On December 23, 2008, the State Administration of Foreign Exchange (SAFE) issued Circular 73 to improve the administration of foreign debt registration under enterprises’ trade in goods. Since July 2008, SAFE has issued a series of circulars to tighten control over foreign exchange involved in the trade of goods. Circular 30, for example, which SAFE issued in July 2008, addresses the administration of foreign debt registration under enterprises’ trade in goods.  

With the global financial crisis continually worsening, SAFE has further adjusted its administration of foreign debt registration under enterprises’ trade in goods by issuing Circular 73, entitled the Circular on Relevant Issues Concerning Improving the Administration of Foreign Debt Registration Under Enterprises’ Trade in Goods. Circular 73 went into effect on the date of its issuance, and experts believe that it will buffer China’s exports from the repercussions of the worldwide economic downturn.  

As used in these circulars, “foreign debt under enterprises’ trade in goods” refers to both advance payments received by an enterprise on export goods, and deferred payments made by an enterprise for import goods. Advances on export goods are export proceeds in foreign exchange received on a date prior to what is stipulated in the export contract, or prior to the actual date of export declaration. A deferred payment on import goods is a payment of foreign exchange made on a date later than what is stipulated in the import contract, or more than 90 days after the actual date of import declaration.  

Before the issuance of Circular 73, the total annual amount of advances or deferred payments registered by an enterprise could not exceed 10 percent of its total export or import payments, respectively, in foreign exchange over the previous year. In an effort to increase enterprises’ financial liquidity, Circular 73 raises both ratios from 10 percent to 25 percent. The ratios applicable to enterprises that import or export vessels and large-scale plants may be adjusted based on the current general ratio.  

In addition, Circular 73 exempts advances on exports and deferred payments for imports that are no more than US$30,000 from the abovementioned ratio restriction. Specifically, advances or deferred payments of no more than US$30,000 do not count toward the 25 percent cap if an enterprise has completed the withdrawal registration in SAFE’s online trade credit registration management system. In other words, enterprises may freely collect and settle advances on export goods or deferred payments for import goods that are no more than US$30,000.  

Circular 73 intends to reward law-abiding enterprises. If an enterprise has good credit standing, has no record of violating SAFE regulations, and strictly complies with SAFE’s trade credit registration requirements, SAFE may adjust the enterprise’s ratio, upon its application, based on its production and operation needs, the nature of its products, or its trade settlement practices.  

Circular 73 also applies to enterprises in bonded areas under customs supervision.