What are the foreign exchange payment procedures under the reforms?
The SAFE Circular simplifies service-related foreign exchange payment procedures. If a domestic institution or individual owes the equivalent of no more than US$50,000 to an overseas institution for services, or no more than US$5,000 to an overseas individual, the institution or individual may purchase foreign exchange upon presentation of the contract or invoices.
If a domestic institution or individual pays foreign exchange through the Internet or any other method of electronic commerce, the institution or individual may purchase foreign exchange upon presentation of the relevant contract and payment notice downloaded from the Internet after it has been signed or sealed.
In cases where the law does not specifically require the examination and approval of documents, the sale or payment of foreign exchange for services is subject to the examination and approval of the foreign exchange bank if the amount is equivalent to no more than US$100,000. If the foreign exchange is equivalent to an amount greater than US$100,000, it is subject to the examination and approval of the local foreign exchange bureau.
International sea transportation enterprises can directly purchase foreign exchange from banks to pay freight and related fees incurred in international sea transportations. The consignors can directly, in accordance with their business needs, make payments for international shipping freight and related fees to overseas transportation enterprises.
The SAFE Circular also eliminates examination and verification procedures for domestic entities' current foreign exchange account opening, change and closure. The only SAFE procedure still required is for the domestic entity to file its business license and its certificate of organization code before opening its first current foreign exchange account. Later account opening procedures can be handled entirely with a foreign exchange bank.
The Circular is permitting certain domestic entities to purchase and deposit foreign exchange into their current foreign exchange accounts in advance, rather than waiting until payment deadlines are imminent facilitates import operations.