Laws of the People's Republic of China

The State Administration for the Inspection of Import and Export Commodity, the Ministry of Finance

Circular of the State Administration for Import and Export Commodity Inspection and the Ministry of Finance for Issuing the Measures on Administration of the Appraisal of Assets Invested by Foreign Businessmen

GuoJianJianLian [1994] No.78

March 18, 1994

All directly subordinate bureaus for the commodity inspection, the departments (bureaus) of finance of the various provinces, autonomous regions, municipalities directly under the Central Government and municipalities separately listed on the State plan:

In order to benefit the establishment of the normal order of investment,conduct the healthy development of the foreign businessmen's investment and further ensure a correct appraisal to the assets put in by foreign businessmen as investment,the State Administration of Commodity Inspection and Ministry of Finance draw together the the Measures on Administration of the Appraisal of Assets Invested by Foreign Businessmen and are now issuing it to you for implementation.You are requested to transmit it to the local bureaus for the commodity inspection,departments of finance,accounting firms and related units of dominated regions for implementation.

Attachment:Measures on Administration of the Appraisal of Assets Invested by Foreign Businessmen

Chapter I General Provisions

Article 1

These measures are enacted to ensure a correct appraisal to the assets put in by foreign businessmen as investment, so as to protect the lawful rights and interests of all investors in the introduction of foreign capital by the country, in accordance with Article 33 of the Regulations for the Implementation of the Law of the People's Republic of China on Import and Export Commodities Inspection (hereinafter referred to as "Regulations for the Implementation of Commodity Inspection Law"), and according to Article 29 of the Rules for the Implementation of the Law of the People's Republic of China on Foreign-capital Enterprises, as well as relevant State laws and administrative decrees.

Article 2

These measures apply to the appraisal of assets that is invested by overseas (including Hong Kong, Macao and Taiwan) firms, businesses, other economic entities, or individuals (hereinafter referred to as "foreign businessmen") in enterprises with foreign investment of various kinds or in compensation trade conducted in various kinds or in compensation trade conducted in China, or assets bought outside China by agents entrusted by enterprises with foreign investment.

Article 3

The State Administration of Import and Export Commodities Inspection of the People's Republic of China (hereinafter referred to as the "State Administration of Commodity Inspection") is in charge of the appraisal of assets invested by foreign businessmen throughout the country. The State Administration of Commodity Inspection shall set up local import and export commodities inspection bureaus (hereinafter referred to as "local bureaus of commodity inspection") to take charge of and handle the appraisal of the assets invested by foreign businessmen in localities. The local bureaus of commodity inspection shall set up property appraisal offices and other joint assets assessment ventures (hereinafter referred to as "other appraisal organs") to handle the appraisal of assets invested by foreign businessmen according to Article 8 of these measures.

Article 4

The Ministry of Finance of the People's Republic of China is in charge of the inspection of assets invested by foreign businessmen and related financial affairs nationwide. Local financial departments are in charge of the inspection of assets invested by foreign businessmen and related financial affairs in their own localities. Accounting firms approved by the Ministry of Finance and local financial departments shall be responsible for arranging for the inspection of assets invested by foreign businessmen.

Article 5

The appraisal of assets invested by foreign businessmen shall adhere to the principle of truthfulness, fairness, scientific, and feasible and be handled according to means and standards of international practices, and stipulated by the State.

Article 6

The appraisal of assets invested by foreign businessmen includes such contexts of category, quality, quantity, value, and loss. In context of category, quality and quantity, the appraisal involves the titles, model numbers, quality, quantity, specifications, trade mark, extent of wear, release dates, producing country, and manufacturers of the assets. In context of value, it is to appraise the current prices of the assets invested by foreign businessmen. In context of loss, it is to appraise cause, extent, charges for settlement, and salvage value of losses of the assets invested by businessmen caused by natural disasters and accidents.

Article 7

After appraising the assets invested by foreign businessmen, the local commodity inspection bureaus and other appraisal offices shall issue an appraisal certificate. The certificate for value is a valid document to approve the value of assets invested by all investors.

The accounting firms of all localities shall assess the assets invested by foreign businessmen according to the value appraisal certificate issued by the commodity inspection bureau and other appraisal offices.

Chapter II Organization and Management

Article 8

The setting up of assets appraisal offices or joint venture assets assessment offices to carry out the work of appraisal prescribed by these measures by local commodity inspection bureaus shall be under the examination and approval by the State Administration of Commodity Inspection and the Ministry of Finance, and be noticed to local accounting firms and other related departments.

Article 9

Personnel for appraisal of assets invested by foreign businessmen can only be qualified to do such a work through attending a formal training organized by the State Administration of Commodity Inspection for such a purpose and passing tests thereof and obtaining a certificate from the latter for such a qualification.

Chapter III Methods and Procedures for Appraisal

Article 10

In appraisal of the assets invested by foreign businessmen, the appraisal methods and related regulations prescribed by these measures shall be used to determine the actual current conditions, extent of wear, functional index, technical parameters, profitability, and cost of replacement of the assets concerned.

