Does contract processing belong to processing trade or general trade?

According to the revised 2025 Customs Processing Trade Management Measures, contract processing operations essentially fall underProcessing tradethe category. Specific manifestations include:

• Goods ownership always remains with the overseas client
• Domestic enterprises only charge processing service fees
• Raw material imports and finished product exports require corresponding verification

II. How to determine the specific classification of contract processing?

The 2025 Customs Classification Standards require enterprises to focus on three core elements:

• Source of materials:
  • Processing with supplied materials (all materials imported)
  • Processing with imported materials (partial materials domestically sourced)
• Processing depth13: Whether the commodity HS code is changed
• Settlement Methods14: Whether processing fees exceed 30% of goods value

III. What risks may arise from common declaration errors?

2024 customs audit data shows that among contract processing declaration error cases:

• 58% involved incorrect trade method declaration
• 32% were caused by inaccurate material consumption reporting
• 10% involved unauthorized domestic sales of bonded materials

A Yangtze River Delta textile enterprise in 2024 faceda fine equivalent to 20% of the goods valueand credit rating downgrade penalties for declaring processing trade as general trade.

IV. Key compliance operation points under the 2025 new policy

In accordance with the requirements of General Administration of Customs Announcement No. 45 of 2025:

• The new version of processing trade ledger system must be used
• EstablishWhole-process traceability management system(including materials, finished products, and by-products)
• Electronic document retention period extended to5 years

V. Special note: New opportunities under RCEP rules of origin

After the full implementation of RCEP in 2025, contract manufacturing enterprises should focus on:

• More flexible rules of origin determination under regional cumulation
• Expanded tariff concessions for specific products up to92%
• Customs clearance time commitment for processing trade among China, Japan, and South KoreaRelease within 48 hours

Important reminder:Starting from 2025年1月1, customs will implement the new version of the processing trade risk parameter management system. Enterprises are advised to complete the following preparations in advance:

• Verify processing trade liquidation records from the past three years
• Update the customs supervision module in the ERP system
• Arrange for customs personnel to participate in annual qualification assessments