Promulgation Authorities:  General Administration of Customs

Promulgation Date:  2018.11.23

Effective Date:  2018.11.23

Validity Status:  valid

Administrative Measures of the People’s Republic of China Customs on Processing Trade Unit Consumption (Revised in November 2018)

Administrative Measures of the People's Republic of China Customs on Processing Trade Unit Consumption (Revised in November 2018)

Chapter 1 GENERAL PRINCIPLES

Article 1   These Measures are formulated pursuant to the provisions of the Customs Law of the People's Republic of China and other relevant laws and administrative regulations for the purposes of standardising administration of unit consumption under processing trade (hereinafter referred to as the "unit consumption") and promoting the steady development of processing trade.

Article 2   These Measures shall apply to Customs administration of unit consumption.

Article 3   Unit consumption shall mean the quantity of materials consumed for processing unit finished product by a processing trade enterprise under normal processing conditions; unit consumption includes net consumption and technique consumption.

Article 4   Processing trade enterprises shall complete unit consumption filing formalities with the Customs at the time of setting up processing trade manual.

Article 5    Administration of unit consumption shall comply with the principles of truthful declaration and truthful verification and cancellation.

Article 6   Where information provided to the Customs by a processing trade enterprise involves trade secrets and the processing trade enterprise  requests in writing to the Customs for protecting confidentiality over the information, the Customs shall maintain confidentiality pursuant to law. Processing trade enterprises shall not refuse to provide relevant information to the Customs on the ground of confidentiality.

Chapter 2 UNIT CONSUMPTION STANDARDS

Article 7    Unit consumption standards shall mean the norms on the material quantity consumed by unit finished product, which are for a general purpose or many be used repeatedly. A maximum value shall be set for the unit consumption standards, and a minimum value shall be set for the unit consumption standards for export taxable finished products.

Article 8   Unit consumption standards shall be formulated by the Customs jointly with the relevant authorities pursuant to the relevant provisions.

Article 9   The unit consumption standards shall be published in the form of Customs circular.

Article 10   The unit consumption standards shall apply to processing trade enterprises outside the Special Customs control areas and bonded control areas; the unit consumption standards shall not apply to processing trade enterprises within the Special Customs control areas and bonded control areas.

Article 11   Processing trade enterprises outside the Special Customs control areas and bonded control areas shall file unit consumption with, or declare unit consumption to, the Customs within the unit consumption standards.

Where unit consumption declared by a processing trade enterprise outside a Special Customs control area or a bonded control area falls within unit consumption standards, the Customs shall verify and cancel the quantity of bonded materials according to the declared unit consumption; where the declared unit consumption exceeds unit consumption standards, the Customs shall verify and cancel the quantity of bonded materials according to the maximum or minimum value of the unit consumption standards.

Article 12   Where the unit consumption standards are yet to be published, a processing trade enterprise shall declare unit consumption to the Customs truthfully; the Customs shall verify and cancel the quantity of bonded materials according to the actual unit consumption of the processing trade enterprise.

Chapter 3 UNIT CONSUMPTION DECLARATION

Article 13    Unit consumption declaration shall mean the reporting of unit consumption to the Customs by a processing trade enterprise.

Article 14   A processing trade enterprise shall declare its unit consumption to the Customs truthfully before the finished products are exported, transferred for further processing, or sold in the domestic market.

Where a processing trade enterprise is unable to declare unit consumption within the stipulated period with proper reasons, it shall retain the samples of the finished products, relevant documents and certificates, and submit a written application before the finished products are exported, transferred  for further processing, or sold in domestic market; upon approval by the Customs in charge, the processing trade enterprise may declare unit consumption before reporting for verification and cancellation.

Article 15   A declaration of unit consumption by a processing trade enterprise shall include the following contents:

(1) The description, serial number, unit of measurement, specifications, model number and quality of the materials and the finished products under the processing trade;

(2) The unit consumption for finished products under the processing trade; and

(3) Where a same type of materials under processing trade comprises bonded and non-bonded portions, the ratio, description, unit of measurement, specifications, model number and quality of the non-bonded materials shall be declared.

Article 16    Consumption in the technological process shall exclude the following circumstances:

(1) Consumption of bonded materials, semi-finished products and finished products caused by a power failure, disruption of water supply, disruption of gas supply or other man-made reasons;

(2) Consumption of bonded materials, semi-finished products and finished products caused by a loss or damage;

(3) Loss, damage or shortage of bonded materials, semi-finished products and finished products caused by a force majeure event;

(4) The increased consumption of materials caused by imported bonded materials and exported finished products that fail to comply with quality, specifications and contractual stipulations;

(5) Consumption caused by non-bonded materials used in technological components; and

(6) Consumption of consumable materials in the course of processing.

Article 17   A processing trade enterprise may apply to the Customs to change or revoke unit consumption other than the following circumstances:

(1) Export declaration has been made for the finished products manufactured with bonded materials;

(2) The finished products manufactured using bonded materials have been transferred for further processing;

(3) An application for the domestic sale of the bonded finished products  has been made;

(4) The Customs has verified the unit consumption; or

(5) The processing trade enterprise has been put on record by the Customs for investigations.

