Measures for the Control of Foreign Exchange in Bonded and Supervised Zones

(Issued by the State Administration of Foreign Exchange on August 15 2007 and effective as of October 1 2007.)

Hui Fa [2007] No.52

Article 1:       These Measures have been formulated pursuant to the PRC Regulations for the Administration of Foreign Exchange Control and other related laws and regulations in order to improve foreign exchange control in bonded and supervised zones and promote the healthy development of bonded and supervised zones.

Article 2:       For the purposes of these Measures, the term "bonded and supervised zones" (the Zones) includes bonded zones, export processing zones, bonded logistics parks, bonded port zones, comprehensive bonded zones, cross-border industrial parks and other such specific zones over which customs effects closed regulation.

Article 3:       The State Administration of Foreign Exchange and its branches and sub-branches (Forex Bureau) shall be responsible for the monitoring and administration in accordance with the law of the foreign exchange accounts and foreign exchange receipts and expenditures of, and the purchase of foreign exchange and, the conversion of foreign exchange into renminbi by, organizations in the Zones.

Organizations in the Zones include administrative authorities, enterprises, institutions and other economic organizations.

Article 4:       Once an enterprise in a Zone obtains its business licence, it shall carry out foreign exchange registration procedures with the Forex Bureau of the place where it is located in accordance with provisions.

When an enterprise in a Zone carries out foreign exchange receipt and expenditure procedures, it shall present its proof of foreign exchange registration and carry out the procedures on the strength of the valid prescribed proof and commercial documents.

Article 5:       Economic transactions between a Zone and a place abroad shall be priced and settled in a foreign currency, unless otherwise provided.

Transactions for trade in goods between a Zone and a place in China outside the Zone (China Proper) may be priced and settled in renminbi or in a foreign currency. Subordinate pricing and settlement currencies for trade in goods shall be handled in accordance with commercial practice. Transactions for trade in services shall be priced and settled in renminbi.

Transactions between organizations in a Zone may be priced and settled in renminbi or in a foreign currency. The various official charges imposed by administrative authorities in a Zone shall be priced and settled in renminbi.

Article 6:       For all receipts and payments of funds between a Zone and a place abroad, the organization in the Zone shall file a report on its balance of payments statistics in accordance with provisions. For receipts and payments of funds between a Zone and China Proper, neither the organization in the Zone or the organization in China Proper is required to file a report on its balance of payments statistics.

Article 7:       Enterprises in the Zones shall open, use and close foreign exchange accounts in accordance with provisions for foreign exchange control applicable in China Proper.

The foreign exchange accounts of enterprises in the Zones shall be subject to administration by inclusion in the information system for administration of foreign exchange accounts.

Article 8:       The foreign exchange receipts and expenditures of enterprises in the Zones in connection with trade in goods shall be subject to different foreign exchange control policies depending on the customs regulation method appropriate to the manner in which the goods are bonded.

Once foreign trade rights have been registered by the department in charge of commerce, an enterprise in a Zone that is to engage in business activities regarding trade in goods shall carry out registration procedures for the Register of Importers That Pay Foreign Exchange to Parties Abroad and for verification of foreign exchange receipts from exports with the Forex Bureau of the place where it is located in accordance with relevant provisions applicable in China Proper.

Article 9:       In any of the following circumstances, an enterprise in a Zone that is to make a payment for goods to a party abroad or to a party in China Proper shall carry out the procedures therefor with a bank on the strength of a valid proof evidencing the lawfulness and genuineness of the transaction and the commercial documents:

(1)   if goods are imported directly from abroad or if goods of an overseas enterprise are purchased from the Zone or China Proper, the payment to the foreign party may be made from a foreign exchange account or with purchased foreign exchange;

(2)   if an export contract has been executed with a foreign party and an enterprise in China Proper carries out the customs declaration procedures for and exports the goods, the payment from abroad may, after the enterprise in the Zone has received foreign exchange, be transferred in the original currency to the enterprise in China Proper;

(3)   if goods are purchased from an enterprise in China Proper, payment may be made directly to it and the bank shall carry out for the enterprise in China Proper the procedures for conversion of foreign exchange into renminbi or crediting to the account in accordance with provisions; or

(4)   other payments to a party abroad or to a party in China Proper.

If an enterprise in a Zone on the Register of Importers That Pay Foreign Exchange to Parties Abroad is to make payment to a different place in China, it shall carry out record filing procedures for the payment of foreign exchange for imports in accordance with provisions.

Article 10:     If an enterprise in a Zone is to make payment to a party abroad, it is not required to carry out verification of the payment of foreign exchange for imports, unless otherwise specified herein.

If an enterprise in a Zone is to make payment to a party abroad on the strength of an import customs declaration form or is to purchase foreign exchange on the strength of an entry record-filing list to make payment to the party abroad, the bank through which the payment of foreign exchange is to be made shall, in accordance with provisions, carry out procedures such as electronic verification of the original account and closing of the case.

If an enterprise in a Zone is to purchase foreign exchange to make payment to a party abroad by a means other than cash on delivery, it shall submit by the prescribed time to the bank through which the payment of foreign exchange is to be made the original of the import customs declaration form or entry record-filing list, and the bank shall carry out the relevant procedures in accordance with the preceding paragraph. If the document is not submitted by the prescribed time, the bank shall submit the list of enterprises in the Zone to the Forex Bureau of the place where it is located within three working days from the date on which each quarter ends and the Forex Bureau shall review the genuineness of each receipt and expenditure of foreign exchange.

