China’s Pilot Program for Facilitating Foreign Exchange Receipts and Payments under Trade
- Introduction of the Pilot Program
The State Administration of Foreign Exchange of the PRC decided to carry out the pilot program on foreign exchange receipts and payments facilitation for trade in goods in Guangdong-Hong Kong-Macao Greater Bay Area, Shanghai city and Zhejiang province in January 2019, which supports prudential and compliant banks to implement more convenient measures when handling trade receipts and payments for enterprises with good credit standing. Major contents of the pilot program include the following parts.
(1)
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Optimizing verification of foreign exchange receipt and payment documents for trade. The banks shall handle foreign exchange businesses for trade in goods in accordance with three principles of “knowing your customer? “understanding your business?and "due diligence?
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(2)
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Foreign exchange receipts from trade are not required to go through accounts pending verification. Foreign exchange receipts of pilot enterprises under authentic and legitimate trade in goods can be entered into foreign exchange settlement account under the current account or settled directly.
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(3)
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Abolishing special re-exchange business registration formalities. Overdue re-exchange and re-exchange via routes other than the original one can be handled with a bank directly
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(4)
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Simplifying import declaration verification. If a bank can confirm that foreign exchange payment for trade is authentic and lawful, the electronic information verification formalities for import declaration can be waived.
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The Circular of the State Administration of Foreign Exchange Further Promoting Cross-border Trade and Investment Facilitation released on 23 October 2019 specified that the pilot program for the facilitation of foreign exchange receipts and payments under trade in goods shall be expended to other regions, and the pilot program shall be expended to trade in services as well.
Upon launch of the pilot program, local branches of the State Administration of Foreign Exchange of the PRC have worked out their implementation plan respectively. Eligible banks may apply for pilot qualification with the local branches of the State Administration of Foreign Exchange of the PRC. Pilot enterprises that can enjoy the benefits of pilot measures shall be selected by the pilot banks based on specific rules and criteria.
- How to become a pilot enterprise?
In principle, enterprises with good compliance records and strong risk prevention and control ability can apply to the pilot banks in their localities to become pilot enterprises. Different cities or regions will have their own pilot criteria, which shall be subject to the specific rules set out by the local branches of the Sate Administration of Foreign Exchange of the PRC.
For example, according to the Guidelines of the Shenzhen Branch of the State Administration of Foreign Exchange on the Pilot Facilitation of Foreign Exchange Receipts and Payments under Trades (Trial), pilot enterprises in Shenzhen shall simultaneously meet the following requirements:
(1)
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Registered in Shenzhen, handle foreign exchange receipts and payments of trade in goods/services with the pilot bank for more than three consecutive years, and have real needs for pilot measures.
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(2)
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The trade balance of goods/services is reasonable, receipts and payments is reasonable and stable. The receipts and payments of trade in goods of last year is USD100 million or more. The receipts and payments of trade in service of last year is USD10 million or more.
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(3)
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The operation of the enterprise is stable and complying with the law. No abnormal record of false trade and have not been punished by Shenzhen Branch of the State Administration of Foreign Exchange in the last three years. The enterprise applying for pilot measures on trade in goods shall be classified as Category A in the last three years.
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(4)
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Have measures to ensure the compliance of trade of goods/services and have assigned dedicated personnel to supervise and evaluate the pilot business.
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(5)
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The enterprise shall operate prudently. The trade credit and trade financing of the enterprise shall be reasonable.
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(6)
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Other requirements set out by the pilot banks for risk prevention purposes.
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The criteria for pilot enterprises in Guangdong-Hong Kong-Macao Greater Bay Area (including Zhuhai, Huizhou, Dongguan, Zhongshan, Jiangmen, Foshan, Zhaoqing, Guangzhou, except Shenzhen) are similar. The differences are as follows:
(1)
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For enterprises applying for pilot measures on trade in goods, the receipts and payments of trade in goods of last year shall be USD200 million or more. For those enterprises registered in Free Trade Zone, it shall be USD100 million or more.
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(2)
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For enterprises applying for pilot measures on trade in services, the receipts and payments of trade in services of last year shall be USD50 million or more.
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Upon implementation of the pilot program, pilot enterprises are no longer required to provide paper contracts, invoices, customs declaration and other materials to the bank for each transaction. The processing time of a single transaction is greatly reduced, which effectively reduces the time cost of both parties and improves the efficiency of capital settlement.
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