UN-exportable sub-standard bonded products of a Bonded Factory and bonded by-products, scraps and wastes produced from the production process and scraps from self-use machines and equipments shall be stored, by categories and nature thereof in warehouses or other storage places approved by the Customs authority. Stock control cards shall be established for their incoming and outgoing records all the time. However, for scraps in the form of semi-finished products, the raw materials used therefore shall be indicated respectively for inspection purposes.

Sub-standard bonded products, by-products, scraps, wastes, inactive stock of materials and scrapes of self-use machines and equipment at a Bonded Factory shall be disposed of in accordance with the following provisions:
1. Items with utilization value may be sold in the domestic market after the duty-paid value thereof have been determined on the basis of "specific duties system" or the selling prices (duty-paid value of sub-standard products shall be determined in accordance with Paragraph 2, Article 40) in accordance with the General Rules of Customs Import Tariff, and duties and taxes thereon have been assessed and collected; or such items may be destroyed under supervision of Customs and then taken out of the Bonded Factory after duties and taxes are paid to Customs for the residual value thereof. Where scraps and/or wastes are large quantity, bulky, difficult to be destroyed in the factory, and that the bonded factory adopts the used quantity declaration for its "Schedule of Raw Materials Used Per Unit of Product" and is not required to process the deduction from stock account, the bonded factory may estimate a three-month quantity in advance for use and file an application for clearance with Customs; the goods may be released with sufficient amount of security deposit. Upon approval of Customs, the bonded factory shall process the customs clearance and pay the tax in advance, and thereafter claim for goods release from the factory in batches; if the scraps and wastes are unable to be fully withdrawn from the factory, the bonded factory may apply with supervising Customs for extension; nonetheless, such extension shall not exceed one month and only one extension of application can be filed.
2. Items without utilization value shall be destroyed under the supervision of Customs officials or under the joint supervision of Customs and authorities concerned, in case such need becomes necessary.
The scraps and wastes approved by Customs for customs clearance with duties and taxes thereof being paid beforehand as provided in the Subparagraph 1 of the preceding paragraph shall be provided with trading receipts of the actual trading amount within four months following the advance customs declaration for Customs to assess customs value; firms with justifiable cause may apply for extension before the completion of four months period, and the extension period shall not exceed one year following Customs release.
For inactive stock of raw materials not re-exported for any reason or bonded products or sub-standard bonded products not exported for any reason, the Bonded Factory may, within two years from the following day of the date of importation or completion of reprocessing of bonded raw materials, deduct such items from the stock account in accordance with the provision of the Paragraph 1; in case of failure to process the stock account deduction within the deadline, the inactive stock of raw materials, the bonded products or the sub-standard bonded products may be sold in the domestic market after duties and taxes are being paid pursuant to Subparagraph 1 of Paragraph 1. Where the failure is caused due to special situation, an application for extension may be filed with the supervising Customs prior to the expiration of the original deadline, and the length of such extension should not exceed one year.
Bonded by-products, scraps and wastes referred to in the preceding Article, for which attrition rates are not separately indicated in the "Schedule of raw materials used per unit" or have been indicated but pending approval, may be offset against the account of bonded raw materials after verification.
For supervising destruction cases of the first paragraph, a scrap list should be prepared in advance, clearly marking the description, serial number, specification, quantity and unit of the bonded goods and attached relevant certification documents while submitting an application to the supervising Customs in written document or electronic transmission.Authorized Economic Operators (AEOs) assessed as superior-class bonded factories who have been approved for exemption from monitoring destruction by Customs shall, within 14 days from the day after the completion of the destruction, specify the date, location, method of destruction and the shipping destination to the scrapped list, with attached pictures of the destroyed goods and other relevant certification documents present to the supervising Customs for verification in written document or electronic transmission.

Sub-standard bonded products, by-products, scraps, waste and inactive stock of materials, self-use machine and equipment at a Bonded Factory are defined as follows:
1. Sub-standard Bonded Products: Defective products that fail to meet the quality requirements of the clients but still possess all or part of the functions of the products and can still be sold.
2. By-Products: Other products generated in the process of producing the target products.
3. Scraps: Residual scraps and additional materials in the manufacturing process of the products that cannot be used by the Bonded Factory.
4. Waste: Objects generated during the production process that cannot be used.
5. Inactive Stock of Materials: Bonded raw materials that are not used due to change of production plans of the factory, change of product types, cancellation of overseas orders or sparse quantities, or bonded raw materials that have been in stock for more than six months.
6. Scrapes of self-use machine and equipment: Unserviceable self-use machines and equipment in a bonded factory, provided that there is neither technology nor possibility whereby the self-use machine and equipment can be repaired or that the cost of repair does not meet the economic interest.

