange receipt voucher under any transit trade, use of materials for an external engineering project or any re-exchange bill by import.

Article 11

When handling the verification and cancellation of a foreign exchange payment balance for imports, the foreign exchange bureaus shall verify the relevant receipts and certificates strictly, indicate the amount of the balance and the date and affix the stamp of ¡°verified¡± on the Verification and Cancellation Form on the Arrival of Goods and the Payments of Foreign Exchange and keep the relevant receipts and certificates.

Article 12

Every foreign exchange bureau shall, pursuant to the local conditions, establish and improve an internal control system of level-by-level authorization of foreign exchange payment for imports.

Article 13

Each of the SAFE¡¯s branches shall conduct information collection and statistics of the verification of balances taking place in its region, and within the first five working days of each month, submit to the SAFE an e-report on the verification and cancellation of foreign exchange payment balance for imports.

Article 14

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

Article 15

These Measures shall go into effect as of February 1, 2005. Where there is any provision conflicting with these Measures, these Measures shall prevail.