(Promulgated jointly by the Customs General Administration, the Bank of China, the State Planning Commission, the Ministry of Foreign Trade and Economic Cooperation, etc. on November 16, 1995)

Article 2 Under the shadow margin account scheme applied to imported materials and parts for inward processing (including processing with supplied and imported materials and parts and processing trade undertaken by enterprises with foreign investment, similarly hereinafter), entities or enterprises engaged in processing trade ( including foreign trade companies, companies intergrating trade with industry, state- owned enterprises and foreign invested enterprises which may engage in processing with supplied materials, and parts trade upon approval, similarly hereinafter) shall apply to the designated banks to open shadow margin accounts for the imported materials and parts for inward processing based on the amounts recorded in the contracts and present relevant documents verified and approved by Customs Services in due course. Where all processed products have been exported within the specified time limit for processing, the banks shall cancel the shadow margin accounts upon verification after such verification and cancellation by the Customs Services.

For the purpose of these Measures, ¡°designated banks" refer to branches (subbranches) of the Bank of China in the localities of the Customs Services responsible for such processing enterprises.

Article 3 The shadow margin account scheme shall not be applied to imported materials and parts for inward processing in the bonded areas or bonded factories where Customs supervisory personnel are stationed.

Article 4 Foreign economic and trade administrative authorities shall strictly examine and approve the contracts according to relevant provisions, and verify the business operation and production capacity of entities and enterprises engaged in inward processing trade and processing production enterprises, so as to prevent enterprises that actually do not have any factories, processing equipment or workers from engaging in smuggling and other illegal activities by taking advantages of inward processing trade.

Responsible Customs Services in the locality of the processing production enterprises shall proceed with examination and approval according to the inward processing contracts submitted by the inward processing entities or enterprises and the documents issued by foreign economic and trade administrative authorities, and issue, to the entities or enterprises engaged in inward processing, a Communication List for the Opening of shadow Margin Account based on the amount of imported materials and parts recorded in the contracts. Such entities or enterprises shall apply to local Banks of China in the locality of the Customs Services for the opening of the shadow margin account.

Local Banks of China shall open the shadow margin accounts for such entities or enterprises according to the Communication List issued by the Customs Services and issue Notice of the Registration of the Shadow Margin Account to such entities or enterprises and the responsible Customs Services. The entities or enterprises shall present the Notice to the responsible customs Services to complete the contract registration and recordation procedures.

When applying for the opening of the shadow margin accounts, the entities or enterprises engaged in inward processing shall pay a RMB100 yuan service fee each application.

Article 5 Where imported materials and parts under inward processing contracts conform with the conditions for transfer transportation, such imported materials and parts shall be transferred, according to transfer procedures, under the supervision and control of Customs Services at the ports of transit to the responsible Customs Services in the locality of the processing production enterprises where Customs declaration shall be completed.

Article 6 Entities or enterprises engaged in inward processing trade shall go through, according to relevant regulations by Customs Services, the procedures of the cancellation of contracts upon verification with local responsible Customs Services within one month after the execution of the contracts or the re-export of the batch of processed products, before the end of the processing duration verified by confirmation. Customs Services shall issue a Communication List for the Cancellation Upon Verification of Shadow Margin Account, based on which the entities or enterprises engaged in inward processing trade shall go through the procedure of cancellation upon verification of the shadow margin account with the relevant Bank of China, but within the time limit of inward processing as verified by the Customs.

Article 7 The duration within which the shadow margin account shall be cancelled upon verification shall depend on the valid term of the inward processing trade contract verified by the customs. Where changes such as the extension of the contracts take place, a Communication List of the Changes in the shadow Margin Account issued by the Customs shall be handed over to the entities or enterprises engaged in inward processing trade after verification and approval by foreign economic and trade administrative authorities and Customs Services. Such entities or enterprises shall go through the procedures concerning extension of shadow margin account and other changes at Bank of China.

Article 8 Entities or enterprises engaged in inward processing shall pay import tariffs according to the stipulated percentage when importing materials. Where products need to be sold domestically due to certain reasons in the course of processing, the entities or enterprises engaged in inward processing shall, first of all, report to foreign economic and trade administrative authorities for approval in accordance with relevant stipulations and pay import tariffs at Customs Services. Where the imported materials and parts are special products or the commodities import of which should be specifically of import quota or import license, import procedures shall be gone through according to relevant regulations.

Article 9 For middle products which have to be transferred for deep processing, procedures to register the contracts for recordation shall be completed once again at the Customs Services of the receiving ports. Receiving entities or enterprises shall apply to the designated Bank of China for the opening of shadow margin account in accordance with relevant provisions of these Measures. These middle products shall be transferred to the Customs of the receiving ports under the supervision of the Customs of the ports of transfer against the Registration Manual of Inward Processing Trade verified and issued by the Customs of the receiving ports and in accordance with relevant transfer procedures. Procedures of the cancellation of the contracts upon verification shall be completed at the transferring entities or enterprises, and relevant certificates shall be issued to these entities or enterprises. Such entities and enterprises shall then go to banks to complete the Procedures of the cancellation of the shadow margin accounts upon verification.

Article 10 Where products processed under inward processing contract are deposited in the wharehouses under customs export supervision or bonded areas, the responsible Customs services shall complete, according to relevant regulations, the verification/cancellation procedures against the receipts issued by the Customs Services responsible for such warehouses or bonded areas under supervision and control and then issue relevant certificates to the entities or enterprises engaged in inward processing, against which, the latter shall go through the procedures of cancellation upon verification of shadow margin accounts at banks.

Article 11 Where entities or enterprises engaged in inward processing trade have violated the supervision regulations of the Customs services and have failed to go through the procedures of cancellation of contracts upon verification at the Customs Services within the designated time frame, Bank of China shall not open new shadow margin accounts for these entities or enterprises. When relevant procedures have been completed, import tariffs shall be paid in time for the products to be sold domestically. Where import tariffs have not been paid in time, the Customs Services, taxation departments and banks shall mandate these entities or enterprises to pay the tariffs, or the opening banks of these entities or enterprises shall directly expropriate the deposits of these entities or enterprises into State treasury based on the tariff invoices issued by the Customs Services. Where entities or enterprises are found to be involved in smuggling or other activities in violation of the Customs supervision regulations, the Customs Services shall levy the overdue import tariffs according to relevant regulations afterwards and mete out punishment according to law. The Customs Services shall stop the registration of the inward processing contracts for recordation and foreign economic and trade administrative authorities shall repeal the processing trade rights of these entities or enterprises.

Article 12 These Measures shall enter into force on the date of Nov. 27, 1995.

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