On April 2, 2010, the State Administration of Foreign Exchange (“SAFE”) issued a circular announcing new rules for a pilot project designed to revamp the verification procedures for import payments (the “Circular”). This pilot program applies to seven regions (provinces, municipalities or cities) including Tianjin, Jiangsu, Shandong, Hubei, Inner Mongolia, Fujian and Qingdao. From May 1st, these regions will carry out the new foreign exchange payment verification and the write-off systems for import payments.
The following are three notable changes introduced by the Circular:
- qualified import enterprises no longer need to complete verification procedures on site;
- online verification of import payments by banks is no longer required; and
- companies no longer need to file with SAFE before making import payments.
The reform focuses on changing from the current practices of case-by-case verifications, on-site inspections and supervision based on transaction behavior to the new practices of inspections of total payments, off-site inspections and supervision of transaction parties.
SAFE will keep a list of companies making import payments and this list would be made available to banks on a nationwide basis.
It is hoped that this new system will help to shorten the processing time for import payment verifications by SAFE, reduce the administrative burden on companies that import regularly as well as the burden on banks in handling the foreign exchange payments.