SAFE reforms foreign exchange control regime on cross-border goods trading - new rules published
On 27 June 2012, the State Administration of Foreign Exchange (SAFE), jointly with the General Administration of Customs and the State Administration of Taxation, issued a Circular on Reforming the Foreign Exchange Control Regime for Goods Trading (Circular). The Circular is designed to adjust the customs filing procedures for exports and to simplify the requirements on tax refund documents. The Circular will take effect on 1 August 2012.
In summary, the Circular effects the following reforms in respect of foreign exchange controls for cross-border goods trading:
- The procedures for collecting or paying foreign exchange relating to exports or imports have been simplified. It is no longer necessary to write off （核销） the receipt or payment of foreign exchange against each import or export of goods; instead, SAFE will monitor the import / export of goods and the associated receipt / payment of funds by reviewing the statistics filed on a unified electronic platform. Based on these observations and statistics, SAFE will evaluate whether relevant enterprises are in compliance with foreign exchange controls for cross-border goods trading.
- Enterprises will be divided into three categories; A, B, and C. Category A enterprises will enjoy preferential treatment for their payment or receipt of foreign exchange. Category A enterprises may instruct their banks to pay foreign exchange directly, as long as they can provide a document or bill (e.g. the customs filing paper, an import contract, or an invoice) to prove a genuine underlying trade. Category B and C enterprises are subject to closer and tighter controls by banks and SAFE in respect of the same payment or receipt of foreign exchange. Category B enterprises must accept a review by their banks of their filed electronic statistics; category C enterprises must register with SAFE before effecting each payment or receipt of foreign exchange. The list of enterprises falling under each category may be adjusted according to the performance of the relevant enterprises.
- The write-off paper （核销单）will no longer be required or issued when filing the export with the customs authority or claiming tax refunds with the taxation authority.
The write-off requirement for export trading was implemented in China in the 1990s, and is regarded as having performed a useful role in foreign exchange controls for goods trading. Such a requirement, however, has been incompatible with the rapid development of China’s cross-border trading business, and in light of this, SAFE initiated a pilot program implementing the above mentioned reforms across seven provinces and cities in December 2011. As that endeavour has proved successful, the Circular now supports the reform across the whole of China.
For further information, please contact Sun Hong.
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