By Koos Jansen

https://www.bullionstar.com/

Recently it appeared the ‘confusion’ regarding Chinese Commodity Financing Deals (CCFDs) that was provoked in 2013 has still not been elucidated in the international gold community. CCFDs are believed to be the reason for the immense discrepancy (± 2,500 tonnes) between physical gold supply in China and Chinese consumer gold demand, which is the same as the difference between Shanghai Gold Exchange (SGE) withdrawals from the vaults and consumer gold demand. Regarding gold, CCFDs constitute of gold round tripping and gold leasing.

In previous posts I’ve written gold round tripping does not have anything to do with the Chinese domestic gold market, and thus with the missing 2,500 tonnes, and gold leasing can only inflate SGE withdrawals to a limited extent. In The Round Tripping Myth And Why It Doesn’t Hurt Chinese Gold Demand (May 2014) and Chinese Gold Trade Rules And Financing Deals Explained (March 2015) I wrote about the differences between processing trade and general trade that are essential to understand the Chinese gold market and CCFDs. But mainstream gold analysts have not took notice.

Because inaccurate information regarding the Chinese gold market keeps circulating in the international gold community BullionStar has decided to translate the most recent Measures for the Import and Export of Gold and Gold Products by the People’s Bank Of China (PBOC) drafted in March 2015. The translation, which can be read below, will serve as a foundation to further expand on CCFDs and investigate the discrepancy between SGE withdrawals and Chinese consumer gold demand. In a forthcoming post I will expand in detail on the Measures for the Import and Export of Gold and Gold Products combined with additional Chinese trade laws, to elucidate how these rules relate to the physical gold flows involved in round tripping. A second succeeding post will be dedicated to the physical gold flows inside the Chinese domestic gold market – through the SGE – and how these relate to gold leasing.

You can download the original Chinese Measures for the Import and Export of Gold and Gold Products from the PBOC here. Be advised the Measures for the Import and Export of Gold and Gold Products can be confusing if not connected to Chinese trade rules in general.

In the translation below reference is being made to:

1. Annex 1, Import and Export License of the People’s Bank of China for Gold and Gold Products, of which is a translation can be viewed here.
2. Annex 2, Application Form for Import and Export of Gold and Gold Product, of which a translation can be viewed here.
3. Catalogue for the Regulation of the Import and Export of Gold and Gold Products, of which a translation can be viewed here.

Measures for the Import and Export of Gold and Gold Products

Order of General Administration of Customs and People’s Bank of China

Order No. 1〔2015〕

Measures for the Import and Export of Gold and Gold Products is prepared by People’s Bank of China and General Administration of Customs based on Law of the People’s Republic of China on the People’s Bank of China, Customs Law of the People’s Republic of China and Decision of the State Council on Establishing Administrative License for the Administrative Examination and Approval Items Really Necessary to be Retained.

The Measured is issued hereby and shall take effect since April 1, 2015.

Measures for the Import and Export of Gold and Gold Products

Article 1 The Measure is prepared to regulate the imports and exports of gold and gold product and to enhance the import and export management of gold and gold product based on laws like Law of the People’s Republic of China on the People’s Bank of China, Customs Law of the People’s Republic of China and Decision of the State Council on Establishing Administrative License for the Administrative Examination and Approval Items Really Necessary to be Retained etc.

Article 2 For the purpose of these Measures, gold means gold unwrought and gold products mean semi-finished gold and finished products of gold.

Article 3 The People’s Bank of China, as the authority in charge of the import and export of gold and gold products, implements a permit system for the import and export of gold and gold products.

The People’s Bank of China, based on the needs of national macroeconomic regulation and control, may conduct restrictive approval for the import and export volume of gold and gold products.

For the import and export customs clearance of gold and gold products as included in the Catalogue for the Regulation of the Import and Export of Gold and Gold Products, the Import and Export License of the People’s Bank of China for Gold and Gold Products (Annex 1) issued by the People’s Bank of China or a People’s Bank of China branch shall be submitted to the Customs.

The People’s Bank of China shall, in conjunction with the General Administration of Customs, formulate, adjust, and issue the Catalogue for the Regulation of the Import and Export of Gold and Gold Products.

