Rules on Foreign Exchange Administration in Bonded Areas

Rules on Foreign Exchange Administration in Bonded Areas
HuiFa [2002] No.74

SAFE branches in all provinces , autonomous regions and municipalities directly under the Central Government, exchange administration offices, and SAFE branches in the cities of Shenzhen, Dalian, Qingdao, Xiamen, and Ningbo:

　　To meet the new situation of exchange administration in bonded areas, the SAFE has revised the Rules on Foreign Exchange Administration in Bonded Areas promulgated on December 18, 1995 and put into force on January 1, 1996. The revised Rules on Foreign Exchange Administration in Bonded Areas is hereby promulgated for implementation.

　　1. According to Rules on Foreign Exchange Administration in Bonded Areas, an inside-area enterprise, whether Chinese or foreign-funded, shall go through formalities of foreign exchange registration and apply for Foreign Exchange Registration Certificate in Bonded Areas. Therefore, as from the day when Rules on Foreign Exchange Administration in Bonded Areas is officially implemented, branches and sub-branches of the State Administration of Foreign Exchange （hereinafter referred to as SAFE offices） shall no longer issue Foreign Exchange Registration Certificate of enterprise with foreign investment to an inside-area enterprise with foreign investment any longer. Instead, they shall only issue Foreign Exchange Registration Certificate in Bonded Areas to such enterprise.

　　2. As of promulgation of this circular, SAFE branches and exchange administration offices are required to reissue Foreign Exchange Registration Certificate in Bonded Areas to inside-area enterprises, and collect from them the old Foreign Exchange Registration Certificate in Bonded Areas and Foreign Exchange Registration Certificate of Enterprise with Foreign Investment. The changeover shall be finished before January 1, 2003.

　　3. During the changeover period, both old and new Foreign Exchange Registration Certificates in Bonded Areas are valid. If an inside-area enterprise cannot acquire the new Foreign Exchange Registration Certificates in Bonded Areas in time to make foreign exchange payment or collection due to reasons on the SAFE office''s side, according to Rules on Foreign Exchange Administration in Bonded Areas, its'' foreign exchange payment or collection may be made by a bank upon SAFE office''s approval on a temporary basis. As of January 1, 2003, the old Foreign Exchange Registration Certificate in Bonded Areas and Foreign Exchange Registration Certificate of enterprise with foreign investment shall become invalid without exception.

　　On receiving this circular, SAFE branches and exchange administration offices shall transmit it promptly to sub-branches and banks under their jurisdiction, administrative organs of bonded areas, and inside-area enterprises, give publicity to the Rules and make preparations to ensure timely issuance of the new Foreign Exchange Registration Certificate in Bonded Areas to the inside-area enterprises. Any problem encountered during implementation shall be reported to the General Affairs Department of the State Administration of Foreign Exchange in good time.

　　Attachment: Rules on Foreign Exchange Administration in Bonded Areas

　　Chapter I General Provisions

　　Article 1 Pursuant to Regulations on the Exchange System of the People''s Republic of China and relevant laws and regulations, this Rules is formulated with a view to improving foreign exchange administration in bonded areas and facilitating sound economic development.

　　Article 2 Bonded areas in this Rules refers to the special areas inside the People''s Republic of China （hereinafter referred to as inside China） under closed supervision of the customs established with the approval of the State Council.

　　Article 3 Outside areas in this Rules refers to the areas inside China other than the bonded areas.

　　Article 4 Inside-area entities in this Rules referred to the administrative organs, enterprises, institutions, and other economic organizations inside the bonded areas.

　　Inside-area Enterprises in the precious paragraph refer to both Chinese-funded and foreign-funded enterprises registered in the bonded areas.

　　Article 5 The organ responsible for foreign exchange administration in the bonded areas is the State Administration of Foreign Exchange （SAFE）, its branches and sub-branches （hereinafter referred to as SAFE offices）.

　　Article 6 Foreign exchange operational activities related to the bonded areas shall be conducted according to this Rules.

　　Article 7 Overseas economic transactions of the bonded areas shall be priced and settled in foreign exchange instead of in renminbi.

　　Bonded goods flowing between the bonded areas and outside areas shall be priced and settled in foreign exchange instead of in renminbi. Goods other than bonded ones flowing between the bonded areas and outside areas may be priced and settled either in renminbi or in foreign exchange. Non-trade transactions such as services shall be priced and settled in renminbi.

