DEMPE Functional Analysis in Cross Border Software Intellectual Property Structures
Cross-border software IP structures require aligning actual developer workflows with intercompany contracts and MOFCOM filings to defend transfer pricing positions.
Public Notice 35
Meaning
Administrative guidance issued by the General Administration of Customs requires foreign trade operators to submit supplementary documentation for all goods subject to heightened regulatory scrutiny at the point of entry. Public notice 35 mandates a reconciliation between original commercial invoices and the actual financial settlement records held by domestic banking institutions. This protocol establishes the necessary evidentiary threshold for the clearance of restricted goods and defines the liability of the local agent should the declared value diverge from the transaction price.
Regulatory Verification
Customs officers initiate the review process by identifying specific discrepancies between the valuation declared on the manifest and the wire transfer logs provided by the importer. The filing demands proof of payment that corresponds exactly to the unit price noted on the shipping documents. A divergence in the currency denomination or the identity of the remitting party forces an immediate suspension of the clearance workflow.
Officials require the submission of a detailed explanation of the transaction structure to justify any third party payments or adjustments to the invoice amount.
Compliance Threshold
Verification of the financial flow provides the primary mechanism for the prevention of under-invoicing or tax evasion within the supply chain. Market participants must maintain these transaction records for a duration of three years to satisfy potential audits triggered by the submission of the document. Failure to demonstrate internal consistency between the financial records and the physical goods arriving at the border results in the reclassification of the entry status to high risk.
Enforcement Limitation
The authority granted to customs officials under this notice stops at the verification of the declared value and the associated financial trail. It does not extend to the arbitration of commercial disputes between a foreign supplier and the domestic buyer regarding contract terms or quality claims. Judicial intervention remains the sole path for the resolution of disagreements involving the underlying sales agreement.
Customs enforcement stays focused on the accuracy of the revenue declaration and the legality of the funds transfers.