The First Edition of the 2025 Copper Semis Export Guide: Trade Mode & How to Apply for a Processing Manual? [SMM Analysis]

On November 15, 2024, the Ministry of Finance and the State Taxation Administration jointly issued an announcement on adjusting the export tax rebate policy (Announcement No. 15 of 2024 by the Ministry of Finance and the State Taxation Administration). Starting from December 1, 2024, export tax rebates for products such as aluminum semis and copper semis will be canceled. Since the implementation of the policy, the export volume of copper semis under Ordinary Trade has significantly decreased, and Ordinary Trade exports no longer hold an advantage. As a copper semis processing/operating enterprise, if you still wish to expand the export market in 2025, in what form should exports be conducted, and what should be noted? How should the processing manual be applied for currently? Below is the first part of the 2025 Copper Semis Export Guide detailing trade modes and the application process for the processing manual: First, regarding export modes, most enterprises are primarily engaged in Ordinary Trade and Processing Trade. Ordinary Trade refers to the unilateral import or export of goods by enterprises within China with import and export operation rights. Goods imported or exported under Ordinary Trade transaction methods are classified as Ordinary Trade goods. Processing Trade refers to the activities where operating enterprises import all or part of raw and auxiliary materials, components, packaging materials, etc., process or assemble them, and then re-export the finished products. This includes processing with supplied materials, processing with imported materials, deep processing transfer, and outward processing. After the cancellation of export tax rebates for copper semis, most import and export enterprises have shifted from exporting under Ordinary Trade to Processing Trade. Specifically, in terms of Processing Trade forms: Processing with Supplied Materials refers to the activity where imported materials are provided by overseas enterprises, and the operating enterprise does not need to pay for the imports. The enterprise processes or assembles the materials according to the requirements of the overseas enterprise, only charging a processing fee, while the finished products are sold by the overseas enterprise. Processing with Imported Materials refers to the activity where imported materials are paid for by the operating enterprise, and the finished products are exported by the operating enterprise. Deep Processing Transfer refers to the activity where products processed from bonded imported materials by a Processing Trade enterprise are transferred to another Processing Trade enterprise for further processing and then re-exported. Outward Processing refers to the activity where the operating enterprise entrusts a contractor to process Processing Trade goods, and the processed products are ultimately re-exported within the stipulated period. Under these four forms of Processing Trade, according to Article 5 of the Measures of the Customs of the People's Republic of China for the Supervision of Processing Trade Goods (Order No. 219 of the General Administration of Customs): "For imported materials under Processing Trade, taxes are levied at the time of importation as per regulations. After the processed finished products are exported, the customs will refund the taxes levied based on the actual quantity of processed and re-exported goods." Therefore, under the current Processing Trade, only the value-added portion (e.g., processing fee) is subject to VAT as per regulations, with minimal impact from the tax rebate cancellation. What are the current requirements for enterprises applying for the processing manual, and how should they apply? Below is the detailed process: According to Article 10, Chapter 2 of the Measures of the Customs of the People's Republic of China for the Supervision of Processing Trade Goods (Order No. 219 of the General Administration of Customs), enterprises should handle the establishment of the processing manual for Processing Trade goods with the customs authority in charge of the processing enterprise's location. Unless otherwise specified, when handling the establishment of the processing manual for Processing Trade goods, the operating enterprise should truthfully declare to customs the trade mode, unit consumption, import and export ports, as well as the names, codes, specifications, models, prices, and origins of the imported materials and exported finished products. Additionally, the enterprise should submit the contracts signed with foreign parties. If the operating enterprise entrusts processing, it should also submit the entrusted processing contract signed with the processing enterprise. The enterprise must obtain the "Certificate of Production Capacity of Processing Trade Enterprises" issued by the competent authority. However, the Ministry of Commerce and the General Administration of Customs issued an announcement in 2018 regarding the cancellation of the "Certificate of Production Capacity of Processing Trade Enterprises." The announcement stated that starting from January 1, 2019, enterprises engaging in Processing Trade no longer need to apply for the "Certificate of Production Capacity," and the competent commerce departments will no longer issue such certificates. Enterprises conducting Processing Trade business must log in to the unified platform of the Ministry of Commerce's business system, enter the "Processing Trade Enterprise Operation and Production Capacity Information System" (https://ecomp.mofcom.gov.cn/), and independently fill out the "Processing Trade Enterprise Operation and Production Capacity Information Form" (hereinafter referred to as the "Information Form"), making a commitment to the authenticity of the information. The "Information Form" is valid for one year from the date of submission (or update). Upon expiration or when relevant information changes, enterprises should promptly update the "Information Form." Enterprises should also submit scanned copies of contracts signed with foreign parties through the Golden Customs Phase II Processing Trade Subsystem. If the operating enterprise entrusts processing, it should also submit scanned copies of the entrusted processing contracts. Additionally, other points to note include: 1. Enterprises should truthfully declare the conditions of imported materials, exported finished products, off-cuts, surplus materials, defective products, by-products, and unit consumption, and submit relevant scanned documents in the Golden Customs Phase II system as required. 2. In any of the following circumstances, customs may require the operating enterprise to provide a guarantee equivalent to the amount of payable taxes or a letter of guarantee from a bank or non-bank financial institution when handling the establishment of the processing manual: (1) Leasing factory buildings or equipment; (2) Engaging in Processing Trade business for the first time; (3) Extending the processing manual twice or more; (4) Handling cross-regional Processing Trade procedures; (5) Suspected of violations and under investigation by customs, with the case not yet concluded. 3. Operating enterprises that have completed the establishment of the processing manual for Processing Trade goods can obtain sub-manuals or renewals of the processing manual from customs. 4. If there are changes to the content of the processing manual for Processing Trade goods, the operating enterprise should handle the changes within the validity period of the processing manual. 5. Operating enterprises importing Processing Trade goods can import from overseas, customs special supervision areas, or bonded supervision sites, or transfer in through deep processing transfer. Operating enterprises exporting Processing Trade goods can export to overseas, customs special supervision areas, or bonded supervision sites, or transfer out through deep processing transfer. 6. Operating enterprises can interchange bonded materials with each other or between bonded and non-bonded materials. However, the interchanged materials must belong to the same enterprise and adhere to the principles of the same variety, same specification, same quantity, and no profit-making. Bonded imported materials for processing with supplied materials cannot be interchanged. 7. If non-bonded materials are required due to processing technology, the operating enterprise should truthfully declare the proportion, variety, specification, model, and quantity of non-bonded materials used to customs in advance. 8. Operating enterprises should process and re-export imported materials within the stipulated period and complete customs verification within 30 days from the date of export of the last batch of finished products under the processing manual or the expiration of the processing manual. If the contract signed with foreign parties is terminated early, the enterprise should complete customs verification within 30 days from the date of contract termination. For more details on unit consumption, document submission, and other considerations, enterprises can refer to relevant documents on the platforms of the customs authority in charge of the processing enterprise's location or the General Administration of Customs. SMM will continue to update you on more guidelines for copper semis export in 2025. If you have any questions regarding the content of this document, please contact Tongxu Zhang from the Copper Industry Research Department of SMM at 13295353556.