　　Transactions between inside-area enterprises in the same bonded area or between different bonded areas may be priced and settled either in renminbi or in foreign exchange. Fees of administrative organs inside the bonded areas shall be priced and settled in renminbi. Economic transactions between the bonded areas and other special areas under closed supervision of the customs, such as the processing areas for export and the Shanghai Diamond Exchange are regarded as transactions between bonded areas.

　　Article 8 Banks shall abide by this Rules and other relevant foreign exchange administration regulations when opening or closing a foreign exchange accounts for, purchasing foreign exchange from or selling foreign exchange to, and making payment or collection in foreign exchange for inside-area enterprises. They shall verify and keep related certificates and vouchers and submit statistic statements and other information to SAFE offices as required.

　　Article 9 All foreign exchange revenues earned by inside-area entities shall be repatriated in time and shall not be deposited overseas without approval of SAFE offices.

　　Article 10 For economic transactions with overseas enterprises, inside-area entities shall go through formalities of balance of payment statistical reporting as required. For economic transactions between inside-area and outside-area entities balance of payment statistical reporting is not required of the entities concerned.

　　Chapter II Foreign Exchange Registration and Annual Inspection

　　Article 11 Within 30 days after acquiring the industrial and commercial business license, the inside-area enterprise shall go through formalities of foreign exchange registration at a relevant SAFE office by presenting the industrial and commercial business license and its copy, the approved contract and its articles of association, and the certificate of organizational code （in the case of an enterprise with foreign investment, the approval document for its establishment is also required）, and fill out the Registration Form of Basic Information accurately.

　　After verifying the submitted documents, the SAFE office shall issue a Foreign Exchange Registration Certificate in Bonded Areas （hereinafter referred to as registration certificate） to the inside-area enterprise. The registration certificate shall be designed by the SAFE and printed by its branches. The registration certificate shall not be forged, altered, rented, lent, transferred, or sold to other entities.

　　Article 12 In case of change of name, address, business scope, stock equity transfer, increase of capital, merger and split after foreign exchange registration, the inside-area enterprise shall report to relevant SAFE office for record and go through formalities of altering foreign exchange registration upon relevant materials within 30 days after acquiring altered industrial and commercial business license.

　　Article 13 In the case of liquidation due to expiration of business term or casual termination of business, the inside-area enterprise shall hand in its registration certificate to the SAFE office and go through formalities of nullifying foreign exchange registration within 30 working days after liquidation is approved by the examining and approving body. Outward remittance of liquidated fund shall be made upon presentation of "approval for foreign exchange business under capital account" issued by the SAFE office. The inside-area enterprise shall hand in its registration certificate to the SAFE office and go through formalities of nullifying foreign exchange registration when it applies for such remittance.

　　Article 14 If the inside-area enterprise loses its registration certificate, it shall make a statement in the newspaper and report to the SAFE office within 5 days after the statement. The SAFE office shall re-issue a registration certificate upon the statement.

　　Article 15 The SAFE office shall inspect annually the inside-area enterprise''s foreign exchange income and expenditure as well as business operations in the first quarter of each year. After the annual inspection, the SAFE office shall record the result in the registration certificate.

　　Article 16 An inside-area enterprise''s income and expenditure in foreign exchange shall only be handled upon inspected and required valid registration certificate and prescribed valid certificates and commercial vouchers. The bank shall not immediately go through formalities of foreign exchange sale, purchase, payment and receipt for an enterprise that cannot present a valid registration certificate.

　　If an inside-area enterprise has not taken or passed the annual inspection, or fails to provide valid registration certificate, the SAFE office shall instruct it to rectify within a stated time. During the period of rectification, each of its receipt or payment in foreign exchange shall be handled by the bank upon the SAFE office''s approval.

　　Chapter III Open, Use, and Administration of Foreign Exchange Accounts

　　Article 17 An inside-area enterprise, before opening a foreign exchange account, shall apply at the SAFE office in the locality where the enterprise is registered by presenting its registration certificate and materials required by relevant regulations on foreign exchange account. Foreign exchange account for current account transactions shall be opened on the presentation of the "Account-opening Notice" issued by the SAFE office and the registration certificate. Special foreign exchange account for capital account transactions shall be opened on the presentation of the "approval for foreign exchange business under capital account" issued by the SAFE office and the registration certificate.

　　Foreign exchange account for current account transactions shall be opened at a bank in the locality where the enterprise is registered. And in principle, only one such account can be opened.

