Decree No. 195 of the General Administration of Customs of the P. R. China

Article 24 Under any of the following circumstances, any enterprise, if applying for the conduct of outward processing, shall deliver a sum of cash deposit or a banker’s guarantee that is equivalent to the tax amount payable on its outward processed goods:

(1) More than one Customs district is involved in the outward processing business;

(2) All working processes resort to outward processing;

(3) Outward processed goods are not subject to carrying back for direct exportation;

(4) The operating or undertaking enterprise is suspected of smuggling and of violating regulations and therefore subject to ongoing detection and investigation by the Customs, although the goods applied for outward processing are not involved in such cases.

With respect to the goods applied for outward processing, where having delivered to the Customs the cash deposit or banker's guarantee that is not less than the tax amount payable, the operating enterprise may be exempt from delivery of such cash deposit or banker's guarantee to the Customs as prescribed above in this Article.

Where the production operation of the operating or undertaking enterprise is incompliant with Customs supervision regulations and the goods applied for outward processing fall into any ongoing law cases, the Customs authorities may not grant the approval of such outward processing business.

Article 25 Based on the approval by the competent Customs at the place of the operating enterprise, it may be unnecessary to carry back to the operating enterprise the processing-trade goods, such as finished products and remaining materials/parts after outward processing and the leftover materials, inferior and defective products, and byproducts generated from production.

Article 26 The operating enterprise and the undertaking enterprise shall both subject themselves to the Customs supervision. The operating enterprise shall, in accordance with the Customs requirements, faithfully report the consignment, processing, unit consumption, storage, and so on regarding the goods under outward processing.

Article 27 Any processing-trade goods shall be used for their specified purpose only.

In urgent need by the processing of export-oriented products, after approval by the Customs, the operating enterprise may conduct exchanges among bonded materials/parts or between bonded and non-bonded materials/parts. But such exchanges of materials/parts shall be limited to the same enterprise under the principle of the same variety, specification, and quantity and non-profit making.

None of such exchanges may apply to bonded materials/parts imported under the processing trade with foreign client-supplied materials.

Article 28 If the operating enterprise must use any non-bonded materials due to the needs of processing techniques, it shall first faithfully declare to the Customs the proportion, category, specification, type, and quantity of the non-bonded materials to be used, and the Customs shall write off those non-bonded materials from the total materials consumed for the export products.

Article 29 Where an operating enterprise needs to return to and change the imported materials with the original supplier as a result of quality problem, or non-conformity of the imported materials with the specification or type with that stipulated in the contract, it may go through the formalities for customs declaration directly with the port customs. Bonded imported materials that have already been processed may not be returned and changed.

Article 30 The operating enterprise shall process and re-export the imported materials within the prescribed time limit, and shall report to the Customs for verification and writing-off within 30 days from the day of export of the last batch of finished products under the manual of processing trade or the day of expiration of the manual of processing trade. Where the contract concluded by an operating enterprise with the foreign party is terminated before expiration, the enterprise shall report to the Customs for verification and writing-off within 30 days from the day of termination of the contract.

Article 31 The operating enterprise shall, when reporting for verification and writing-off, faithfully declare the information about the imported materials, the finished products, leftover materials, residual materials, inferior materials, byproducts, and unit consumption, etc, and shall submit to the Customs the manual of processing trade, the special customs declaration form for import and export of processing-trade goods, as well as the other documents that the Customs requires.

Article 32 The Customs shall accept the report for verification and writing-off if the documents are complete and valid upon examination. If the Customs rejects the application, it shall notify the enterprise of the reasons in writing, and the enterprise shall report for verification and writing-off again pursuant to the provisions.

Article 33 The Customs may make the verification and writing-off through paper documents or electronic data, and may go to the factories to make inspections if necessary, and the enterprise shall render cooperation. The Customs shall make the verification and writing-off within 30 days from the day of accepting the report. Where it is needed to extend the period due to special circumstances, it may be extended for 30 days upon approval of the director of the Customs directly under the GAC or the director of the subordinate customs authorized thereby.

Source: ETCN