Laws of the People's Republic of China

The State Administration of Foreign Exchange

Supplementary Reply of the State Administration of Foreign Exchange on Issues Concerning Administrative Penalties for Violation of Provisions of Foreign Exchange Administration

HuiFa [1999] No.48

February 11, 1999

All subordinate administrations of the State Administration of Foreign Exchange (SAFE), the Departments of Foreign Exchange Administration of Beijing and Chongqing:

To impose the penalties in cases in violation of laws and regulations on foreign exchange discovered during the examination, on December 25, 1998, SAFE issued the Circular on Issues Concerning Administrative Penalties for Violation of Provisions of Foreign Exchange Administration, which clarifies the problems that should be paid attention to during the imposition of penalties for violation of law and regulations on foreign exchange. However, the Penalty Decision and other materials submitted by some subordinate administrations still reflect such problems as lack of evidence, abuse of penalty criteria and improper application of law. To safeguard the solemnity of law enforcement for foreign exchange rectification and to successfully complete this examination, supplementary issues that should attract enough attention in the process of conducting investigation and prosecution for violation of laws and regulations on foreign exchange are hereby noticed as follows:

1.

Determining the nature of cases in violation of laws and regulations on foreign exchange, legal reference and penalty criteria

Procedures for Investigating and Handling Cases in Violation of Foreign Exchange Administration should be strictly implemented. Cases of in violation of laws and regulations on foreign exchange should be classified and the penalties should be determined in accordance with such public rules or regulations as the Regulations of the People's Republic of China on Foreign Exchange Administration. Documents coded HuiFa [1998] No.37, 43, 55 and 98 of the State Administration of Foreign Exchange are for internal reference for the penalty decisions and should not be directly quoted for case classification and penalty decision. Fraudulent purchase of foreign exchange through letters of credit or collection should be investigated and prosecuted as cases of false customs declaration. Enterprises that fail to submit customs declaration forms for examination or fail to cancel them after verification through letters of credit or collection should be punished in accordance with the penalty criteria stipulated in the document coded HuiFa [1998] No.98.

2.

Collection of confiscated fines

During this examination, a large majority of the businesses in violation of the regulations on foreign exchange are foreign trading companies that serve as import agencies. Full collection of confiscated fines may affect local budgets to some extent. In view of the consistency of the policy of turning in the confiscated fines in the foreign exchange examination, the proportion of the confiscated fines to be turned in by local administrations (including sub local administrations) in this examination is hereby adjusted as follows: 50% is turned in to the State Administration of Foreign Exchange and then turned in to the state budget; the other 50% is turned in to local budgets. The provisions in the document coded HuiFa [1998] No.107 of turning in the confiscated fines in full in this examination should be terminated. Local administrations that have turned in the confiscated fines in full are kindly requested to report the situation to the general administration in writing and the general administration will made a refund upon examination.

As for some industries that have special difficulties in turning in the confiscated fines in full within the prescribed time limit, local administrations should handle strictly and report to the general administration as special cases. While reporting, reasons should be stated and the financial statements be submitted. The deferred payment should only be granted upon the approval of the general administration. The period for deferred payment should be no longer than 1 year.

3.

Handover of cases in violation of laws and regulations on foreign exchange

Cases in violation of laws and regulations on foreign exchange involving the evasion of customs duties or smuggling should be handed over, after administrative penalties are made, to customs where the filing documents were signed to be investigated and punished for duty evasion or smuggling. Cases in violation of laws and regulations on foreign exchange in which business units in the customs declaration form belong to "Three Without Enterprises" or fake units should be directly handed over by local administrations of foreign exchange in those areas to administrations of foreign exchange in areas where the foreign exchange was purchased or sold and be reported to the general administration for file-keeping purpose.

4.

Treatment in case the main body in violation of laws and regulations on foreign exchange has disappeared.

In case that the suspected enterprise has disappeared and cannot be brought to justice in cases in violation of laws and regulations on foreign exchange, local administrations should summarize and provide a detailed list, notify administrations of industry and commerce to cancel the registration of the enterprise, instruct banks to stop offering foreign exchange service to it, and then properly end the case. The detailed list should be submitted to the general administration for file-keeping purpose.

It is hereby notified.