While bonded items in warehouses or in process at a Bonded Factory are damaged or destroyed by flood, storm, fire or other acts of God, the Bonded Factory shall, within one week from the date following the discontinuation of the force damage, first report the damages to Customs for verification and subsequently delete such items from the account after verification.
In case shortage in bonded articles, either in stock or in process, is found due to theft, supplementary payment of import duties levying on such shortage shall be made and the missing articles may be deleted from the account within three months from the date following the date of occurrence of the theft, if the case of theft has been reported to and certified by the police authority concerned and subsequently verified by the Customs authority. Under special situation and with the approval of the supervising Customs, the Bonded Factory may apply for temporary exemption from making supplementary payment of import duties levying on such missing articles against the monetary security to be provided by it. However, the period of such temporary exemption from import duties shall in no case be longer than six months, and if the missing articles can not be recovered upon expiry of the said grace period, the case shall be closed by offsetting the security against the import duties levying thereon. The Customs authority shall refund the portion of such security in securing the import duties payable on the missing articles which have been recovered.

The raw materials and items requiring processing imported by a Bonded Factory may, upon the supervising Customs authority’s approval of the application filed by the Bonded Factory, be shipped out of the Factory for processing and the off-factory processing shall be limited to the level of semi-product to the extent that the raw materials contained in the processed product are still identifiable, nevertheless, if the quantity of products produced by the Bonded Factory exceeded the authorized production capability, and the Bonded Factory has in advance undertaken, in writing, to be responsible for having the finished products to be processed from the raw materials and items requiring processing out of its own factory exported or selling to other bonded factories or an enterprise in the Science Park, an exporting enterprise in an Technology Industrial Park, an enterprise in the Agricultural Biotechnology Park and a free-trade-zone enterprise or another Bonded Factory in its own name after the completion of off-factory processing, the Bonded Factory may apply to the supervising Customs for granting a special approval to permit it to have the raw materials and items requiring processing shipped out of the Factory for processing into finished products.
For off-factory processing, as referred to in the preceding paragraph, the Bonded Factory shall prepare in advance an application for off-factory processing stating the name, address, unified serial number, and factory registration number of the processing plant (in the case of a natural person, his name, address and I.D. card number), the name and quantity of raw materials to be used and of the processed products and the scheduled period of processing, and submit the same together with a list of raw materials to be used for off-factory processing and the off-factory processing agreement to the supervising Customs for approval. Upon approval, the Bonded Factory shall fill out the off-factory processing record cards duly authenticated and stamped by Customs and release the materials in one lot from the Factory, or fill out the said record cards and release the materials by lots, subject to the approved categories, quantities and period of processing. However, for out-of-factory processing cases entrusted by the Bonded Factory to other branches of the Bonded Factory, other related certification documents may be attached instead of the contract.
Bonded raw materials imported from foreign countries or purchased from other bonded factories or an enterprise within the Science Park, an enterprise in an Technology Industrial Park, an enterprise in the Agricultural Biotechnology Park and a free-trade-zone enterprise may, with the approval of the supervising Customs, be shipped directly to the processing place for off-factory processing. However, the raw materials shall be processed into semi-finished goods only and then re-transported to the bonded factory.
Raw materials added in the course of off-factory processing by the processing establishment shall not be eligible for tax refund. However, if the processing establishment is a Bonded Factory, it may apply for deduction from the additional raw materials from its raw material stock account.
In case the quantities of bonded raw materials or processed products used in off-factory processing are not consistent with the quantities released from the Bonded Factory due to attrition, Customs shall identify the cause thereof and handle the case in accordance with these Regulation and other relevant laws and ordinances. For processing operation with complicated procedures, the bonded factory or the processing establishment shall submit relevant information in advance for examination and approval.
The duration of off-factory processing shall be limited a period of not more than six (6) months from the date following the day on when the off-factory processing case is approved by the supervising Customs. However, under special situation an application for extension of the aforesaid time limit may be filed with the Customs authority for approval prior to the expiry of the original time limit, but the length of extension shall be limited to a period of not longer than three months and that only one extension shall be allowed. In the event that the product(s) are not returned to the Bonded Factory within the fixed duration, a supplemental payment of customs duties and taxes shall be filed within ten (10) days after expiry of said duration, and the product(s) involved shall be included in the quantity of bonded products allowed for domestic sale.

