What is processing with supplied materials?
Processing with supplied materials and assembly industry are collectively referred to as outward processing and assembly business. Generally speaking, it is to use raw materials provided by foreign countries, and assemble finished products or complete machines by odd jobs, and charge processing fees or assembly fees. According to the customs regulations on processing with supplied materials and assembly with supplied materials, outward processing and assembly business mainly refers to:
Raw materials, parts and components (referred to as materials) provided by foreign enterprises, if necessary, are processed and assembled by our processing company according to the other party’s requirements, and the finished products are delivered to the other party, and we collect labor fees. The price of foreign equipment is repaid by our hired workers.
Evaluate the raw materials and finished products separately, sign contracts separately, issue letters of credit, do not use foreign exchange, the prices of materials and equipment are deducted from the exported finished products, and we pay wages.
Foreign trade (industry and trade) companies sign contracts with foreign businessmen, undertake processing and assembly business, organize factory production, and the purchasing relationship between foreign trade (industry and trade) companies and factories.
What is the difference between supplied materials and materials?
Material processing is the other party’s materials. We process them according to the patterns, varieties and quantities they specify. We charge the other party the agreed processing fees. Material processing is my own business. I provide my own materials, determine the varieties and colors, and bear my own profits and losses.
Processing with imported materials and imported materials are buying and selling, and processing and re-exporting are buying and selling. The import of raw materials for processing and the export of finished products that are not related in the import and export contract are buying and selling, or they are two related transactions. The supplier of raw materials is often the contractor of the finished product.
The two parties to material processing generally have a commissioned processing relationship. Some material processing, including some of our raw materials, has a buying and selling relationship to a certain extent, but we generally sign an agreement with the other party to purchase these products in order to ensure the timely export of products. From the perspective of the trading object, there is no necessary connection between material processing and re-export. In terms of import and export, I and the other party are in a commodity trading relationship, not a processing relationship.