Laws of the People's Republic of China

MEASURES OF THE CUSTOMS OF THE PEOPLE'S REPUBLIC OF
CHINA ON THE CONTROL OF THE IMPORT AND EXPORT OF
COMMODITIES INVOLVED IN THE PROCESSING OF
MECHANICAL AND ELECTRICAL PRODUCTS

(Promulgated on November 23, 1987 by the
General Administration of Customs)

 

 

SUBJECT: IMPORT & EXPORT LICENSING & ADMINISTRATION

ISSUING-DEPT: GENERAL CUSTOMS ADMINISTRATION

ISSUE-DATE: 11/23/1987

IMPLEMENT-DATE: 12/01/1987

LENGTH: 2442 words

TEXT:

[Article 1] These Measures are formulated in accordance with the Customs Law of the People's Republic of China, the Regulations of the People's Republic of China on Import and Export Duty and other relevant State regulations, in order to encourage and advance the export of Chinese mechanical and electrical products, to increase foreign excange earnings through the expansion of exports and to strengthen administration.

[Article 2] The import and export commodities involved in the processing of mechanical and electrical products as mentioned in these Measures refer to raw materials, auxiliary materials, accessories, components, spare parts and packaging materials (hereinafter referred to as materials and parts) imported by independent economic entities, specialised export factories (specialised workshops), export based enterprises and enterprises with independent rights to expand their foreign trade operations, all being authorised to operate import and export businesses, in order to process mechanical and electrical exports, as well as the finished products (including semi-finished products) which are re-exported after processing.

The import and export commodities involved in the processing of mechanical and electrical products as described in the preceding paragraph shall be classified as bonded goods and subject to Customs supervision and control.

[Article 3] A unit which processes mechanical and electrical products with imported materials shall enjoy favourable duty reductions in accordance with the provisions of these Measures and shall be obliged to make Customs declarations, pay supplementary duty charges when appropriate and be responsible for completing verification and cancellation procedures after fulfilling a contract.

A unit which processes mechanical and electrical Products with imported materials shall establish special books of account for matters such as the import of materials and parts, storage, custody, withdrawal of materials for use or transfer to another factory for processing, as well as the storage, export and sale of finished products, and shall submit a quarterly report and statistical tables to Customs.  In cases of a long production cycle a submission may be made every 6 months, subject to Customs examination and approval.  Customs shall have the right to undertake random inspections and the relevant operating units and processing units shall report their situations accurately and provide every necessary convenience.

[Article 4] Imported materials and parts used in the processing of mechanical and electrical products for export and subsequently re-exported as finished products shall be exempt from customs import duty.  If products processed from imported materials and parts are to be sold domestically, the consent of the original examining and approving organ shall first be obtained and, following Customs verification and approval, supplementary payment of duty on the imported materials and parts therein shall be made in accordance with regualtions.

The duty free materials and parts mentioned above shall include reasonable quantities of chemical substances, such as catalysts, catalytic agents and detergents, which are consumed in the production process.

If a material necessary to process a finished product is not completely consumed in the process and retains a use value, or if substandard goods or scrap materials are left over in the course of production, Customs shall impos a levy according to consideration of the estimated use value of the material.

[Article 5] Customs shall administer control of import and export commodities involved in the processing of mechanical and electrical products by verifying the items and issuing a Registration Manual for Mateials Imported for Processing (hereinafter referred to as a Registration Manual).

A unit which processes mechanical and electrical products with imported materials shall present an Import Material Processing Approval Certificate issued by the relevant State Council Ministry or Commission, the Foreign Economic Relations and Trade organ of the province, directly administered municipality or municipality authorised to formulate its own independent plans or the relevant department in charge (including the departments in charge of industry of the various import and export corporations and provincial, municipal or autonomous regional level departments and bureaus), together with a copy of the contract signed by the units signatory to the Customs inspection control division and shall carry out procedures for registration and the filing of details and shall obtain a Registration Manual.

[Article 6] When importing materials and parts and exporting finished products, a unit which processes mechanical and electrical products with imported materials shall make accurate declarations to the Customs authority at the point of entry (or exit), based on the Registration Manual and the Import (Export) Commodity Declaration Form which shall be completed in accordance with Customs regulations.

Items which are among goods which State provisions stipulate as requiring an Import/Export Commodity Licence shall be handled in accordance with the relevant regulations.

Materials and parts imported under a counterpart export contract for the finished products and using a Letter of Credit shall be exempt from the need to obtain an Import Commodity Licence.

[Article 7] No materials or parts imported duty free or the resulting finished products shall be sold domestically.  If, for any reason and following approval by the original examining and approving organ and verification and approval by Customs, goods are transferred for sale domestically, the operatin unit, within one month of the signing of a domestic sales contract, shall pay Customs a supplementary payment equal to the original amount of duty payable on the materials and parts, regardless of whether Renminbi or a foreign currency was used to settle the account.  If it is a commodity which also requires the supplementary issuing of an Import Commodity Licence, this Licence shall be presented to Customs for inspection.

[Article 8] Imported materials and parts shall be processed into finished products and re-exported for sale abroad within one year of their date of import.  If, in special circumstances, it is necessary to extend this period, an application for an extension shall be submitted to the Customs authority in charge.  The Registration Manual, an Import/Export Commodity Declaration From with a Customs seal affixed and other relevant documents shall be presented to Customs for the completion of verifiction and cancellation procedures within one month of the fulfilment of the contract.

