Announcement of Shanghai Customs on Implementing the Processing Trade Work-Order Write-off Mode in China (Shanghai) Pilot Free Trade Zone

No. 8, 2014

    With a view to advancing the facilitation of entry-exit goods clearance in the China (Shanghai) Pilot Free Trade Zone, in accordance with the Customs Law of the People’s Republic of China and the Notice of the State Council on Printing and Distributing the Framework Plan for the China (Shanghai) Pilot Free Trade Zone (SC G [2013] No. 38), upon approval by the General Administration of Customs, matters about the implementation of processing trade work-order write-off mode in the Pilot Zone are hereby announced as follows:

    1. Work-order write-off mode means that the customs sets up the part-number-level record in the China (Shanghai) Pilot Free Trade Zone customs supervision informatization system (hereinafter referred to as the informatization system), based on the P/N-level management, and again, according to merge rules, sets up the item-number level record, to conduct a supervision mode of making the item-number-level record clearance and P/N-level record write-off in the informatization system for the enterprises registered with the customs in the Pilot Zone (hereinafter referred to as the “enterprises in the Zone”).

    2. Enterprises in the Zone conducting the work-order write-off mode shall comply with the following conditions:

    (1) engaging in processing trade;

    (2) using ERP and other systems to conduct full infomatization control over purchase, production, storage and sale;

    (3) using work order to record production consumption and output;

    (4) setting up a computer management system in line with the customs supervision requirements, able to network with the informatization system via the data exchange platform or other computer network according to the attestation mode stipulated by the customs, and submit to the customs relevant data that can satisfy the customs supervision requirements (for specific networking conditions and handling formalities, see Shanghai Customs Announcement No. 5, 2014); and

    (5) exercising separate management of bonded materials part number and non-bonded materials part number.

    3. Eligible enterprises in the Zone, conducting work-order write-off, shall submit the China (Shanghai) Pilot Free Trade Zone Customs Work-order Write-off Mode Filing Form (see Annex) to the competent customs in the Pilot Zone (hereinafter referred to as the competent customs) and may conduct such mode after verification of compliance with the relevant conditions by the customs.

    4. Enterprises in the Zone that conduct work-order write-off shall truthfully declare the following data to the customs:

    (1) Before importing materials and exporting (selling on the domestic market, and deep processing and transferring ) finish products, declare to the informatization system the pre-merge information on P/N level materials and finish products, and declare information on corresponding item-number level materials, finish products and theoretic unit consumption.

    The merge relation between P/N level materials and finish products on the one hand and corresponding item-number level materials and finish products on the other shall be set up in reference to relevant provision of the Rules for Merging Processing Trade Networked Supervision of Import & Export Commodities (for trial implementation) (GAC Announcement No. 55, 2010)

    (2) P/N level declaration data (the informatization system, based on merge relation, automatically creates corresponding item-number level declaration data), after the customs makes discharge and confirmation of such data, enterprises in the Zone shall declare to the customs the related item number level bill of entry.

    (3) P/N level work-order data (all the intraday work-order data shall be submitted on the following day, no delay permitted without the consent of the customs);

    (4) Data of P/N level goods in and out of storage (all the intraday storage data shall be submitted on the following day, no delay permitted without the consent of the customs);

    (5) Stock data of P/N level goods raw materials, semi-finished products, finish products and leftover bits and pieces (shall be submitted according to the cycle stipulated by the customs, at most 14 days);

    (6) If the bonded processed finish products for domestic sale by enterprises in the bonded area contain materials purchased from inside the border, and the customs levies taxes on materials in the finish products purchased from abroad and sold inside the border, the corresponding unit consumption of domestic sale shall be declared; and

    (7) Other dynamic data as required by the customs supervision.

    5. Enterprises in the Zone shall make regular declarations to the customs from the day of implementation of work-order write-off mode. The cycle of write-off shall be determined by the customs depending on actual supervision needs, at most one year.

    Enterprises in the Zone shall finish declaration within 30 days from the end of write-off cycle determined by the customs. If declaration cannot be made on schedule for proper reasons indeed, delay is allowed upon examination by the competent customs but the extension may not exceed 60 days.

    6. The customs may adopt the at-the-factory check mode to check the inventory number declared by enterprises in the Zone, so as to confirm the actual P/N level inventory number written off in the current period.

    7. In making write-off, the customs, after comparing the P/N level actual inventory number at the deadline of write-off period of enterprises in the Zone and the P/N level inventory number by statutory calculation in the informatization system, make the following disposition separately depending on situations:

    (1) If the actual inventory number is more than that by statutory calculation and the enterprise in the Zone can provide proper reasons therefor, the customs shall confirm the balance of the current period according the actual inventory number;

    (2) If the actual inventory number is less than that by statutory calculation, and the enterprise in the Zone can provide proper reasons therefor, the customs shall confirm the balance of the current period according to the actual inventory number. In respect of the shortage, the customs shall order the enterprise in the Zone to complete the follow-up formalities for tax payment, and tax shall be levied on the leftover bits and pieces classified according to the actual check.

    8. Definitions of the following terms in this announcement:

    “Work order” means that which the processing trade enterprise uses in the actual production management to indicate the detail of materials consumed for a certain batch of corresponding finish products, reflecting the detail of materials consumed for each production process transformed to multi-level semi-finished products in the enterprise’s processing process ;

    “Semi-finished products” mean goods whose production an enterprise has not yet finished for export or domestic sale and which need to be further processed. The customs exercises only the P/N level control over semi-finished products, not making item-number level filing.

    “Inventory by statutory calculation” means the informatization system operates the P/N level electronic data checked in a certain cycle by a certain logic formula and produces the P/N level theoretic inventory number.

    Material inventory number by statutory calculation = number at the beginning of the current period (the transferred last period write-off P/N level actual inventory) + material import number (according to P/N level declared data corresponding to item-number level bill of entry) – material returned number ( P/N level declaration data corresponding to item-number level bill of entry) – work-order consumption number

    Finish product inventory number by statutory calculation= number at the beginning of the current period (the transferred last period write-off P/N level actual inventory) + finish product returned number (P/N level declaration data corresponding to item-number level bill of entry) + work-order output finish product number – finish product export (domestic sales) number (P/N level declaration data corresponding to item-level bill of entry)

    Semi-finished product inventory number by statutory calculation= number at the beginning of the current period (the transferred last period write-off P/N level actual inventory) + work-order output semi-finished product number – work-order consumed semi-finished product number

    This announcement shall be effective as of May 1, 2014

    It is hereby announced.

Annex: China (Shanghai) Pilot Free Trade Zone Customs Work-order Write-off Mode Filing Form

Shanghai Customs

April 21, 2014

Annex:

China (Shanghai) Pilot Free Trade Zone Customs Work-order Write-off Mode Filing Form

                                 No.   (  ) Customs    year      no.:

Note: This form is printed on the right and wrong sides, in duplicate, the competent customs and the filed enterprise each keeping a copy.