Laws of the People's Republic of China

Circular of Ministry of Finance, General Administration of Customs and State Administration of Customs on Distributing the Regulations of Exempting the Import Tariffs of Materials for the Coalbed Methane Prospecting and Exploiting

Cai Guan Shui [2006] No. 13

China United Coalbed Methane Co., Ltd.:

The Regulations of Exempting the Import Tariffs of Materials for the Coalbed Methane Prospecting and Exploiting is hereby distributed and please follow it.

Appendix: Regulations of Exempting the Import Tariffs of Materials for the Coalbed Methane Prospecting and Exploiting

Ministry of Finance

General Administration of Customs

State Administration of Customs

October 25, 2006 Appendix: Regulations of Exempting the Import Tariffs of Materials for the Coalbed Methane Prospecting and Exploiting

I.

The current regulations are formulated in accordance with the spirits of the State Council of reserving and adjusting the tariff and import-stage value-added tax exemption policy on imported materials for coalbed methane prospecting and exploiting programme of the Eleventh Five-Year Period, and of moderately enlarging the scope of enterprises which enjoy the exemption.

II.

China United Coalbed Methane Co., Ltd. and its collaborators at home and abroad (hereinafter referred to as China United Coalbed Methane Co., Ltd.) will, in case of conducting any coalbed methane prospecting and exploiting programme within China, be exempted from the import tariffs and import-stage value-added tax for the imported equipment, apparatus, parts and accessories and special instruments directly used in prospecting and exploiting which have not be produced in China or whose domestic counterparts fail to meet the requirements (see the list of the materials involved at the end).

Other entities engaged in coalbed methane prospecting and exploiting shall file an application to the Ministry of Finance before the import takes place. They will only enjoy the preferential policies of import tariffs with the confirmation of Ministry of Finance, General Administration of Customs and State Administration of Customs.

III.

China United Coalbed Methane Co., Ltd. and other confirmed coalbed methane prospecting and exploiting entities shall report all the coalbed methane prospecting and exploiting programmes to the Ministry of Finance. Only after the examination of Ministry of Finance, General Administration of Customs and State Administration of Customs may these entities go through the necessary procedures of import in the local customs.

IV.

The importing entities shall, when going through the exemption procedures, show the list of materials examined by China United Coalbed Methane Co., Ltd. and other confirmed entities to the customs and report the corresponding programmes that have been examined. The specific procedures of operation and supervision will be formulated by the General Administration of Customs separately.

V.

The attached List of Tariff-Exempted Materials Imported for Coalbed Methane Prospecting and Exploiting (hereinafter referred to as the List of Tariff-Exempted Materials) include the tariff codes, name of goods and technical index and the latter two shall be in line with the actual uses. The List of Tariff-Exempted Materials can be adjusted by Ministry of Finance, General Administration of Customs and State Administration of Customs. The customs will, when examining the exemption of imported goods, take the name and technical index of the goods on the List of Tariff-Exempted Materials as the standard should any inconsistency occurs.

VI.

The equipment, apparatus, parts and accessories and special instruments unlisted in the List of Tariff-Exempted Materials while imperative for the coalbed methane prospecting and exploiting shall be examined and confirmed by General Administration of Customs together with the Ministry of Finance and State Administration of Customs.

VII.

China United Coalbed Methane Co., Ltd. and other coalbed methane prospecting and exploiting entities will be exempted from the import tariffs for importing materials on the List of Tariff-Exempted Materials. The customs will put the materials under the procedures of temporarily admitted goods when processing them. Should the time for temporarily admitted goods has expired but the goods are still needed, the customs may approve the extension of use and the tariffs will be exempted within the time limits of temporarily admitted goods (including the extended goods).

VIII.

The materials that have been imported in the form of lease may be exempted from the import tariffs according to the present regulations should they fall into the scope of the List of Tariff-Exempted Materials; otherwise import tariffs shall be paid.

IX.

With the approval of the customs, tariff-exempted materials imported according to the present regulations may be devolved or transferred between different confirmed coalbed methane prospecting and exploiting programmes, or used for the disposal of colliery gas or for emergency dealing and disaster relief. The specific procedures of operation and supervision will be formulated by the General Administration of Customs separately.

X.

Tariff-exempted materials imported for coalbed methane prospecting and exploiting shall not be mortgaged, impawned, transferred, made other use of or disposed otherwise. Any violation will lead to due penalties according to the relevant laws and regulation of the state.

XI.

China United Coalbed Methane Co., Ltd. and other coalbed methane prospecting and exploiting entities shall report to the Ministry of Finance the list of actually imported materials as well as their value and the amount of exempted tariffs and send a copy to the General Administration of Customs and State Administration of Customs.

XII.

The present regulations shall be interpreted by Ministry of Finance, General Administration of Customs and State Administration of Customs.

XIII.

The present regulations shall be practiced from January 1, 2006 to December 31, 2010.

Appendix: List of Tariff-Exempted Materials Imported for Coalbed Methane Prospecting and Exploiting (omitted)