Laws of the People's Republic of China

National Development and Reform Commission, Ministry of Finance, Ministry of Commerce, Ministry of Land and Resources, General Administration of Customs, State Administration of Taxation, State Environmental Protection Administration

Circular concerning the Measures to Control the Export of Products of High Energy Consumption, High Pollution and Resource

Fa Gai Jing Mao [2005] No. 1482

Departments of finance, departments of land and resources (departments of land and resources, bureaus of land and resources, land, resources & housing administrative bureaus, real estate land and resources administration bureaus, programming &land and resources bureaus), the Guangdong Sub-Administration of the Customs General Administration, Tianjin and Shanghai Special Commissioner's of Tianjin and Shanghai Office in all provinces, autonomous regions, municipalities directly under the central government, cities specifically designated in the state plan, development and reform commission of Xinjiang Production and Construction Corps and the customs directly under the General Administration of Customs, state tax bureaus and environmental protection bureaus (departments):

In light of the spirit of plenary meeting of the State Council, the central government has since May of this year taken measures to control the export of part of the precuts of high energy consumption, high pollution and resources. In order to do it well, the matter of concern is hereby given as follows:

1.

The necessity to control the export of products of high energy consumption, high pollution and resources

In recent year, the excessive investment in such industries as steel, cement, electrolytic aluminum, coke, aimless extension of the yield, the surge of export of high-energy-consumption, high-pollution and resources products such as billet, steel ingot, electrolytic aluminum, ferroalloy, part of the non-ferrous metal intensified the relations between domestic energy, raw material, transportation and exerted more pressure on resources and environment. In 2004, the export of billet, steel, unforged and unrolled aluminum, ferroalloy and coke registered 6.058 million ton, 14.23 million ton, 1.68 million ton, and 15.01 million ton, an increase of 312.1%, 104%, 34.8%, 20.5% and 2% respectively on year-on-year basis; that in the first half of this year increased by 262.4%, 154.1%,21.9%, 17% and 16.2% respectively. In addition, such non-ferrous metals as zinc, tin, antimony and such high-energy-consumption, high-pollution and resources products as phosphorus yellow and calcium carbide boasted a surge of export.

The massive export of high-energy-consumption, high-pollution and resources products intensified the conflict between coal, electricity and oil and exerted greater pressure upon the environment. In 2004, the production of unforged and unrolled aluminum, billet, steel, ferroalloy and phosphorus yellow for export consumed 49 billion kw, accounting for 82% of the electricity shortage, and even more without the consideration of whole process of transport and electricity consumption. The high-energy-consumption products are largely at the cost of serious environmental pollution, such as waste air and water released in the process of coke production, fluoride set off in electrolytic aluminum and industrial dust in ferroalloy. Some electrolytic aluminum and billet enterprises were located in the hinterland so that the exported material from the southeast regions had to be transported to the middle and the western region and the finished products had to be transported to the southeast offshore area for export, which exerted greater pressure upon transport. The massive export of high-energy-consumption, high-pollution and resources products overloaded upon the exterior conditions as energy, resources, environment, and transport, and had side effect upon the sound and steady operation of our national economy. To control of the export of high-energy-consumption, high-pollution and resources products was utterly necessary for the implementation of scientific development outlook, reduction of environmental pollution, freeing the economic development from resource limit and alleviating the tense relations among coal, electricity and oil.

2.

Measures to control the export of high-energy-consumption, high-pollution and resources products

Since this year, the relevant authorities with the approval of the State Council took a series of measures to set a limit of the export of high-energy-consumption, high-pollution and resources products.

(1)

Axing the total export volume. The export quotas of coal was reduced from 0.1 billion tons in 2003 to 80 million tons in 2005, that of raw oil from 5 million tons in 2003 to 1 million ton in 2005, and that of coal from 14.72 million in 2004 to 14 million in 2005.

