Application of ultimate destination principle by commerce authorities

The Administrative Measures on Overseas Investments (order No. 3) plays a major role in regulating commerce authorities’ filing and approval of overseas investments. Although the Ministry of Commerce (MOFCOM), together with six other ministries and commissions, issued the Provisional Measures on the Reporting for Filing (Approval) of Overseas Investments (document No.24) on 18 January 2018, this document was mainly intended to define the role and responsibility of each department, and the information sharing mechanism, and did not make any substantive change to order No.3.

Four years have passed since order No.3 was brought into effect, and although the approach to different issues by commerce authorities of different regions may vary, the same authorities at all levels have generally accumulated abundant experience through practice. The authors of this article aim to shed some light on the latest practices in respect of overseas investments of commerce authorities for the reference of interested enterprises.

Ultimate destination-based principle. The ultimate destination of overseas investments constitutes a critical part of the filing and approval by commerce authorities. The ultimate destination-based principle helps commerce authorities understand as to where the overseas investments actually flow. In fact, order No.3 in 2014 already made clear that the Certificate of Overseas Investments by Enterprises (certificate) issued by commerce authorities is proof that the overseas investments by an enterprise have obtained filing or approval, and shall be issued in accordance with the ultimate destination of the overseas investments.

Wang Jihong is a partner and Liu Ying is a senior associate at Zhong Lun Law Firm