Article 4 A legal person or another organization importing and exporting gold and gold products by the following trade modes shall obtain an Import and Export License of the People’s Bank of China for Gold and Gold Products in accordance with these Measures:

(I) General trade;

(II) Processing trade for the domestic market and gold products exported under processing trade with gold raw materials purchased within the territory of China; and

(III) Import and export between areas under special customs supervision or supervised bonded places and overseas areas.

An individual, a legal person or any other organization donating imported gold and gold products for public interest undertakings shall obtain an Import and Export License of the People’s Bank of China for Gold and Gold Products in accordance with these Measures.

The provisions on the administration of individuals entering and leaving China with gold and gold products shall be formulated by the People’s Bank of China in conjunction with the General Administration of Customs.

Article 5 The import and export of the state gold reserves shall be handled by the People’s Bank of China.

The import and export of gold coins (including gold precious metal commemorative coins) shall be handled by institutions designated by the People’s Bank of China.

Article 6 The main market players with the qualifications for the import and export of gold shall assume the liability of balancing the supply and demand of material objects on the domestic gold market. Gold to be imported and exported shall be registered at a spot gold exchange approved by the State Council where the first trade shall be completed.

Article 7 Applications for the import and export of gold and the import of gold products donated for public interest undertakings shall be accepted and approved by the People’s Bank of China.

Applications for the import and export of gold products shall be accepted by the branches of the People’s Bank of China at or above the prefecture level and approved by the Shanghai Head Office of the People’s Bank of China, the branches and business management departments of the People’s Bank of China, or the central sub-branches of the People’s Bank of China in the capital cities of the provinces (autonomous regions), and the central sub-branch of the People’s Bank of China in Shenzhen.

Article 8 An applicant for the import and export of gold (except the import of gold for donation to public interest undertakings) shall have corporate status, have no record of violating laws and regulations within the recent two years, and satisfy one of the following conditions:

(I) It is a financial institution member or a market maker on a gold exchange approved by the State Council, with professionals of the gold business, a perfect gold business risk control system, and stable gold import and export channels, whose business carried out on the gold market complies with relevant policies or regulatory provisions, and whose spot trading of gold is active and the volume of transactions for its own account is among the highest in the two years before the application is filed;

(II) It is a comprehensive member of a gold exchange approved by the State Council, and a mining enterprise with annual gold production of 10 tons or more, pollutant emissions during the production process satisfying the environmental protection standards of the state, overseas gold mineral products investment scale exceeding USD 50 million, which has obtained mining rights of overseas gold mines or paragenetic and associated gold mines, which has formed mineral gold production capacity, whose business carried out complies with relevant policies or administration provisions, and whose spot trading of gold is active and volume of transactions for its own account is among the highest in the two years before the application is filed;

(III) It is a mining enterprise, with three consecutive years of domestic taxation records no less than RMB 200 million yuan and investment in overseas nonferrous metals exceeding USD 100 million, which has obtained mining rights of an overseas gold mine or paragenetic and associated gold mine and is ready to produce gold, and whose business carried out complies with the relevant policies or regulatory provisions;

(IV) It is a manufacturing enterprise that assumes the task of producing precious metal commemorative coins for the state;

(V) It is a gold importing and exporting refining enterprise which has become a certified brand on the international gold market.

Article 9 An applicant for the import and export of gold products (except the import of gold products for donation for public interest undertakings) shall have corporate status or the status of other organization, have no violation of laws and regulations within the recent two years, and satisfy one of the following conditions:

(I) For enterprise which produces, processes or uses relevant gold products, it shall possesses necessary production sites, equipment and facilities, discharge pollutant made in the production process based on national environment protection standards and keep a tax payment record that no less than RMB 1 million yuan has been paid each year for a successive 3 years;

(II) For foreign trade operation enterprise which applies to customs certification on enterprise management, it shall keep a tax payment record that no less than RMB 3 million yuan has been paid each year for a successive 3 years;

(III) Educational organizations, science study organizations and so on which need to use gold product for national research project and key subjects.

