China Reforms Foreign Exchange Administration for Trade in Goods

To be more facilitated by the SAFE, the General Administration of Customs (GAC) and State Administration of Taxation (SAT) jointly released the “Announcement of the State Administration of Foreign Exchange, gonggao [2012] No. 1, hereinafter referred to as ‘Announcement’) “on June 29, which is scheduled to take effect on August 1, 2012.

There are six reform measures stipulated in the Announcement – the key information of each measure can be found below.

Reforming the administration mode of foreign exchange for trade in goods
Starting from the date of reform, the verification and writing-off form for foreign exchange proceeds from exports (hereinafter referred to as the “verification and writing-off form”) shall be cancelled, and enterprises are no longer required to go through the verification and writing-off formalities for foreign exchange proceeds from export.

Implementing a differentiated management system for enterprises
Foreign exchange bureaus shall, based on compliance with the regulation of trade-related foreign exchange proceeds and payment as well as the consistency of the import and export of goods, divide enterprises into Class A, Class B and Class C.

For Class A enterprises, the documents concerning foreign exchange payments from export shall be simplified. Class A enterprises are eligible to handle foreign contracts of imports, contracts, invoices or other documents that can prove the authenticity of the transactions. Class A enterprises are also eligible to receive foreign exchanges from export without network-based inspection. Banks shall accordingly simplify the formalities for examination and approval of the proceeds and payment of foreign exchange for such enterprises.

For Class B and Class C enterprises, strict inspection will be about the documents on foreign exchange proceeds and payment in goods trade, business type, settlement method and other aspects. For Class B enterprises, electronic data on foreign exchange proceeds and payment in goods trade shall be inspected by banks. For Class C enterprises, foreign exchange proceeds and payments shall be registered as foreign exchange bureaus item by item.

Adjusting the export declaration procedure
Beginning from the date of reform, verification and writing-off forms are no longer required from enterprises for export declaration purposes.

Simplifying export tax rebate vouchers
Export enterprises that apply for export taxes and declared to Customs before August 1, 2012.

Disposing of the foreign exchange proceeds from exports that have not been verified and written-off within the prescribed time limit
Enterprises should handle the verification and writing-off procedures before July 31, 2012 for goods exported and declared to the Customs August 1, 2012 and which have also expired the verification and writing-off period for foreign exchange proceeds from export before July 31, 2012. From August 1, 2012 onwards, the foreign exchange bureaus shall no longer carry out the verification and writing-off procedures for foreign exchange proceeds from export, and shall not issue verification and writing-off forms.

Strengthening joint supervision by departments
Enterprises shall, increase awareness of good faith, strengthen self-discipline and consciously conduct lawful operations.