Chapter 4 EXAMINATION AND APPROVAL OF UNIT CONSUMPTION

Article 18   Examination and approval of unit consumption shall mean the Customs' examination and verification of the unit consumption declared by a processing trade enterprise, against the relevant provisions and actual processing pursuant to the provisions of these Measures.

Article 19   The Customs may exercise the following powers when examining the veracity and accuracy of unit consumption:

(1) Inspect and duplicate samples, visual images, pictures, drawings, quality, composition, specifications and model numbers of the materials and finished products under processing trade, as well as account books and information including processing contracts, orders, processing plans, processing reports, and cost accounting;

(2) Inspect and duplicate relevant materials including workflow charts, markers, quantities list, table of components, quality testing standards, which may reflect the technical requirements, processing workflow and the corresponding consumption of the finished products;

(3) Request the processing trade enterprise to provide the unit consumption calculation method and formula;

(4) Check bonded materials and finished products, or take samples for inspection or laboratory testing;

(5) Interview the legal representative, main person-in-charge and other relevant personnel on issues concerning unit consumption;

(6) Enter the storage premises of the processing trade enterprise to inspect goods related to unit consumption and the status of processing; and

(7) Conduct on-site measurements of unit consumption of products under processing, and take samples where necessary.

Article 20   The Customs shall examine the unit consumption declared by a processing trade enterprise, and accept the declaration by the processing trade enterprise where it complies with the provisions.

Article 21   Where the Customs doubts the veracity or accuracy of the unit consumption declared by a processing trade enterprise, it shall issue a "Notice of the Customs of the People's Republic of China on Query of Unit Consumption under Processing Trade" (hereinafter referred to as the "unit consumption query notice", see Appendix) to notify the processing trade enterprise's legal representative or agent in writing of the reason for the query.

Article 22   The processing trade enterprise's legal representative or agent shall provide the relevant materials to the Customs in writing within 10 working days upon receipt of the "unit consumption query notice".

Article 23   Where the processing trade enterprise is unable to provide the relevant materials within the timeframe stipulated by the Customs or the materials provided are inadequate or the materials provided cannot determine the unit consumption, the Customs shall determine the unit consumption.

Article 24   The Customs may verify and determine the unit consumption declared by a processing trade enterprise through technical analysis, actual measurement, cost accounting, etc, either singularly or in combination.

Article 25   Prior to verification and determination of unit consumption, where a processing trade enterprise makes a security deposit or provides a bank guarantee with the approval of the Customs, the processing trade enterprise may complete the Customs formalities in advance for import/export of materials and finished products under processing trade, transfer for further processing, or domestic sale etc.

Article 26   A processing trade enterprise which objects to a verification and determination of unit consumption outcome may apply in writing for a review to the higher-level Customs of the Customs which made the unit consumption verification and determination; the higher-level Customs shall make a review decision within 45 days upon receipt of the application for review.

Chapter 5 SUPPLEMENTARY PROVISIONS

Article 27    The following terms used in these Measures shall be defined as follows:

Net consumption shall mean the quantity of materials that exist in or are converted into unit finished products through physical change or chemical reaction after being processing.

Technique consumption shall mean the quantity of materials, other than net consumption, that is consumed in the course of normal processing but cannot exist or be converted into finished products due to processing technique; technique consumption includes tangible consumption and intangible consumption. Technique consumption rate shall mean the percentage of technique consumption in the total material consumption.

Unit consumption = Net consumption / (1 - rate of consumption in the technological process).

Technical analysis method shall mean the method adopted by the Customs to analyse and compute various factors which affect unit consumption, such as the structure, composition, formula and technological requirements of finished products, so as to verify and determine the unit consumption of finished products.

Actual measurement method shall mean the method adopted by the Customs to determine the unit consumption in the course of processing by way of measurement, calculation etc, and to verify and determine the unit consumption of finished products through an integrated analysis.

Cost accounting method shall mean the method adopted by the Customs to compare and analyse based on the statistical information of raw materials consumption including account books, processing records, warehouse accounts etc, so as to calculate, verify and determine the unit consumption of finished products.

Article 28    Violations of the provisions of these Measures which constitute smuggling or violations of regulatory provisions of the Customs shall be dealt with by the Customs pursuant to the relevant provisions of the Customs Law of the People's Republic of China and the Implementation Regulations of the Customs of the People's Republic of China on Administrative Penalties; where the case constitutes a criminal offence, criminal liability shall be imposed according to law.

Article 29    The General Administration of Customs shall be responsible for the interpretation of these Measures.

Article 30   These Measures shall be effective from 1 March 2007. The Administrative Measures of the Customs of the People's Republic of China on Unit Consumption of Processing Trade promulgated via General Administration of Customs Order No. 96 on 11 March 2002 shall be repealed simultaneously.

Appendix:  Notice of the Customs of the People's Republic of China on Query of Unit Consumption under Processing Trade (omitted)