Comments on: SAFE Issues New Regulations to Further Control Foreign Exchange Movement

By: Antonio

Antonio — Tue, 04 Nov 2008 21:18:27 +0000

Can anybody tell me the document required by safe to get a commission payment to an foreing (USA company) representing a Chinese company. Are they the same document required on the letter of credit or should you provide more documents. It is there any regulation on commission payments to a foreign company

By: Sean

Sean — Tue, 02 Sep 2008 04:14:40 +0000

Hi all,

I like to enquire on (2) areas pertaining to the commercial contract between a foreign based company outside China and a Chinese supplier in China:

1. Suppose there is an advance payment contract for goods where the foreign company pays to the Chinese supplier designated account outside China. Is SAFE registering necessary? Note that the money does not flow into China. Does it put the paying customer at risk of violating Chinese law (and thus the enforceability of the commercial contract) if the Chinese supplier does not register the commercial contract where payment is recieved by the supplier outside China?

2. Is such a commercial contract structure sound and legally enforeceable in Hong Kong? Whereby I pay as instructed by the Chinese supplier into a HK based bank account (could be under the name of the Chinese Co. Or maybe not - does it matter?). If there is a commercial dispute or non-performance by the Chinese supplier to deliver goods, can I use the commercial contract and evidencing payment, to the HK court and get back the money I pay or even compensations from the Chinese supplier?

Best regards,

Sean

By: Andy Scott

Andy Scott — Fri, 01 Aug 2008 08:40:57 +0000

Dear Willy,

If your company pays in foreign currency outside of China to import goods, this new SAFE regulation will affect your company. Your company must report any overseas payment to SAFE with a payment term over 90 days as from the date shown on import declaration form starting from October 1, 2008. The accumulated reported delay payment amount in one calendar year cannot exceed 10 percent of the total importation amount for the last year.

Regards,

By: Willy Lai

Willy Lai — Thu, 31 Jul 2008 07:02:00 +0000

Cornerstone is a WFOE and we import wines from our own wineries. We buy in USD or EURO and since these are our own wineries, we get credit terms ranging from 90 days to 180 days. Occasionally, we may delay payment for another 30 days to 60 days. We can import directly but we chose to import through and Import Agent. My question is:

The current policy is targetted at domestic company exporting and getting payment in foreign currencies. How does it affect importing companies that pays in foreign currencies? Or does it affect us at all?

By: Thomas Nicolaisen

Thomas Nicolaisen — Tue, 29 Jul 2008 08:50:54 +0000

This is certainly in effect in Shanghai, but only for domestic companies. Companies registered and approved as a 100% Free Trade Zone company by SAFE are also exempt these regulations, or at least this is how it is currently practiced. To get the status of a FTZ company, certain documents must be submitted to SAFE. When SAFE has agreed or the bank has seen enough evidence that you are in fact a FTZ company, you will not have any issues with receiving USD.

The workaround for many of our suppliers seems to be that they are now opening up HK bank accounts.

By: Chris Devonshire-Ellis

Chris Devonshire-Ellis — Tue, 29 Jul 2008 06:18:56 +0000

We’ve had a number of questions from clients and readers on the new regulations, for interest we reproduce the most common of these below together with our answers. Should you require further assistance on the issue please email to info@dezshira.com.

Q: I am running a representative office and every month I write an invoice for the coming expenses for the next month, for salaries, tax, energy, office expenses etc. Is this money also subject of this new regulation?
A: The money for RO expenses are not subject to this new regulation.

Q: I would like to enquire is the above release only applicable to export/import of goods? Does this release impact the services provided to overseas country?
A: These new regulations are just applicable for export/import of goods, not for services provided to overseas companies. It is possible that in the future, SAFE will place further controls on service income, however in practice it remains difficult to verify the service income value compared with export/import goods.

By: China Primer

China Primer — Mon, 28 Jul 2008 10:55:36 +0000

It looks like this is already in effect in Shanghai. A friend of mine with a consulting WFOE received a decent-sized wire transfer to his BOC account last week; however, it did not reflect in his balance until he went to the branch in person to certify in writing that the funds were for “non trading” purposes.

By: Chris Devonshire-Ellis

Chris Devonshire-Ellis — Mon, 28 Jul 2008 05:36:52 +0000

Thanks Rich. As always in China it’s a case of wait and see. Regulations can often seem draconian, and many states (Singapore is a good example) have laws in place that are on the statute, but are effectively (and deliberately) not enacted. The point being - they could be. Getting regulatory change through the legislature may not always be indicative of an immediate change in how regulations are implemented across the board. That is a different question. How the Chinese then use this change remains to be seen, and there is a lot of scope in the regulatory margins.

By: All Roads

All Roads — Fri, 25 Jul 2008 08:06:38 +0000

Correct me if I am wrong, but the hot money they are targeting is not going to be found in the manufacturing sector… and this is going to crush a lot of exporters.

I have put up a post going through some of the options/ implications, and hope that people will share their work arounds. there are bound to be some.

r
http://www.allroadsleadtochina.com