Article 10 Those which apply for import and export of gold shall submit the following materials to People’s Bank of China:

(I) Descriptions on business conditions including name, address (office place), enterprise profile, using of the imported and exported gold and planned amount etc. shall be noted on the written application;

(II) Application Form for Import and Export of Gold and Gold Product (Annex 2);

(III) Copies of officially sealed business certification of the enterprise legal person;

(IV) Gold import and export contracts and their copies;

(V) Officially sealed copies of Organization Code Certificate of the People’s Republic of China;

(VI) Explanatory materials on whether the applicant has illegal conducts in the past 2 years;

(VII) Financial organization of banking industry shall also offer relevant materials on internal gold business control system; those which apply for gold export shall submit real gold inventory amount certification of gold and commodities exchange approved by State Council;

(VIII) Gold mining enterprises shall also submit pollutant discharge permit certification and copies of annual qualification inspection report issued by provincial environment protection department, copies of relevant foreign investment approval document by the business department, copies of bank out-remittance certification, relevant certifications on exploiting gold in foreign countries or regions and tax payment record of the enterprise in the past 3 years; those which apply for exporting gold shall submit gold production capacity issued by the industry command department or self-discipline organization and registration certification of gold and commodities exchange approved by State Council.

Those which apply for gold import and export again and of which no materials of the aforesaid terms are changed shall only need to submit materials in Item II and Item IV; or shall apply and handle as the first application in case the other materials in the aforesaid terms are changed.

Article 11 Those which apply for import and export of gold product shall submit the following materials to the branch of People’s Bank of China above municipal level where the applicant lives:

(I) Descriptions on business conditions including name, address (office place), enterprise profile, using of the imported and exported gold and planned amount etc. of the applicant shall be noted on the written application;

(II) Application Form for Import and Export of Gold and Gold Product;

(III) Copies of officially sealed legal registration certificate including business certification of the enterprise legal person and legal certificate of public institutions;

(IV) Gold import and export contracts and their copies;

(V) Registration Form for the Archival Filing and Registration of Foreign Trade Operator or Certificate of Approval for Establishment of Enterprises with Foreign Investment in PRC which is sealed with archive filing seal.

(VI) Description materials on whether the applicant has illegal conducts in the past 2 years;

(VII) Enterprises which produce, process or use gold product shall also submit the enterprise tax payment record of the past 3 years, pollutant discharge permit certificate issued by municipal environment protection department and annual qualification inspection report as well as their copies;

(VIII) Enterprise of foreign trade operation shall also submit relevant enterprise management proving materials apply to customs certification and enterprise tax payment record of the past 3 years;

(IX) Education organizations and science research institutes shall also submit proving materials on conducting national research projects or key subjects;

(X) Enterprises which export gold products shall also submit proving materials including added-value tax invoice of gold raw materials obtained within China.

Those which apply for gold import and export again and of which no materials of the aforesaid terms are changed shall only need to submit materials in Item II and Item IV; besides, education organizations and science research institutes shall also submit materials in Item IX and enterprise which export gold products shall also submit relevant materials specified in Item X; or shall apply and handle as the first application in case the other materials in the aforesaid terms are changed.

Article 12 The application conditions specified in Item I, Article 9 of the Measure applies to gold product from processing trade for the domestic market, imported materials of products for domestic market within products listed in Catalogue for the Regulation of the Import and Export of Gold and Gold Products and gold products exported under processing trade with gold raw materials purchased within the territory of China.

For processing trade for the domestic market, the application materials shall be submitted and delivered in accordance with provisions in Article XI of the Measure; besides, materials explaining fair reasons for turning to domestic market, copies of processing trade business approval certificate and processing trade contracts and their copies etc.

For gold products exported under processing trade with gold raw materials purchased within the territory of China, the enterprise shall report the conditions of gold purchase within the territory of China when the processing trade manual is established (changed) and submit Import and Export License of the People’s Bank of China for Gold and Gold Products.

Article 13 As for imported gold and gold product donation made by individual, legal person or other organization for public welfare establishments, the following materials shall be submitted by the Donee to People’s Bank of China:

(I) Donation agreement that conforms to provision of Law of the People’s Republic of China on Donations for Public Welfare;

(II) Legal registration certificate and their copies including public institute legal person certificate or social group legal person registration certificate;

(III) Application Form for Import and Export of Gold and Gold Product

Article 14 People’s Bank of China shall make the administration permit decision within 20 work days since accepting the application for import and export of gold and gold products.

Article 15 Municipal branches of People’s Bank of China shall directly report the primary review opinions and all the application materials to the upper organization within 20 work days since accepting the application for import and export of gold and gold products. And the upper organization shall make the administration permit decision within 20 work days since receiving the primary review opinions and all the application materials.