　　Special foreign exchange account for capital account transactions may be opened at a bank inside or outside the locality where the inside-area enterprise in registered. Before opening a special foreign exchange account for capital account transactions at a bank outside the locality of its registration, the inside-area enterprise shall apply to the SAFE office in the locality where the account is to be opened, and go through the formalities of account opening at a bank in the locality where the account is to be opened by presenting the "approval for foreign exchange business under capital account" issued by the SAFE office and the registration certificate.

　　Article 18 When approving an inside-area enterprise to open a foreign exchange account, the SAFE office shall check and ratify the receipt and payment scope and lifetime of the account according to the nature and purpose of the account in the "Account-opening Notice" or the "approval for foreign exchange business under capital account". But the SAFE office shall not set a balance ceiling for the foreign exchange account for current account transactions of the inside-area enterprise.

　　Article 19 The bank shall open foreign exchange account for an inside-area enterprise upon the "Account-opening Notice" or the "approval for foreign exchange business under capital account" issued by the SAFE office, indicate clearly in the relevant column of the enterprise''s registration certificate the bank''s name, account number, currency denomination and date of opening, and affix its seal to the certificate. The bank shall supervise the use by the inside-area enterprise of the foreign exchange account according to the scope of receipt and payment and lifetime of account.

　　Article 20 The inside-area enterprise shall use its foreign exchange account according to the scope of receipt and payment and lifetime ratified by the SAFE office.

　　Article 21 When an inside-area enterprise wants to close its foreign exchange account, it shall go through formalities of closing the account at the SAFE office presenting the registration certificate and the account-closed certificate issued by the account-opening financial institution within 10 working days after the account is cleared.

　　After the foreign exchange account of an inside-area enterprise is closed, the foreign exchange balance in it may be transferred into its new foreign exchange account opened upon approval of SAFE office. In the case of terminating business operation,Article 35 of this Rules shall be acted upon.

　　Article 22 If an inside-area enterprise wants to open a foreign exchange account overseas, it shall apply for the approval of the SAFE office concerned, according to regulations on overseas foreign exchange account; and open, use and close such account in accordance with rules.

　　Chapter IV Administration of Foreign Exchange Receipt and Payment, Sale and Purchase

　　Article 23 Foreign exchange revenues of an inside-area enterprise from current account transactions shall be deposited in its foreign exchange account for current account transactions. Sale of foreign exchange shall be made at the bank in the locality where the enterprise is registered by presenting the registration certificate and relevant certificates.

　　After buying foreign exchange from an inside-area enterprise, the bank shall make a record in the registration certificate, copy it after affixing its seal to the certificate. The copy, together with other relevant certificates, shall be kept for 5 years for future check.

　　Article 24 Overseas payment by an inside-area enterprise for current account transactions shall be made from its foreign exchange account upon the registration certificate, verification certificate of import payment in foreign exchange （acting reporting form）, other valid certificates and commercial vouchers required by rules on the administration of sale, purchase of, and receipt and payment in foreign exchange. If the original of customs declaration form is required according to such rules, while the inside-area enterprise can not get the original customs declaration form because the import is only subject to customs recording, the original detailed list of customs recording shall be presented. Unless this Rules provides otherwise, purchase of foreign exchange for payment is prohibited.

　　Article 25 Overseas remittance of a foreign investor''s profit, dividend, and bonus from an inside-area enterprise shall be made from the enterprise''s foreign exchange account upon the presentation of the registration certificate, profit distribution resolutions by the board of directors, tax payment certificates, paid-in capital verification report and auditing report on profits, dividend and bonus prepared by an accountant firm. If the account balance is not enough to cover the payment, the enterprise may purchase the shortfall at the bank upon the above-mentioned documents and all the statements of the bank where its foreign exchange accounts are opened.

　　Article 26 In case an outside-area enterprise sells goods to an inside-area enterprise in the mode of pricing and settlement in foreign exchange, the inside-area enterprise shall make the payment from its foreign exchange account upon the contract or agreement, invoice, the original of customs declaration form, the registration certificate, and shall not purchase foreign exchange for that purpose. The bank shall purchase foreign exchange from the outside-area enterprise or put the foreign exchange to its credit according to relevant rules.

　　Article 27 In case an inside-area enterprise sells imported goods that have entered the bonded area to an outside-area enterprise, the outside-area enterprise shall pay the inside-area enterprise with foreign exchange in its account or purchased foreign exchange upon a copy of the inside-area enterprise''s registration certificate and valid certificates and commercial vouchers required by Rules on Foreign Exchange Purchase, Sale and Payment. Unless the outside-area enterprise can provide the original detailed list of customs recording of the inside-area enterprise, direct overseas payment is not permitted.

