Key points
- Processing with supplied materials: an overseas party provides the materials, the operating company makes no foreign exchange payment and earns an agreed processing fee. Customs supervision mode code 0214.
- Processing with imported materials: the operating company pays foreign exchange to import the materials and exports the finished products itself. Customs supervision mode code 0615 (processing with imported materials, matched) or 0715 (processing with imported materials, unmatched).
- Imported materials are normally bonded and managed in a processing-trade handbook or electronic ledger, accounted for through unit consumption and written off against exports. Materials diverted to domestic sale incur back duties and deferred-tax interest.
In practice
The central challenge in processing trade is the material balance: the registered quantity of imported materials must equal the sum of materials consumed by exported finished goods, deep-processing transfers, transfers of leftover materials, domestic sales, and scrap and defective goods disposed of. If declared unit consumption drifts from reality, the error accumulates across the whole handbook and only surfaces at verification.
Internally, the accounting basis also needs to be distinguished. Where the company owns the raw materials and has another party process them, it is commissioned processing and the processing fee is added to inventory cost. Where the raw materials belong to the customer and the company only performs the processing, it is toll processing and only the processing fee is recognised as revenue. What decides the treatment is who owns the materials, not who does the processing.
Deep-processing transfers also require the upstream and downstream companies’ handbook data to correspond, and outsourced processing must be registered and materials held by subcontractors kept under control – all of which needs a record for every transaction.
How Tranexio supports it
Tranexio provides modules for processing-trade handbooks and ledgers, registration of materials and finished goods, unit consumption and multi-level BOMs, balance sheets, deep-processing transfers, outsourced processing, and verification and write-off. The commercial model dimension distinguishes commissioned processing from toll processing for accounting purposes. See Processing trade.