Where a Bonded Factory intends to release its bonded product(s) for off-factory test, inspection, sample-approval, or repair, an application enclosed with a photocopy of the factory registration certificate (not required if the testing/inspecting institute is a government owned enterprise or a research institution) of the testing/inspecting contractor shall be filed with the supervising Customs for its approval prior to taking out the product(s) from the Bonded Factory.
For the bonded product(s) to be released from a Bonded Factory under the preceding Paragraph, the supervising Customs may, depending upon the quantity and nature of the product(s) involved, set a fixed duration for such off-factory testing/inspecting/sample approving process, whose duration may be extended upon filing of an application (stating therein the reason therefore) with the supervising Customs prior to the expiration of the initial duration provided that the overall length of the duration allowable shall not exceed six months accumulatively.
The exit and re-entry of the bonded product(s) from and in the Bonded Factory under the provisions of Paragraph One of this Article shall be recorded in the "Register of Exit and Re-entry of Off-Factory Testing/Inspecting/Sample-Approving/Repair of bonded Products of Bonded Factory" duly verified with the seal of Customs Office. In the event the product(s) released from a Bonded Factory under this clause are not returned to the Bonded Factory within the duration fixed under Paragraph Two of this Article, a supplemental payment of customs duties and taxes shall be filed within ten (10) days after expiry of the said duration, and the product(s) involved shall be included in the quantity of bonded products allowed for domestic sale.
A bonded factory import raw materials or purchasing from an enterprise in the Science Park ,an exporting enterprise in an Technology Industrial Park, an enterprise in the Agricultural Biotechnology Park and a free-trade-zone enterprise or another Bonded Factory may, with the approval of supervising customs, shipped directly to the inspection, testing repair and maintenance activities place to conduct the inspection, testing repair and maintenance activities for relevant raw materials.
A bonded factory may, with the approval of supervising customs, in writing, to be responsible for having the finished bonded products to be processed the inspection, testing repair and maintenance activities export directly from the off-factory or selling to an enterprise in the Science Park, an exporting enterprise in an Technology Industrial Park, an enterprise in the Agricultural Biotechnology Park and a Free-Trade-Zone enterprise or another Bonded Factory in its own name after the completion of off-factory processing.

If a bonded factory ships re-imported bonded product out of the factory for maintenance or repairs with the approval of the monitoring Customs, the provisions of Article 46 shall be applicable mutatis mutandis. Unless it is approved in advance for direct export, a form on tax payment shall be filled out within ten days beginning from the second day of expiration and the product shall be categorized as part of domestic sales.

Manufacturing establishment performing processing contract for a Bonded Factory shall have an area to be used exclusively for storage of bonded raw materials and processed products and shall at all times establish and maintain stock record cards for recording quantities of in-coming, out-going and in-stock bonded items for inspection and audit by Customs.
If the manufacturing establishment performing processing contract in the preceding Paragraph has used a computer to control the deposit, withdraw and stock quantity of bonded goods for online inspection and audit by Customs, it may be exempt from setting up the record cards.

While a Bonded Factory intends to take its bonded products out of the Factory for display, it shall prepare an "application for taking out and bringing in exhibits" and file the same together with relevant documents (such as the invitation from the sponsor of the exhibition etc.) with the supervising Customs for approval before taking the products out of the Factory.
The bonded products may be displayed outside the factory premises for a period not exceeding six months, and application for extension of the period may be submitted to the Customs authorities together with a written explanation explaining the reasons. However, the entire period allowable shall not exceed one year.
A label stating "this product is provided for display only" shall be pasted in a conspicuous place on the bonded products for exhibit.
The bonded products for exhibit taken out from and returned to the Factory shall be recorded in a register book established for such purpose. For products taken out from the factory for display not returned to the Bonded Factory in accordance with the time limit set up in Paragraph Two above, the Bonded Factory shall prepare and submit an "application for export" for payment of duties and taxes, with ten (10) days after expiration of such time limit.