Regulations Affecting Foreign-Funded International Freight Transportation Agencies in China

May 10, 2012 Posted by China Briefing Reading Time: 3 minutes

May 10 – In order to create a healthy environment for the development of China’s international freight transportation industry and to establish a regulatory system for business operations, the Ministry of Commerce issued the “Administrative Measures for Foreign-Funded International Freight Transportation Agency Enterprises (Order of the Ministry of Commerce [2005] No.19, hereinafter referred as the ‘Measures’) in 2005.

According to the Measures, foreign investors are allowed to establish foreign-funded international freight transportation agencies in China in the form of a joint venture or cooperation. From December 11, 2005, solely foreign-owned international freight transportation agencies are allowed in China with a minimum registered capital of US$1 million. Foreign investors may acquire established international freight transportation agencies through stock equity purchases. However, the ratio of the equity and investors’ qualifications shall comply with the requirements prescribed in the Measures. Relevant laws and regulations shall be followed if state-owned assets are involved.

Scope of business of foreign-funded international freight agencies
Upon approval, foreign-funded international freight agencies may conduct all or some of the following businesses:

Booking (ship, flight, and lump-sum renting), consigning, storing and packaging
Loading and unloading supervision, container assembling, dissembling, distributing, transferring and related short-distance transportation services
Customs agency service to handle inspection, insurance
Preparing related documents, paying for transportation fees, settlement and miscellaneous fees
Transportation Agency Service for international exhibits, personal belongings and cross-border goods
International multi-method joint transport and container transport
International express delivery (not including delivery of personal letters and government documents above county level)
Consulting and other international freight transportation agency services

Those enterprises that conduct document express delivery (not including delivery of personal letters and government documents above county level) shall go through the requisite authorization procedures with the postal service once approved by the department of commerce.

Application for setting up international freight transportation business
To set up a foreign-funded freight transportation agency, the investor should submit an application according to the existing laws and regulations concerning foreign investment in China to the provincial departments of commerce, who will reply within 30 days after receiving the application. Once approved, an Authorized Certificate for Foreign Invested Enterprise will be issued to the applicants, otherwise a written statement outlining the reasons for disapproval will be provided.

Applications for setting up an international freight transportation business shall be reviewed and processed by the Ministry of Commerce after a first round review by the provincial departments of commerce, which may require up to 75 days for approval.

Required documents

Application
Report of the feasibility of the proposed business
Contracts and Articles of Association of the foreign-funded international freight agency (only Articles of Association is required for solely foreign-funded agencies)
Names of the members of the Board of Directors and letters of assignments
Notice of pre-approval of the company name
Proof of registration of foreign investors in their home country and credibility certification

Application for setting up a branch
After one year of business, the foreign-funded freight transportation agency can apply for setting up branches elsewhere in China if the registered capital is ready. The scope of business of the branch should not exceed that of the parent agency, and the parent agency holds the civil liability of the branches.

An increase of at least US$500,000 is needed for setting up one branch of the foreign-funded freight transportation agency. If the agency has a registered capital above US$1 million, the exceeded part can be used for setting up branches.

The application procedure for setting up a branch is similar to setting up a foreign-funded freight transportation agency, except for the required documents.

Required documents

Application
Board decision
Board decision on capital increase, revised contracts, and Articles of Association (only revised Articles of Association is required for solely foreign-funded agencies)
Capital verification report

Dezan Shira & Associates is a boutique professional services firm providing foreign direct investment business advisory, tax, accounting, payroll and due diligence services for multinational clients in China, Hong Kong, India, Singapore and Vietnam. For advice on these measures, please email china@dezshira.com, visit www.dezshira.com, or download the firm’s brochure.

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