Laws of the People's Republic of China

The General Administration of Customs

Measures of the General Administration of Customs for the Administration of Materials and Parts that Enterprises with Foreign Investment Need Import in Order to Perform Product Export Contracts

the General Administration of Customs

November 24,1986

Article 1

These Measures are formulated in accordance with the Interim Customs Law of the People's Republic of China and relevant provisions of the State Council for the encouragement of foreign investment in order to encourage the re-export of products that are processed (manufactured) by enterprises with foreign investment for which materials and parts need to be imported to perform their product export contracts and to expand exports to generate foreign exchange earnings.

Article 2

Enterprises with foreign investment shall, in accordance with the provisions of these Measures, enjoy preferential treatment and perform the obligations in customs clearance and the paying of taxes. The goods imported and exported by them shall be declared to the Customs strictly according to the facts. Machinery and equipment, vehicles used in production and raw materials, fuel, knock-down parts, spare parts, components, sets of parts, auxiliary materials and packaging materials (hereinafter referred to as "Materials and Parts") that need to be imported by these enterprises for the execution of their product export contracts shall be categorized as bonded warehouse goods and shall be subject to supervision and control by the Customs.

Article 3

The imported machinery, equipment, vehicles used in production, and Materials and Parts referred to in Article 2 of these Measures shall be exempted from the requirement of obtaining import licenses. The Customs shall inspect and release such imports on the strength of the concerned enterprise's contract(s) or the import-export contract(s).

For products that are processed from Materials and Parts imported by enterprises with foreign investment and then re-exported, the Customs shall, at the time of re-export, handle the inspection and release of such products in accordance with the Provisions of the Measures of the Ministry of Foreign Economic Relations and Trade Concerning the Application of Import and Export Licenses by Enterprises with Foreign Investment.

But if imported Materials and Parts are used in products to be sold domestically, the enterprise with foreign investment in question shall have to go through the import Measures retroactively in accordance with the relevant provisions of the State. Where such products belong to the category of commodities subject to the control of import licensing control, import licenses for the said imported goods shall be submitted to and inspected by the Customs.

Article 4

As regards the imported Materials and Parts referred to in Article 2 of these Measures, exemption from import duties and the consolidated industrial and commercial tax applies only to that part of the imported Materials and Parts that is actually consumed in the processing of products for export.

The tax-free Materials and Parts referred to above shall include reasonable quantities of imported catalysts, catalytic agents, abrasives and fuel that are directly used in the processing of products for export and that are consumed in the production process.

Imported Materials and Parts shall be restricted to use by the enterprise that processes products for export and such products may not be sold on the domestic market. But for those products that are, for one reason or another, approved for domestic disposal (sale), the imported Materials and Parts that are used for their manufacture shall be taxed retroactively in accordance with the relevant regulations. Taxes may be reduced or exempted for substandard and defective products and scrap materials that are left over in the course of production on the basis of their use value as the case may be.

Article 5

Materials and Parts that enterprises with foreign investment need to import in order to manufacture products that are included in the List of Products to Substitute Imports approved by the department in charge as stipulated by the State shall, in light of these Measures, be treated as bonded warehouse goods over which the Customs shall exercise supervision and control, thus obviating the need to go through the measures for the payment of taxes at the time of import. When the product referred to above are supplied to domestic users, import duties and the consolidated industrial and commercial tax on the imported Materials and Parts used shall be paid to the Customs, and the import measures required shall be completed retroactively in accordance with the relevant regulations.

If domestic users import similar types of products from abroad, they may enjoy preferential tax reduction or exemption. When enterprises with foreign investment supply the products referred to above to these users, preferential tax reduction or exemption may also be granted, provided that they shall, in accordance with the relevant provisions of the State submit for inspection the certificate of tax reduction or exemption that has been approved by the department in charge.

Article 6

Materials and Parts that are purchased by enterprises with foreign investment from the bonded warehouses of the relevant departments or are imported by other enterprises in the capacity of agents of the said enterprises with foreign investment shall be likewise treated as those imported by the enterprises with foreign investment themselves, hence similarly subject to the relevant provisions of these Measures.