　　In case an inside-area enterprise sells to an outside-area enterprise imported goods that have not entered the bonded area and have been declared outside, the out-side enterprise shall make the payment either overseas or to the inside-area enterprise with foreign exchange in its account or purchased foreign exchange upon a copy of the inside-area enterprise''s registration certificate and valid certificates and commercial vouchers prescribed by Rules on Foreign Exchange Purchase, Sale and Payment.If the inside-area enterprise makes overseas payment after being paid by the out-side enterprise, the inside-area enterprise shall present its registration certificate, certificate of the verification of the electronic account of the declaration form of the outside-area enterprise, and valid certificates and commercial vouchers prescribed by Rules on Foreign Exchange Purchase, Sale and Payment.

　　Article 28 The outside-area enterprise shall handle the formalities of export proceeds verification and verification of import payment in foreign exchange for bonded goods coming from the outside area to the bonded area or the other way around. For goods going from the bonded area to overseas or vice versa, the inside-area enterprise need not go through such formalities.

　　Article 29 If an inside-area enterprise''s registered capital is paid in renminbi, its payment in foreign exchange to overseas or outside area shall be made firstly with the foreign exchange balance in its account. If the balance is not sufficient for the payment, it may apply to the SAFE office in its locality of registration for purchasing the shortfall upon its registration certificate, paid-in capital verification report issued by an accountant firm, certificate of foreign exchange balance in its account issued by the bank, and valid commercial vouchers and certificates listed below. Purchase of and payment in foreign exchange shall be made upon its registration certificate and the SAFE office''s approval. Total purchase shall not exceed the equivalent of its renminbi paid-in capital.

　　（1） In the case of import of goods, the contract of import, the verification paper of import payment （acting reporting form）, the original of customs declaration form （verifying copy） or the detailed list of customs recording shall be presented;

　　（2） In the case of debt service or performance of external guarantee, the contract of external debt or external guarantee, the registration certificate of external debt or guarantee, the notice of payment sent by overseas creditor shall be presented;

　　（3） In the case of repayment of a domestic foreign exchange loan, the contract of loan, the registration certificate of domestic foreign exchange loan, and the notice of repayment sent by the creditor shall be presented.

　　Article 30 Payment in foreign exchange to overseas by an inside-area enterprise authorized by the bonded area administrative committee and customs to redistribute goods shall be made firstly with the balance in the enterprise''s foreign exchange account. If the balance is not sufficient for the payment, in the case of goods import, the redistributing enterprise may apply to a bank in its locality of registration for purchasing the shortfall by presenting its registration certificate, a certificate of the balance of its foreign exchange account issued by the account-opening bank, the original of customs declaration form （verifying copy）, invoice in renminbi, tariff clearance certificate, the original of detailed list of customs recording, the contract of import, the verification paper of import payment in foreign exchange （acting reporting form） and other valid commercial vouchers and certificates

　　In the case of debt service, performance of external guarantee and repayment of a domestic foreign exchange loan, the redistributing enterprise shall apply to the SAFE office in the locality of its registration for purchasing the shortfall upon its registration certificate, a certificate of the balance of its foreign exchange account issued by the account-opening bank, the original of customs declaration form （verifying copy）, invoice in renminbi, tariff clearance certificate, the contract and registration certificate of external debt, domestic foreign exchange loan, or external guarantee, the notice of repayment sent by the creditor, and other valid commercial vouchers and certificates. Purchase of and payment in foreign exchange shall be made upon its registration certificate and the SAFE office''s approval.

　　Annual total purchase of foreign exchange by an inside-area redistributing enterprise shall not exceed its total import in the same year.

　　Article 31 Foreign exchange payment to overseas by an inside-area processing enterprise that has been authorized by the bonded area administrative committee to sell a portion of its products in the domestic market shall be made firstly with the balance in the enterprise''s foreign exchange account. If the balance is not sufficient for the payment, in the case of goods import, the enterprise may apply to a bank in the locality of its registration for purchasing the shortfall by presenting its registration certificate, a certificate of the balance of its foreign exchange account issued by the account-opening bank, approval document on domestic sale, the contract of domestic sale, the original of customs declaration form （verifying copy）, invoice in renminbi, tariff clearance certificate and the original of detailed list of customs recording, contract of import, verification paper of import payment in foreign exchange （acting reporting form） and other valid commercial vouchers and certificates.