Article 11

The appraisal methods consist of on-the-spot examination, technical tests, and value rating. The method of value rating includes the following means:

(1)

Market method;

(2)

Cost method;

(3)

Income method;

(4)

Other methods stipulated by the Ministry of Finance and State Administration of Commodity Inspection.

Article 12

When the market method is applied to the appraisal of the assets invested by foreign businessmen, the value of the assets should be assessed with reference to the current market prices of like or similar assets.

Article 13

When adopting the cost method to appraise the assets invested by foreign businessmen, one should determine the reassessed value of the assets concerned by subtracting the accumulated depreciation amount based on the cost of replacement from the cost of replacement of brand- new assets of the same kind, taking into account changes in the production capability and percentage of newness. Or one can get the reassessed value according to the current condition and life expectancy of the assets appraised, taking into account changes in its functions and re-determining its percentage of newness.

Article 14

When adopting the income method to the appraisal of the assets invested by foreign businessmen, one should calculate the current value of the assets to be appraised according to the reasonable expected profitability of the assets and appropriate discount rate.

Article 15

The appraisal of assets invested by foreign businessmen shall be carried out according to the following procedures:

(1)

The applicant submits an application for the appraisal;

(2)

The appraisal organ makes an initial examination of the data and accepts the application;

(3)

The appraisal personnel draw up a plan for the appraisal;

(4)

The certificates and data provided by the applicant shall be examined and checked, and a survey shall be made of the markets as home and abroad.

(5)

On-the-spot examination;

(6)

A suitable appraisal method is selected;

(7)

An appraisal certificate is issued.

Article 16

In applying for an appraisal of assets invested by foreign businessmen, the applicant should fill in an application form with the outline of the object, target, and requests of the appraisal. At the same time appropriate documents and data on inventory of the property, customs declaration, contract, invoices, insurance policy, maintenance expenses, and equipment and technology should be provided.

Article 17

Upon the receipt of an application for the appraisal of assets invested by foreign businessmen, local commodity inspection bureaus and other appraisal organs shall first of all see that whether the application form filled out by the applicant and other related data submitted are complete and then demand the temporary sealing of the assets that should keep their current conditions for the appraisal.

Article 18

The appraisal personnel should carry out the operation of appraisal according to the appraisal procedures. When conducting on-the- spot examination and appraisal, they must check the items for appraisal one by one. If necessary, they can ask related persons of the assets for supplementary explanation. After concluding the appraisal, they should issue an appraisal certificate in time.

Article 19

Should there be any objections to the results of the appraisals by the applicants, an application for re-appraisal can be made to the commodity inspection bureau that produces the result, or to a higher-level commodity inspection bureau, or even to the State Administration of Commodity Inspection. The specific procedure is defined in the "Re-Inspection Measures for Import and Export Commodities."

Chapter IV Legal Liability

Article 20

Those who forge or falsify certificates issued by the commodity inspection bureau or other appraisal organs shall be punished according to the related provisions of the "Regulations for the Implementation of the Commodity Inspection Law."

Article 21

If the personnel for appraisal produce an untrue or false result due to dereliction of duty or for personal gains, they shall be punished according to the related provisions of the "Regulations for the Implementation of the Commodity Inspection Law."

Article 22

The appraisal personnel shall not provide a third party with related circumstances and data of the appraisals (except otherwise stipulated by law). Those who fail to observe the above provision and bring harmful result shall be punished according to the seriousness of the case.

Article 23

Local accounting firms or registered accountants shall be punished by the finance department in charge according to related provisions of the "Registered Accountants Law of the People's Republic of China" upon their violations to Article 7 (Part 2) of these measures.

Article 24

Should a party concerned refuse to accept a punishment meted out by the commodity inspection bureau or finance department, an application for reconsideration can be made to the organ that imposes the punishment or to its higher authorities within 30 days after the receipt of the punishment notice. Should the reconsidered decision be again refused, the case may be brought up to the people's court within 30 days after the receipt of the reconsidered decision.

Upon an refusal to observe the punishment without an application for reconsideration be made or a case be brought to the court within the time limit, the commodity inspection bureau or finance department that imposes the punishment shall apply to the people's court for compulsory execution.

Chapter V Supplementary Provisions

Article 25

During an appraisal made by the related personnel on the assets, the applicant for making the appraisal should provide necessary work conditions, assistants, and appliances.

Article 26

For doing the job of appraisal of assets invested by foreign businessmen according to these measures, the local commodity inspection bureaus and other appraisal organs shall charge the applicant for the appraisal a certain fee according to the related State regulations.

Article 27

These measures shall be interpreted by the State Administration of Commodity Inspection and the Ministry of Finance. If any regulations enacted by localities or departments on the appraisal of assets invested by foreign businessmen contravene these measures, these measures shall prevail.

Article 28

These measures shall enter into force as of May 1, 1994.