Article 7

Enterprises with foreign investment that are engaged in processing operations for which materials must be imported must complete the registration measures with the Customs in the locality (or the appropriate administrative division of Customs) for the record, for which their relevant contracts must be submitted, and, upon examination by the Customs, a Manual of the Customs of the People's Republic of China for the Registration of Processing and Re-export of Materials and Parts that Need be Imported by Enterprises with Foreign Investment in Order to Perform Product Export Contracts (hereinafter referred to as the "Registration Manual") shall be issued to the said enterprises with foreign investment. Those enterprises that are qualified, upon verification by Customs in the locality, may be dealt with in accordance with the administrative provisions of the Customs for bonded factories that import materials for processing operations.

When the above-mentioned Materials and Parts are imported and, after processing, the finished products are exported, an enterprise with foreign investment shall make declarations to the Customs at the place of entry and exit by submitting the Registration Manual, three copies of the customs declaration form for imported and exported goods, the invoice for the goods, packing lists and other relevant lists and certificates. The Customs shall make annotations and comments, and then affix a seal on the Registration Handbook, which shall then be returned to the enterprises with foreign investment, which shall use this to complete the verification and cancellation measures at the Customs in the locality (or the appropriate administrative division of the Customs).

Article 8

In respect of imported Materials and Parts imported under the items of each import contract, within two months after completing the execution (performance) of the relevant contracts, enterprises with foreign investment shall submit the Registration Manual, the customs declaration form for imported and exported goods and other relevant documents to Customs to complete the verification and cancellation measures.

A record of the import, storage and care, allocation for use and passing on to factories for processing of Materials and Parts, and the storage, export and domestic sales of the finished products after processing, must be kept by enterprises with foreign investment in specialized account books and quarterly statements must be submitted to the Customs for examination. As for products that require a long production period, upon the verification and approval of the Customs, such statements may be submitted every six months.

Article 9

If products processed from imported and tax-exempted Materials and Parts are, upon approval, sold domestically, the enterprises with foreign investment concerned shall, within one month of the date of approval, pay retroactively to the competent the Customs the customs duties and consolidated industrial and commercial tax on the imported Materials and Parts that were originally exempted from tax.

Article 10

Except where the Customs has given approval because of special reasons, enterprises with foreign investment shall, within one year of the date of import of the tax-exempted imported Materials and Parts, process them into finished products and perform the relevant contracts.

Article 11

When imported Materials and Parts after being processed into finished products are not exported directly but instead are transferred to another production enterprise, which also does processing on imported materials for re-export, for reprocessing and assembly, the enterprise that imported the Materials and Parts shall, together with this other production enterprise, complete the measures with the Customs as regards transfer and verification and cancellation, for which the purchase and sales contract or production and processing contract signed by the two parties and other relevant documents must be submitted. Such production enterprise that carries on the business of reprocessing of imported materials for re-export shall, in accordance with the stipulations of these Measures, apply for a new Registration Manual, and shall comply with the relevant stipulations of these Measures, subject to the supervision and control of Customs.

Article 12

In case of any alteration, transfer, suspension or cancellation of contracts that occurs after the importation of Materials and Parts, the enterprises with foreign investment concerned shall complete as soon as possible the required measures with the Customs for the said alteration, transfer, or cancellation.

Article 13

In order to facilitate the business activities of carrying out processing and export by enterprises with foreign investment and by production enterprises that do reprocessing of imported materials for re-export, the Customs may, based on the actual situation, dispatch Customs officers to be stationed at the factories to carry out actual supervision and control, and may examine the relevant account books. The enterprises referred to above shall provide offices and the necessary facilities.

Article 14

Enterprises with foreign investment may not, without authorization, transfer or sell domestically imported Materials and Parts and their processed products that are bonded warehouse goods. If an enterprise concerned is found to have made a transfer, or to have acted illegally in violation of the stipulations of these Measures, the matter shall be dealt with by the Customs in accordance with customs law and the relevant decrees and regulations of the State.

Article 15

These Measures shall enter into force as of December 1, 1986.