Article 11:     When an enterprise in a Zone exports goods to a party abroad and carries out exit record filing for bonded goods with customs, it shall not be required to carry out verification of foreign exchange receipts from exports after the receipt of foreign exchange. If customs declaration procedures for the export of non-bonded goods are carried out with customs, the enterprise in the Zone shall carry out verification of foreign exchange receipts from exports with the Forex Bureau in accordance with relevant provisions applicable in China Proper.

Article 12:     Payments for transactions between enterprises in a Zone shall be made in renminbi or from a foreign exchange bank account on the strength of a valid proof evidencing the lawfulness and genuineness of the transaction, such as the contract or agreement, invoice, etc., and the commercial documents.

Article 13:     If an enterprise in China Proper purchases goods from a Zone, it may make payment on the strength of the valid proof and the commercial documents to the enterprise in the Zone, directly to a party abroad or to an enterprise in China Proper that has rights in the goods. Once an enterprise in China Proper that has rights in the goods receives foreign exchange from the aforementioned enterprise in China Proper, it shall carry out verification procedures on the strength of proof such as an account crediting notice and conversion note. in accordance with provisions.

Article 14:     The conversion of foreign exchange receipts on the current account into renminbi and the purchase and payment of foreign exchange for trade in services by enterprises in the Zones shall be handled in accordance with relevant provisions applicable in China Proper.

Article 15:     Foreign exchange transactions on the capital account by organizations in the Zones shall be handled in accordance with relevant foreign exchange control provisions applicable in China Proper.

The assets obtained by a foreign investor from the liquidation of an organization in a Zone may be remitted abroad or re-invested in China after the approval of the Forex Bureau. The assets obtained by a Chinese investor shall be repatriated to China Proper in a timely manner and matters shall be handled in accordance with relevant provisions.

Article 16:     After a bank has carried out procedures for the purchase of foreign exchange or the conversion of foreign exchange into renminbi for an enterprise in a Zone, it shall note the same in the appropriate box on the proof of foreign exchange registration and retain the relevant proof and commercial documents for future reference.

Article 17:     Forex Bureaux shall conduct monitoring inspections of the foreign exchange receipts and expenditures and foreign exchange operations of banks and organizations in the Zones on a regular or ad hoc basis. Violations hereof shall be punished in accordance with the PRC Regulations for the Administration of Foreign Exchange Control and other foreign exchange control provisions. If the PRC Regulations for the Administration of Foreign Exchange Control and other foreign exchange control provisions are silent on a matter or their stipulations on the form of, or criteria for, penalties are unclear, a warning shall be given, a notice of criticism shall be circulated and a fine of maximum Rmb30,000 shall be imposed. Where procedures for the conversion of foreign exchange into renminbi or the purchase of foreign exchange have not been carried out in accordance herewith, the right to carry out procedures for the conversion of foreign exchange into renminbi or the purchase of foreign exchange directly with a bank may additionally be suspended or revoked.

Article 18:     These Measures shall apply mutatis mutandis to
(A and B type) bonded logistics centres, diamond exchanges, etc.

Article 19:     These Measures shall be effective as of October 1 2007. The State Administration of Foreign Exchange is in charge of interpreting these Measures. Matters not expressly provided for herein shall be handled in accordance with relevant foreign exchange control provisions applicable in China Proper. In the event of a discrepancy between these Measures and previous foreign exchange control provisions, these Measures shall prevail.

Appendix:

Titles of Documents that Will Be Repealed Upon the Entry into Effect of the Measures for the Control of Foreign Exchange in Bonded and Supervised Zones

The following documents shall be repealed from the date of implementation of the Measures for the Control of Foreign Exchange in Bonded and Supervised Zones:

1.     State Administration of Foreign Exchange, Circular on Issues Relevant to Foreign Exchange Control in Bonded Logistics Parks (Hui Fa [2005] No.92)

2.     General Affairs Department of the State Administration of Foreign Exchange, Official Reply on Matters Relevant to the Purchase of Foreign Exchange for Imports by Enterprises in the Haikou Free Trade Zone (Hui Zong Fu [2005] No.16)

3.     General Affairs Department of the State Administration of Foreign Exchange, Official Reply on the Issue of the Transfer of Foreign Exchange by Enterprises in Bonded the Zones to Enterprises in China Proper (Hui Zong Fu [2004] No.79)

4.     General Affairs Department of the State Administration of Foreign Exchange, Official Reply on the Issue of the Purchase of Foreign Exchange by Motor Vehicle Distribution Enterprises in Bonded the Zones (Hui Zong Fu [2003] No.32)

5.     General Affairs Department of the State Administration of Foreign Exchange, Official Reply Issues Relevant to the Payment of Foreign Exchange by a Bonded Zone Enterprise that Purchases Goods Stored in a Warehouse in the Bonded Zone by an Overseas Company (Hui Zong Fu [2003] No.27)

6.     State Administration of Foreign Exchange, Circular on the Issuance of the (Hui Fa [2002] No.74)

7.     Circular on the Issuance of the (Hui Fa [2000] No.116)