Shanghai head office, all branches, business management department, central branches of provincial capitals (metropolis) and Shenzhen central branch of People’s Bank of China which directly handle application for import and export of gold products shall make the administration permit decision within 20 work days since acceptance.

Article 16 People’s Bank of China or its branches may review the applicant in case it is necessary to verify the real content of the application materials; the review shall be conducted by more than 2 working staff.

Article 17 The approved applicant shall handle relevant procedures at the customs by Import and Export License of the People’s Bank of China for Gold and Gold Products when handling cargo import and export of gold and gold products.

There shall be one Import and Export License of the People’s Bank of China for Gold and Gold Products for each batch of product and the License shall be used within 40 work days since the issuing date. The licensed party which need a postpone for reasonable reasons may apply for handling a delay procedure to the issuing organization with the original license 5 work days after the expiring of the license.

Article 18 People’s Bank of China and its branches are entitled to supervise and inspect the activities of administration permit items conducted by the Licensee shall be cooperative.

Article 19 The Licensee shall promptly report the implementation conditions of import and export of gold and gold products and provide relevant materials based on the provision of People’s Bank of China and its branches.

Article 20 Despite of the provisions in Article 4 of the Measure, gold and gold products imported and exported by the following means shall exempted from handling Import and Export License of the People’s Bank of China for Gold and Gold Products and shall be supervised by the customs instead:

(I) Imported or exported by processing trade;

(II) Imported or exported between customs special supervision region, tax-free supervision area and foreign territories;

(III) Imported or exported between customs special supervision region and tax-free supervision area;

(IV) Imported or exported by maintenance, shipment return and temporary in-and-out methods.

Article 21 Except for provisions in Article 4, 5 and 20 of the Measure, any individual, legal person or other organization shall not import and export gold and gold products by any other means. Except otherwise specified by the state.

Article 22 Individual, legal person or other organization shall abide by relevant national regulations on anti-money laundering and anti-terrorist financing when importing and exporting gold and gold products.

Article 23 Foreign exchange receipts and payments incurred when importing and exporting gold and gold products shall be handled in accordance to foreign exchange management rules.

Article 24 The Licensee shall not make the following conducts:

(I) Transfer or lend the import and export license for gold and gold products;

(II) Use fake or intentionally made import and export license for gold and gold products;

(III) Acquire the import and export license for gold and gold products by lying or other dishonest conducts;

(IV) Exceed the class, specification and amount scale permitted by the import and export administration;

(V) Make fake donations on imported and exported gold and gold products;

(VI) Fail to register and exchange the imported and exported gold at the gold and commodities exchange based on the provisions;

(VII) Maliciously manipulate gold exchange price by means like hoarding and profiteering, or other conducts which violate the rights and interests of the other investors like cheating;

(VIII) Violate relevant policies or management provision on gold market and gold derivatives exchange;

(IX) Refuse the supervision and inspection by People’s Bank of China and its branches or hide relevant conditions and provide fake materials during the supervision and inspection process.

In case the Licensee makes any of the conducts listed in former terms, People’s Bank of China and its branches is entitled to suspend the handling of its import and export application; those with vital situations shall be punished in accordance to Article 46 of Law of the People’s Republic of China on the People’s Bank of China.

Article 25 People’s Bank of China and its branches is entitled to withdraw the import and export license for gold and gold products of the Licensee by law.

Article 26 Illegal conducts including smuggling or violating customs supervision provisions resulting from importing and exporting gold and gold products by violating the Measure shall be disposed in accordance to laws and regulations including Customs Law of the People’s Republic of China and Regulation of the People’s Republic of China on the Implementation of Customs Administrative Punishment by the customs; or shall be investigated for its criminal liabilities by being transferred by the justice organization in case of crime.

Article 27 People’s Bank of China and General Administration of Customs are responsible for explaining the Measure.

Article 28 The Measure shall be implemented since April 1, 2015.

Annexes:

1. Import and Export License of the People’s Bank of China for Gold and Gold Products

2. Application Form for Import and Export of Gold and Gold Products

Koos Jansen
E-mail Koos Jansen on: koos.jansen@bullionstar.com

| Digg This Article
 -- Published: Wednesday, 4 November 2015 | E-Mail  | Print  | Source: GoldSeek.com

comments powered by Disqus
Previous Articles