Verification of Payment

Payment verification and cancellation (fu hui he xiao) is a system in China's foreign exchange administration. It means that after an importing enterprise makes an external payment in foreign exchange, it must report and cancel that payment with the State Administration of Foreign Exchange (SAFE) to prove that it corresponds to a genuine and lawful import trade background. The system aims to prevent illegal evasion and arbitrage of foreign exchange and to ensure balance in foreign exchange receipts and payments. Usage scenario: after completing payment through a bank, the importer goes to SAFE with documents such as the import customs declaration form, contract, and invoice to handle the cancellation procedures. Note: after 2012, China promoted reform of foreign exchange administration for trade in goods, and payment verification and cancellation was gradually replaced by enterprise reporting and monitoring systems, but the term is still commonly seen in old documents or historical business. It is the counterpart of 'receipt verification and cancellation' (shou hui he xiao), which targets export receipts; it differs from 'import payment' (jin kou fu hui), as payment is the fund action while verification and cancellation is the subsequent regulatory procedure. Practitioners should note timeliness; failure to cancel overdue may affect an enterprise's foreign exchange classification rating.