　　In the case of debt service, performance of external guarantee and repayment of domestic foreign exchange loan, the enterprise shall apply to the SAFE office in the locality of its registration for purchasing the shortfall by presenting its registration certificate, a certificate of the balance of its foreign exchange account issued by the account-opening bank, approval document on domestic sale, contract of domestic sale, the original of customs declaration form （verifying copy）, invoice in renminbi, tariff clearance certificate, contract and registration certificate of external debt, domestic foreign exchange loan, or external guarantee, notice of repayment sent by the creditor, and other valid commercial vouchers and certificates. Purchase of and payment in foreign exchange shall be made upon its registration certificate and the SAFE office''s approval.

　　Total purchase of foreign exchange by a processing enterprise shall not exceed its total authorized sales in the domestic market.

　　Article 32 When selling foreign exchange to an inside-area enterprise, the bank shall examine submitted valid certificates and commercial vouchers strictly according to this Rules, check previous purchases recorded in its registration certificate, affix a seal of "foreign exchange provided" to the original of customs declaration form, and verify the original electronic account of the declaration form from the verification network system for import customs declaration form and wind up the case. A customs declaration form with the seal of "foreign exchange provided" shall not be used as a supporting document for foreign exchange purchase and payment.

　　Article 33 After selling foreign exchange to an inside-area enterprise, the bank shall record the date of purchase, source of renminbi, amount and nature of the purchase in the registration certificate, copy the registration certificate after affixing the bank''s business seal to it. The copy, together with other commercial vouchers and certificates submitted by the enterprise for the purchase, shall be kept for 5 years for future check.

　　Article 34 An inside-area enterprise's receipt or payment in foreign exchange and foreign exchange transactions under capital and financial accounts, such as borrowing international commercial loan, foreign exchange on-lending loan, providing external guarantee, overseas bond issuance, overseas investment, domestic increase of capital or re-investment with foreign investor's profit, and so on, shall be handled upon its registration certificate and other required documents according to relevant regulations effective in outside areas. Overseas payment under capital and financial accounts shall be made from the enterprise's foreign exchange account; and shall not be made with purchased foreign exchange except where this Rules clearly provides for otherwise.

　　Guarantee provided by an outside-area enterprise to an inside-area enterprise for its borrowing of domestic foreign exchange loan shall be regarded as external guarantee.

　　Article 35 An inside-area enterprise that is going to terminate its operations shall liquidate all its assets according to relevant regulations effective in outside areas. Liquidated assets belonging to foreign investor may, with the SAFE office's approval, be remitted abroad from the enterprise's foreign exchange account or with purchased foreign exchange or reinvested domestically. Those belonging to the Chinese party, both in foreign exchange and in renminbi, shall be transferred to an outside area and disposed of according to relevant regulations.

　　Chapter V Supplementary Provisions

　　Article 36 The bank shall report to the local SAFE office within the first 5 working days of each month the purchase of foreign exchange by inside-area enterprises in the previous month, including their names, sources of renminbi, amounts purchased and purposes of the purchases.

　　Article 37 SAFE offices shall supervise and inspect the foreign exchange receipt and payment and foreign exchange business operations of banks and inside-area enterprises periodically or occasionally; and punish violators of this Rules according to the Regulations on the Exchange System of the People's Republic of China and other foreign exchange regulations; and for offences not specified in Regulations on the Exchange System of the People's Republic of China and other foreign exchange regulations, may give warning to, circulate a notice of criticism of, or impose fine up to RMB30000 on the violator. If an inside-area enterprise's purchase of foreign exchange with renminbi is not made according to this Rules, the SAFE office concerned may suspend or nullify its right to purchase foreign exchange with renminbi.

　　Article 38 This Rules shall enter into force as of October 1, 2002. The SAFE is responsible for its interpretation. Rules on Foreign Exchange Administration in Bonded Areas promulgated by the SAFE on December 16, 1995, Circular on the Implementation of Rules on Foreign Exchange Adminstration in Bonded Areas promulgated by the SAFE on January 24, 1996, Official Reply of the SAFE to SAFE Zhejiang Branch's Inquiry on the Classification of Foreign Exchange Sale to and Payment for the Inside-area Enterprises by the Outside-area Banks promulgated by the SAFE on July 27, 1998, Circular on Issues Related to Foreign Exchange Administration in Bonded Areas promulgated by the SAFE on July 26, 2000, and Circular on Transmitting Circular on Issues Related to the Establishment of Subsidiaries by enterprise with foreign investment in Bonded Areas promulgated by the General Affairs Department of the SAFE on January 29, 2002, and other supporting rules and normative documents shall be nullified at the same time.