Provincial Approvals of Foreign Investment Clarified
July 02, 2001 | BY
clpstaff &clp articles &New regulations governing record filing requirements and procedures have been issued by MOFTEC. This law aims to clarify record filing procedures and streamlines the record filing process
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New regulations governing record filing requirements and procedures have been issued by MOFTEC. This law aims to clarify record filing procedures and streamlines the record filing process.
In 1999, the State Council of the PRC created an important exception to the rule that foreign- invested enterprises (FIEs) have to apply to the Ministry of Foreign Trade and Economic Cooperation (MOFTEC) for approval to invest more than US$30 million. The provincial equivalent offices of MOFTEC were given the power to grant these approvals for FIEs in the "encouraged category". Not long after this exception was created, the Issues relevant to Record Filing with the Ministry of Foreign Trade and Economic Cooperation of Foreign Investment Enterprises in the Encouraged category that are Above the Examination and Approval Limit of Provincial Level Foreign Trade and Economic Cooperation Authorities Supplementary Circular (Supplementary Circular) was issued to the provincial offices requiring them to file approvals granted for foreign investment in excess of US$30 million with MOFTEC.
Supplementary Circular
On June 1 2001, MOFTEC issued a Supplementary Circular clarifying the requirements and procedures for filings.
The Supplementary Circular has clarified that FIE projects under the "encouraged category" to which expanded provincial approval powers apply, are limited to enterprises that do not require governmental balancing efforts, including foreign currency balance support by the State and are either in the "encouraged category" under the Foreign Investment Guidance Catalogue or fall within the Guiding Foreign Investment in the Dominant Industries of the Central and Western Regions Catalogue.
The Supplementary Circular requires MOFTEC to process filings under the Supplementary Circular within 10 days of receipt. If it has no objection to the filing, MOFTEC will issue a Final Notice Certificate to the provincial authority that submitted the filing, with a copy to the appropriate customs offices. The Filing Notice Certificate may be delivered by mail, by fax or through the internet.
Significance of the Supplementary Notice
We believe the requirement that MOFTEC must either object to a filing or issue a Final Notice Certificate within 10 days of receipt of a filing, strongly indicates that MOFTEC review will be more procedural and less substantive. Presumably, MOFTEC will limit its review to a determination of whether the FIE is within the encouraged category and whether the procedural requirements have been observed.
The Supplementary Circular does, however, put both provincial officials and FIEs on notice that MOFTEC has established a system where it monitors whether provincial authorities are granting approval for investments in excess of US$30 million to FIEs outside the encouraged category. And the requirement of a Final Notice Certificate will mean that unless the MOFTEC filing requirements are met, FIEs that have received local approval will not qualify for reduced customs duties, preferential tax treatment and similar benefits available to FIEs.
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