The State Administration of Foreign Exchange, the State Administration of Taxation, and the General Administration of Customs recently jointly issued an announcement in which they decided to reform the foreign exchange administration system for trade in goods and to optimize and upgrade the information-sharing mechanism for foreign exchange receipts from exports and export rebates. Entering into effect as of December 1, 2011, a pilot reform will take place in provinces (cities) such as Jiangsu , Shandong , Hubei , Zhejiang (excluding Ningbo ), Fujian (excluding Xiamen ), Dalian , and Qingdao .

The reform of foreign exchange administration for trade in goods mainly includes the following:

First, improving foreign exchange administration for trade in goods and preventing risks in foreign exchange receipts and payments. The foreign exchange authorities will carry out comprehensive verifications on the flows of imported and exported goods and on the flows of capital from receipts and payments from trade, will conduct classified management of enterprises based on their compliance with the provisions on foreign exchange administration, and will dynamically adjust the results of the classified management. Most enterprises will enjoy facilitation during the handling of foreign exchange receipts and payments from trade; meanwhile the foreign exchange authorities will strengthen supervision of non-compliant enterprises with respect to document examination regarding receipts and payments from trade, business type, mode of settlement, and relevant handling procedures.

Second, simplifying the formalities for receipts and payments of foreign exchange from trade and the relevant handling procedures. Enterprises will not be required to handle verifications and writing-off formalities after receipts and payments of foreign exchange from trade; the documents required for enterprise compliance with foreign exchange payments for imports will be simplified significantly, and foreign exchange payments may be handled with the banks upon the strength of the import customs declaration, contract, invoice, or any other documents that can prove the authenticity of transactions. The bank documents and examination procedures for foreign exchange payments by enterprises will be simplified significantly and foreign exchange collections from exports will not be subject to online inspections.

Third, simplifying the export-rebate vouchers. During the pilot period, where the export enterprises in the pilot regions apply for export rebates, they will not be required to provide a paper Export Verification Form for Foreign Exchange Collections. The tax authorities will, in accordance with the relevant provisions, examine the enterprises’ export rebates with reference to the information provided by the foreign exchange authorities on the foreign exchange receipts from exports and the classification of the enterprises.

Fourth, adjusting customs declaration procedures for exports. During the pilot period, where the export enterprises in the pilot regions make customs declarations on exports, they shall still provide an Export Verification Form for Foreign Exchange Collection in accordance with the provisions in force. Upon nationwide acceptance of the reform of the foreign exchange administration system for trade in goods, the State Administration of Foreign Exchange and the General Administration of Customs will adjust the customs declaration procedures for exports and in general will cancel the Export Verification Form for Foreign Exchange Collections.

Fifth, improving regulatory synergy. The State Administration of Foreign Exchange, the State Administration of Taxation, and the General Administration of Customs will further strengthen their cooperation, realize data-sharing, improve coordination mechanisms, and rigorously crack down on irregular cross-border capital flows and activities such as tax fraud and smuggling that are in violation of the relevant laws.

Reforming the foreign exchange administration system for trade in goods and establishing a new administration mode combining facilitation and risk management are important measures conforming with the development and changes in the scale, mode, and participants in the country’s foreign trade and responding to the current balance of payments situation. They are an important element in the transformation of the concept and methods of foreign exchange administration. Optimizing and upgrading the information-sharing mechanism for foreign exchange receipts from exports and export rebates is beneficial to reduce social costs, improve the means of foreign exchange administration, and further enhance the level of trade facilitation.