When materials and parts are imported and finished products are exported, the operating unit shall fill in the words "Materials and parts imported for processing" or "Re-export of finished products processed with imported materials" in the "Trade" column of the respective Import or Export Declaration Form or shall affix a seal inscribed with the above words to the Import or Export Declaration Form.

[Article 9] When undertaking supervision and control of import and export commodities involved in the processing of mechanical and electrical products,Customs may adopt the following different methods:

(1) If an independent economic entity, specialised export factory (specialised workshop), export based enterprise or enterprise with independent rights to expand its foreign trade operations, all being authorised to operate import and export businesses, undertakes the processing of mechanical and electrical products with imported materials in an area with a Customs establishment, and implements a comprehensive administrative system and provides all necessary conditions for Customs supervision and control, Customs may approve the establishment of a bonded factory (or bonded workshop).  The levying of or exemption from duty on imported materials and parts shall be handled in accordance with the actual circumstances of export or non-export of the finished products.  The exported portion shall be duty free, but duty shall be levied on any portion not exported.

(2) If the processing of imported materials involves the import of materials and parts and the export of finished products under a counterpart contract (including a counterpart contract with a different customer, the party being from an associate company), Customs may, subject to approval by the Customs authority in charge, handle such matters as exemption from the supplementary payment of duty and other administrative matters in accordance with relevant Customs provisions on "commission processing".  However, machinery and equipment imported under such a contract shall be sujbect to the nomal import and duty payment procedures for import commodities.

(3) If an enterprise which uses imported materials to process mechanical and electrical products does not meet the requirements of (1) or (2), in orde to simplify procedures for accounting calculations and levying charges, 85% of its imported raw and auxiliary materials shall be classified as its export portion and be exempt from duty, and 15% shall be classified as the portion it is unable to export and shall have duty levied accordingly.  95% of parts, components and ready-made packaging imported for its various mechanical and electrical products shall be classified as its export portion and be exempt from duty, and 5% shall be classified as the portion unable to be exported and shall have duty levied accordingly.

[Article 10] A unit which processes mechanical and electrical products with imported materials and needs to store such materials and parts prior to processing, may apply to Customs for approval to establish a bounded warehouse, and administration shall be handled in accordance with the Customs Measures for the Control of Bonded Goods and Bonded Warehouses.  Accordingly, at the time of import, procedures for the deferred payment of duty may be carried out and when, within one year, the imported materials or parts are withdrawn from the warehouse for use in the processing of exports, the unite may apply to Customs to carry out import procedures and duty reduction or exemption and verification and approval procedures.

[Article 11] If, after processing into semi-finished products, imported materials and parts are transferred to another production enterprise for further processing and assembly before re-export as mechanical and electrical products, the unit which originally imported the materials and parts shall, in conjunction with the second production enterprise, present to Customs the jointly signed purchase and sales contract or the product processing contract and other relevant documents, and shall complete transfer, verification and cancellation procedures.  The production enterprise which undertakes the further processing of the imported materials and the re-export of the finished products shall apply independently to be issued with a new Registration Manual in accordance with the provisions of these Measures.

[Article 12] If materials and parts imported duty free with Customs approval are allocated for transfer elsewhere for processing and export,the enterprise receiving the materials and parts shall complete a Certificate for Approval to Transfer Imported Materials and Parts from a Different Area and, following its verification and approval by the Customs authority in charge, on copy shall be kept for filing and verification and cancellation purposes by the Customs of the area into which the goods are to be transferred and one copy shall be given to the enterprise receiving the materials and parts for transfer to the enterprise applying to re-allocate the materials and parts.  This enterprise in turn shall present its copy of the certificate to the Customs of the area from which the goods are transferred so that verification and cancellation procedures may be completed.

[Article 13] If an export contract stipulates that the foreign customer shall provide raw and auxiliary materials and packaging materials free of charge or for a fee, and, after the processing and export of the finished products, a surplus remains, transfer procedures may be carried out subject to Customs approval of an application by the operating unit.

[Article 14] If a situation such as an amendment, transfer, suspension, extension or cancellation occurs in the case of a contract which is already registered and with its details filed with Customs, the operating unti shall, within one month, complete procedures for the amendment or cancellation of registration with the Customs authority in charge in strict accordance with the facts.

[Article 15] In order to facilitate the processing and export operations of units which process mechanical and electrical products with imported materials and those of production enterprises which further process the imported materials into mechanical and electrical products for export, Customs may, depending on actual circumstances, dispatch Customs officials to undertake on-site supervision and control.

[Article 16] The import and export of commodities involved in the processing of mechanical and electrical products shall, in the case of a foreign investment enterprise which engages in the processing of mechanical and electrical products with imported materials, be handled in accordance with the Measures of the Customs of the People's Republic of China for the Control of the Import of Materials and Parts Required by Foreign Investment Enterprises for the Fulfilment of Export Contracts.

[Article 17] If the provisions of these Measures are violated through smuggling or other acts in violation of Customs supervisory and control regulations, the matter shall be handled in accordance with the provisions of the Customs Law of the People's Republic of China and the Detailed Rules on Administrative Penalties for the Implementation of the Customs Law of the People's Republic of China, and if the matter is serious enough to constitute crime, criminal liability shall be pursued by the judicial organs.

Operating units and processing units shall bear common responsibility when implementing these Measures and the various Customs regulations.  If a violation occurs,Customs may pursue criminal liability separately in accordance with the actual circumstances.

[Article 18] These Measures shall take effect from 1 December 1987.