Administration on Import, Export and Processing of Processing Trade Goods

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

Import and export of processing trade materials and goods

Where an operating enterprise imports goods under processing china trade, it may either import them from foreign counties, areas under special customs control, or bonded warehouses, or transfer them into China by way of deep processing and transfer.

Where an operating enterprise exports goods under processing china trade, it may export the goods to foreign countries, areas under special customs control, or bonded warehouses, or transfer them out of China by way of deep processing and transfer.

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

Imported materials under processing trade fall within import restrictions

Except when the state has otherwise provisions, where the imported materials under processing china trade fall within import restrictions imposed by the state, the operating enterprise shall be exempted from submitting the import license to the customs; where the finished export products of processing china trade fall within the export restrictions imposed by the state, the operating enterprise shall submit the export license to the customs.

Deep processing and transfer

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 china trade goods.

Outward processing

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

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

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

The operating enterprise and undertaking enterprise shall both subject themselves to the customs control. 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.

The main customs rules regulate the "outward processing":

The undertaking enterprise shall register with customs and have corresponding processing ability. An operating enterprise shall deliver back to itself such processing china trade goods as the finished products, leftover materials, residual materials, inferior products and byproducts, etc., generated in the outward processing.

Interchange of bonded materials

In the case of urgent need for 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.

Use of non-bonded materials If the operating enterprise must use any 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.

Return and change of imported materials Where an operating enterprise needs to return to and 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 and changed.

Verification and Writing-off of Processing Trade Goods

Where the imported materials under processing china trade are under the control of bonded goods, 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.

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 china trade or the day of expiration of the manual of processing china 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.

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

Where the imported materials or finished products under processing china 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.

Where the operating enterprise returns the imported materials under processing china 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.

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 the leftover materials, residual materials, inferior products, byproducts, and bonded goods suffering losses from disasters. The customs shall make the verification and writing-off on the strength of the relevant documents.

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Several important definitions of processing trade:

The term "œprocessing 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 "processing china trade enterprises" shall include the operating enterprise 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 china 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 "operating 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 that are established by the operating enterprises , but employ relatively independent accounting and have obtained the business certificate (license)of industry and commerce .

The term "unit consumption quantity" refers to the imported materials consumed per finished export product by the processing or manufacturing entity 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 china trade enterprise transfers the products processed by using bonded imported materials to another processing china 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 china 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 china 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 china trade goods, etc. , declared by the processing china 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 china 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.

The term "Bank Deposit System" refers to the bank-customs cooperation supervision system governing the operation of processing china trade. This system is constituted by four functions: A. processing china trade enterprises classification. B. processing china trade related goods classification. C. deposit management D. enterprises guarantee management. The general description of the bank deposit system is controlling the import materials and export products in respect of enterprises of different grades through the measures of the management on the bank deposit required to place by the processing china trade enterprises.

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Application process for commencement of processing trade in China

First step:
Apply for the Business Situation and Production Capacity Certificate of Processing china trade Enterprise ("Capacity Certificate") with the competent authority of Ministry of Commerce through the website of China international economy and commerce. There are three kinds of forms to be filled in by three related parties involving in processing china trade business respectively.

Second step:

Apply for the Approval Letter of Processing china trade Business（"Approval Letter"）\

The proposed processing china trade enterprise shall first obtain the electronic KEY from the EDI system of related administration authority, and apply for the Approval Letter through the client's platform of the on-line verification and approval controlling system of processing china trade.

The following documents are required to be submitted:
Application Form of Processing china trade Business
Registration Letter of Operational Enterprise or Approval Letter of Foreign Invested Enterprise
Capacity Certificate
Business License of Operational Enterprise and Processing Enterprise
Import and Export Contract Concluded between operational enterprise and foreign party
Processing Contract concluded between operational enterprise and processing enterprise
Other documents is needed in case the operational enterprise or the processing enterprise belong to foreign invested enterprise

Third step:

Handle the registration formalities with customs and set up the enterprise record

The following documents are required to be submitted:

For the processing enterprises:
a. business license
b. tax bureau registration
c. outward processing enterprise registration letter
d. outward processing enterprise customs registration notice
e. Capacity Certificate

For the operational enterprise
a. Approval Letter for import and export business
b. Business license
c. Customs Declaration Registration Letter

For the foreign invested enterprise
a. Approval letter for foreign invested enterprise
b. Business license
c. Registration certificate of self-operational customs declaration
d. Company Contract and Constitution
e. Registration certificate of foreign invested enterprise
f. Taxation registration certificate
g. Capacity Certificate

Forth step:

Fill in record of the Processing china trade Contract

Process: input contract-declare to related competent Customs-registration formalities with designated bank for the guarantee-fund electronic credit system-Customs issuing processing china trade handbook

The following documents are required to be submitted:

a. Import and export contract concluded between operational enterprise and foreign partner
b. Approval Letter of Processing china trade Business
c. Capacity Certificate
d. Production process flowchart and unit-consumption of demanded materials of the new products
e. Other documents required by related authorities