WFTZ---- One of the Best Choices
for Foreign Enterprises to Conduct Business in China
-------Helen Hu

Wai Gao Qiao Free Trade Zone ("WFTZ"), the first and the largest Free Trade Zone in China, has benefited quite a lot of foreign enterprises, which seeks to engage in their business of selling products into the Chinese marketplace. Trading company wholly owned by foreign parent company, for instance, which can be established only in Free Trade Zone, has been a widely used vehicle by foreign investors who desires to conduct trading in the domestic market.

To bring a rough idea of how the process works for WFTZ trading company participating in domestic trade, a general description of the procedures could be outlined as follows:

1.. Step 1: When the WFTZ trading company purchases goods from a foreign company, the trading company or its agent shall need to register the transaction with Customs for recording purposes within 14 days of the arrival of the goods. The trading company may, upon completion of the above filing procedure, pick up the goods from the harbor against the documents cleared by Customs and store the goods in the WFTZ warehouse that it has leased or built. In this step, the duty is exempted under the WFTZ regulations.

2.. Step 2: When the trading company establishes a contractual relationship with a PRC domestic buyer, that buyer bears the duty to conduct the import procedures when the goods cross from the WFTZ into the commerce of the PRC. Under the national law, the buyer is supposed to be a local company with import & export licenses and therefore be entitled to conduct the procedure. The WFTZ administrative committee provides the Import & Export Company associated with the Materials Exchange Market to complete the Customs procedures for WFTZ trading companies' contracting with local distributors or end users who do not have import licenses, by charging the trading company certain percentage handling fee.

3.. Step 3: When goods are transferred to the local buyer, there are two ways of going about it. The trading company can issue the invoice in its own name using a VAT invoice from the Market, saving one leg of involvement of the Market/I&E company; or the trading may utilize the Market/I&E company to complete the lawful procedure by paying an extra agency fee.

The filing procedures and the import procedures can be handled simultaneously if the goods do not need to be stored in the WFTZ warehouse. The above procedures can also work in reverse, as well, if a WFTZ trading company purchases goods from a PRC domestic company and sell the same to a foreign company.