Knowledge Related to Processing Trade Approval

I. Basic Concepts and Policies on Processing Trade

1. What is processing trade?

Processing trade refers to business activities where raw and auxiliary materials, parts and components,元器件, and packaging materials are imported from overseas on a bonded basis,全部 or partially, processed or assembled by domestic enterprises, and re-exported as finished products. It includes processing with supplied materials and processing with imported materials.

Processing with supplied materials refers to a type of processing trade where imported materials and parts are provided by foreign businesses, requiring no payment in foreign exchange for import, nor repayment with processing fees. The finished products are sold by the foreign business, and the operating enterprise charges processing fees.

2. Basic policies implemented by China on processing trade

First, a bonded policy is applied to imported materials and parts for processing trade;

Second, liberal trade policies are implemented for imported materials and parts for processing trade, with no quantitative restrictions (i.e., in principle, no quota or license management) except for very few sensitive goods;

Third, except for a few goods not exempt from tax as stipulated by the state, customs duties and import value-added tax are exempted on imported equipment provided free of charge by foreign businesses for processing trade;

Fourth, imports under processing trade are not subject to the regulations on operating division management for general trade imports, and operating enterprises can organize imports on their own.

II. Processing Trade Management

Given its characteristics of having both ends outside, flexible methods, and being less affected by changes in the domestic and international economic environment, processing trade has gained increasing attention from enterprises, becoming one of the important means for them to expand exports and earn foreign exchange, and improve economic benefits. Although processing trade has played a positive role in introducing advanced foreign production equipment, technology, and management experience, upgrading product quality, accelerating adjustments in commodity structure, market structure, and industrial structure, solving labor employment, driving the development of related domestic industries, and promoting economic growth, its vast scale, wide distribution, and numerous operating enterprises have made management more difficult. Some lawless enterprises fake the name of processing trade to engage in smuggling and illegal activities, taking advantage of the large tax burden gap between goods imported under processing trade and general trade. This has seriously impacted the domestic market and some industries, caused significant tax revenue losses for the state, and adversely affected the reform, relief of difficulties for state-owned enterprises, and the healthy development of the national economy. To promote the healthy development of processing trade, the state began to further improve the system from July 1996, mainly as follows:

1. Implementing classified management of commodities for processing trade (prohibited, restricted, and permitted categories).

2. Implementing classified management of processing trade enterprises (divided into categories A, B, C, and D).

3. Implementing "actual transfer" management of the bank deposit guarantee margin account.

III. Approval Management of Processing Trade

1. Approval Authorities

Provincial Department of Foreign Trade and Economic Cooperation authorizes municipal/regional foreign trade bureaus and some national-level economic and technological development zones, high-tech development zones, and export processing zones (hereinafter referred to as processing trade approval authorities) to approve and manage processing trade businesses within their regions. Based on actual conditions, our city has applied to and obtained approval from the provincial department to grant processing trade approval authority to all counties (cities), districts, and provincial-level development zones.

2. Graded Approval

Operating units undertaking processing trade must submit to and obtain approval from the competent foreign trade and economic cooperation department in advance. Except for commodities prohibited by the state from processing trade, graded management and graded approval are implemented based on commodity categories.

(1) For processing trade involving imported raw materials such as cotton, sugar, vegetable oil, wool, natural rubber, crude oil, and refined oil products, for which the state implements aggregate balance management on imports, all levels of foreign trade corporations, self-operated import & export production enterprises, and foreign-invested enterprises must submit through the respective foreign trade bureau to the provincial department for approval. If the state has other regulations, the new regulations shall apply.

(2) For processing trade involving other commodities, provincial enterprises submit to the provincial department for approval, while enterprises at the city, prefecture, and county levels submit to the foreign trade bureau in their place of registration for approval.

3. Application Documents and Materials

When applying to undertake processing trade business, the operating unit must provide the following materials:

(1) Copy of the document approving the operating unit's import & export operating rights or the foreign-invested enterprise approval certificate and business license, along with the original "Processing Trade Enterprise Operating Status and Production Capacity Certificate" (Form 1).

(2) Original "Processing Trade Enterprise Operating Status and Production Capacity Certificate" (Form 3) issued by the county-level (or higher) competent foreign trade department in the processing enterprise's registration area, plus a copy of the current or most recently annually inspected business license. However, if the processing enterprise is a foreign-invested or production-type enterprise, submit "Processing Trade Enterprise Operating Status and Production Capacity Certificate" (Form 2); foreign-invested enterprises must also provide the approval certificate and capital verification report. (The above forms can be downloaded from the processing trade section at www.ec.com.cn, and online registration is also required.)

(3) Application Form for Approval of Processing Trade Business, Application List for Filing Imported Materials & Parts, and Application List for Filing Export Finished Products and Corresponding Imported Materials & Parts Consumption (all originals). These can be processed only after obtaining the CA e-Security Certificate from Jinan Electronic Commerce Center.

(4) Original copies of the import and export contracts signed by the operating unit (for processing with imported materials) or original processing contract (for processing with supplied materials).

(5) Original processing agreement signed between the operating unit and the processing enterprise (must bear official stamps of both parties, which is not required if the operating unit is a self-operated import & export production enterprise).

Additionally, for the following specific processing trade businesses, in addition to the documents and materials above, corresponding approval documents are required:

(1) For processing trade involving imported materials & parts that are scrap metal or items, provide the material import approval document issued by the State Environmental Protection Administration according to relevant regulations.

(2) For processing trade involving imported materials & parts or exported finished products that are dual-use chemicals (military and civilian), provide the material import or product export approval document according to relevant regulations.

(3) For processing trade involving exported products that include maps, globes, or other map-containing items, provide the approval document from the State Bureau of Surveying and Mapping as required.

(4) For processing trade where exported products are audio/video products or printed matter, provide the approval document from the provincial press and publication administrative authority.

4. Contract Approval and Notes

When approving processing trade contracts, the approval authority must strictly verify materials submitted by the operating unit per the ministry's requirements. If materials are complete and correct, issued with an "Approval Certificate for Processing Trade Business," stamped with the approval authority's special seal. Go to customs for contract registration and filing.

The approval authority must note the following specific conditions when granting approval

(1) Commodity classification and enterprise classification

During approval, verify the categories of the imported commodity and enterprise. Add the word ``actual transfer``_s> remark if combining Restricted-category import with Category B Enterprises``s exception, ensure these phrases appear correctly comment underscores. Comma placement okay But note:

▶ Correct original clause reads “应认真审核加工贸易进口商品和企业的类别，如属于B类企业开展限制类商品的加工贸易或C类企业开展的加工贸易，应在《加工贸易业务批准证》备注栏内注加‘实转’字样。“ So “actual transfer” is written only for Category B LIMITED-case OR any Category C application. Not for ALL cases. Upper no marking mistake needed.

Approval authorities must NOT approve business for Category D enterprises. No approved ban imported items for operational processed supplies classes. Category AA enterprise >’ contracts still formal resolution is needed but bond bank guarantee accounting not applied.

(2) Review productions processing environment verification docs source described origin administrative accepted after investigating capability earlier before official authorized certify shape among the files piece each last output subject statement … certificate last period clear proof for restriction measures older system detection side only limited work factory that insufficient.

(Field revised following note should simply propose native paraphrase rules accordingly rather execute substitution): Revised transmission but take integration given: one full calibrated content existing unchanged will note supply). Continue format as preserved.