Bonded Materials

Regulatory Supervision

Control mechanisms enforced by the General Administration of Customs maintain a strict audit trail for every kilogram of material that enters a bonded warehouse or factory. Enterprises must register their production capacity and warehouse specifications before the authority grants permission to hold such goods. The customs handbook or the electronic equivalent tracks the inflow of raw substances and the outflow of finished goods.

Officers perform periodic physical inspections to verify that the actual inventory matches the digital records maintained in the official database. Any discrepancy between the physical stock and the electronic ledger triggers a mandatory investigation and potential fines. If a company fails to account for the disappearance of items, the authority presumes they entered the domestic market illegally.

Administrative penalties for such violations include the suspension of the bonded status and the imposition of heavy financial sanctions. Proper management requires a dedicated team to handle the constant updates to the customs system.

Storage Requirement

Physical isolation of the tax-exempt inventory from items purchased on the domestic market is a mandatory operational standard for all processing trade enterprises. The warehouse must have clear signage and physical barriers that distinguish the bonded zone from the non-bonded areas of the facility. Mixing different categories of inventory is prohibited because it complicates the audit trail during official inspections.

Companies often use separate software modules or distinct bins to keep these items organized and traceable. Documentation for every movement of goods from the warehouse to the assembly line must be kept for at least three years for potential review. Precise record-keeping ensures that the specific origin of each component can be proven during a formal customs audit.

If a factory uses the same raw materials for both domestic sales and export production, the accounting system must demonstrate a clear allocation between the two streams.

Final Liquidation

Reconciliation processes at the end of a production cycle verify that the volume of imported inputs matches the volume of exported outputs after accounting for waste. The company submits a liquidation report to the local customs office once the contracted export volume is met or the manual expires. This report details the consumption of raw materials for each unit of finished product.

Officers compare these figures against the approved unit consumption ratios to detect any over-reporting of waste. If the liquidation reveals a surplus of raw materials, the company must either export the remaining stock or pay the deferred taxes. Scrap and defective products also require official handling to ensure they do not bypass the tax net.

The authority may demand the destruction of scrap under supervision or the payment of duties based on the value of the residual material. Completion of the liquidation process results in the closure of the specific customs account. Without this formal closure, the enterprise cannot release the financial guarantees held by the bank.

Any remaining inventory that cannot be accounted for through these official channels is subjected to immediate duty assessment and interest charges calculated from the date of the original import. These rules ensure that the tax benefits provided to manufacturers are used solely for the promotion of international trade.