(2)

Abolishing or reducing tax refund of part of the products. On January 1, 2005, the tax refund of such high-energy consumption products as electrolytic aluminum, ferroalloy, phosphorus yellow, calcium carbide was abolished, in April, that of the primary products of steel was annulled and the tax refund of steel was reduced from 13% to 11%, On May 1, that of rare earth metal, rare earth oxide, rare earth salt, silicon metal, molybdenum ore and concentrate, light and dead burnt magnesite, fluorite, talcum, silicon carbide and part of the processed timber was abolished; that of coal, zinc, tungsten, tin, antimony and their finished products reduced to 8%. On August 1, the tax refund of electrolytic manganese was abolished.

(3)

Levying export tariff. From January 1 of this year, export tariff was imposed on carbamide and tax of unforged and unrolled aluminum was 5%. From June 1, the provisional duty rate for exported phosphorus was raised from 10% to 20 %, that of ferrosilicon from 0% to 5%.

(4)

Stopping processing trade. The central governmental listed successively such products as coal, coke, phosphorous yellow, steel into the forbidden category of processing trade, on August 22, alumina, ferroalloy mine was planned to be listed in and new processing trade contract was scheduled to be stopped.

3.

Doing well the implementation of the supporting measures concerning alumina and ferroalloy mine processing trade.

In recent years the investment in electrolyte and ferroalloy industry surged, so does its yield. Stopping the alumina processing trade was conducive to the reduction of import of alumina and export of electrolyte aluminum, decline of the price of alumina in international market, recovery of alumina in international market and recovery of its price in the domestic market, as well as the creation of a fairly competitive market, which was generally beneficial for the electrolyte and ferroalloy market. However, considering that the supply of electrolyte and ferroalloy exceeded its market demand, the whole industry was generally in difficulties and losses occurred in some enterprises. Therefore, the relevant authorities in all regions shall do well its work to overcome the difficulties in electrolyte and ferroalloy industries.

(1)

The processing trade contract approved prior to the stop hereof shall be allowed to be completed. After having listed the export of alumina and ferroalloy into the forbidden processing trade, the central government will no longer examine and approve new processing trade control, as for the processing trade contract having been approved by the authorities in charge of commerce and recorded in the files of the customs, they shall be allowed to be completed in accordance with the current processing trade policy.

(2)

To research some relevant tariff policy. The relevant tariff policy shall, with the combination of the formation of tariff policy of next year, be researched and studied in the interest of the protecting domestic resources, encouraging the export of resource products, facilitating the sound development of electrolyte aluminum and ferroalloy

(3)

To perfect the electricity price formation system of high-energy-consumption enterprises. The policy concerning differential electricity price shall be continued. The price between different voltages class shall be widened, raising the price of low voltage class and reducing the price of high voltage class. The direct supply and joint operation between electrolyte aluminum enterprises and electricity ones in the areas rich in electricity shall be undertaken to reduce the cost of electrolyte aluminum. The policy concerning peak and bottom electricity price shall be perfected and implemented to widen the price difference between electricity peak and electricity bottom and to reduce the production cost of ferroalloy.

(4)

To perfect the credit policy. The implementation of national macro policy such industries as steel, electrolyte aluminum, coal and ferroalloy shall be evaluated comprehensively, the industrial investment warning as well as the relevant policy direction be strengthened so as to master the loan investment orientation and offer effective support to such enterprises and project as accords with national industrial policy and credit principle.

(5)

To make great effort to maintain social stability. All the relevant authorities shall put into practice the relevant supporting measures and help the enterprises to solve their difficulties and problems. It is imperative to understand and comprehend promptly the enterprise operation, to study earnestly the problems occurred after the suspension of processing trade and submit them to the relevant higher authorities in time.

National Development and Reform Commission

Ministry of Finance

Ministry of Commerce,

Ministry of Land and Resources

General Administration of Customs,

State Administration of Taxation

State Environmental Protection Administration

July 28, 2005