Laws of the People's Republic of China

General Administration of Customs

Decree of the General Administration of Customs

No.141

The Decision of the General Administration of Customs on Amending the Provisions of the Customs of the People's Republic of China on Executing the Rules of Origin for Trade in Goods under the Mainland/Hong Kong Closer Economic Partnership Arrangement was discussed and adopted at the Executive Meeting of the General Administration of Customs on December 27, 2005. It is hereby promulgated and shall enter into force as of the date of January 1, 2006.

Director-General of the General Administration of Customs Mu Xinsheng

December 30, 2005

Decision of the General Administration of Customs on Amending the Provisions of the Customs of the People's Republic of China on Executing the Rules of Origin for Trade in Goods under the Mainland/Hong Kong Closer Economic Partnership Arrangement

In order to promote the closer economic partnership between the Mainland and Hong Kong, the General Administration of Customs decides to make these amendments as follows to the Provisions of the Customs of the People's Republic of China on Executing the Rules of Origin for Trade in Goods under the Mainland/Hong Kong Closer Economic Partnership Arrangement (hereafter referred to as the CEPA) (Promulgated by Decree No.106 of the General Administration of Customs, hereafter referred to as these Provisions).

I.

ArticleVI of the Provisions shall be amended as "The 'substantial processing' as mentioned in Section II, ArticleIII shall be determined by the criteria of 'procedure of manufacturing or processing', of 'change of duty paragraph', and of 'ad valorem percentage', and by 'other criteria' or 'mixed criteria'; and other additional conditions, when stipulated, may also be permitted; and the concrete procedures shall be carried out in accordance with the Form of Origin Criteria for Hong Kong Goods Subject to Preferential Measures for Trade in Goods under the CEPA. This Form is a component of these Provisions, and shall be separately promulgated by the General Administration of Customs.

The 'procedure of manufacturing or processing' refers to such main procedures as endow the processed goods with their basic characteristics, and such procedures as are completed within the territory of Hong Kong shall be regarded as substantial processing.

The 'change of duty paragraph' refers to changes of the four-digit taxation categories in the Customs Tariff of Import and Export of the People's Republic of China for such products using the non-Hong-Kong materials as are processed within the territory of Hong Kong, and as are subject to no production, processing or manufacturing that will change the four-digit taxation categories in the countries or regions without the territory of Hong Kong.

The 'ad valorem percentage' refers to the ratio between the total amount of the paid values for such raw materials, component parts, value of labor power and product development as are fully acquired within the territory of Hong Kong and the FOB of the finished products for export; those with a ratio of more than or equivalent to 30%, and with the last manufacturing or processing procedures of these products being completed within the territory of Hong Kong shall be regarded as substantial processing, and the formula for this is as follows:

Value of Raw Materials+Value of Component Parts+Value of Labor Power+

Value Paid for Product Development

---------------------------------------------------------------------------------------------100%¡Ý30%

FOB of Finished Products for Export

The 'product development' as mentioned in the formula refers to the product development conducted for producing or processing relevant finished products for export within the territory of Hong Kong. And the value paid for product development shall be related with these finished products for export, including the outlays paid for the self-developing of producers and processors themselves, for the developing of consigned natural persons or legal persons within the territory of Hong Kong and for purchasing the designs, patent rights, proprietary technologies, trademark rights or copyrights possessed by natural persons or legal persons within the territory of Hong Kong; and this value concerned shall be specified in accordance with the generally-accepted accounting standards and with relevant provisions in the Agreement on Implementation of ArticleVII of the General Agreement on Tariffs and Trade 1994.

The calculation of the 'ad valorem percentage' shall be conducted in accordance with the generally-accepted accounting standards and with relevant provisions in the Agreement on Implementation of ArticleVII of the General Agreement on Tariffs and Trade 1994.

The 'other criteria' refer to other ways jointly adopted by authorities in charge of the Mainland and Hong Kong for determining places of origin, besides the aforesaid criteria of 'procedure of manufacturing or processing', of 'change of duty paragraph', and of 'ad valorem percentage'.

The 'mixed criteria' refer to using two or more than two of the aforesaid criteria when determining places of origin.

Other additional conditions refer to those such as brand requirements etc., with the consensus of authorities in charge of the Mainland and Hong Kong, which shall be applied when the aforesaid determining criteria for 'substantial processing' are not enough to determine places of origin."

II.

ArticleXIV of the Provisions shall be amended as:

"Those acts in violation of these Provisions shall be subject to the provisions in the Customs Law of the People's Republic of China and the Implementation Regulations on the Customs Administrative Penalties of the People's Republic of China by the customs; in case crime is constituted, one shall be prosecuted for the criminal responsibilities according to law."

This decision shall enter into force as the date of January 1, 2006.

The Provisions of the Customs of the People's Republic of China on Executing the Rules of Origin for Trade in Goods under the Mainland/Hong Kong Closer Economic Partnership Arrangement is hereby repromulgated after related amendments in accordance with this Decision.

The Provisions of the Customs of the People's Republic of China on Executing the Rules of Origin for Trade in Goods under the Mainland/Hong Kong Closer Economic Partnership Arrangement

(Promulgated by Decree No.106 of the General Administration of Customs on December 30, 2003, and Amended in accordance with the Decision of the General Administration of Customs on Amending the Provisions of the Customs of the People's Republic of China on Executing the Rules of Origin for Trade in Goods under the Mainland/Hong Kong Closer Economic Partnership Arrangement Promulgated by Decree No.141 of the General Administration of Customs on December 30, 2005)

ArticleI

These Provisions are formulated in accordance with the Customs Law of the People's Republic of China and the Mainland/Hong Kong Closer Economic Partnership Arrangement (hereafter referred to as the CEPA) for the purpose of promoting trade between the Mainland and Hong Kong and of determining correctly places of origin for the imported goods subject to the CEPA.

ArticleII

These Provisions are applicable to goods imported from Hong Kong subject to the CEPA (please refer to the Customs Tariff of Import and Export of the People's Republic of China for the detailed list of products), while goods imported in the form of processing trade are excluded.

ArticleIII

The places of origin for goods directly imported from Hong Kong subject to the CEPA shall be determined in accordance with these principles as follows:

i.

The places of origin for goods fully acquired within the territory of Hong Kong shall be determined as Hong Kong; and

ii.

The places of origin for goods non-fully acquired within territory of Hong Kong shall be determined as Hong Kong only after ascertaining that their substantial processing are conducted within the territory of Hong Kong.

ArticleIV

The "goods fully acquired within the territory of Hong Kong" as mentioned in ArticleIII of these Provisions refer to:

i.

Minerals exploited or distilled within the territory of Hong Kong; and

ii.

Plants or plant products harvested or collected within the territory of Hong Kong; and

iii.

Live animals born and bred within the territory of Hong Kong; and

iv.

Products acquired from the animals as mentioned in Section III of this Articlewithin the territory of Hong Kong; and

v.

Products acquired from hunting or fishery within the territory of Hong Kong; and

vi.

Fish and other sea products acquired from fishing on the high seas by vessels with Hong Kong licenses and hanging the flags of the Hong Kong Special Administrative Region; and

vii.

Products acquired from processing the products as mentioned in Section VI of this Articleon the vessels with Hong Kong licenses and hanging the flags of the Hong Kong Special Administrative Region; and

viii.

Waste and used stuffs only for raw material recycling generated in the process of consumption in Hong Kong and collected within the territory of Hong Kong; and

ix.

Waste small pieces only for raw material recycling generated in the process of processing and manufacturing within the territory of Hong Kong; and

x.

Products acquired from processing all the products as mentioned in from Section I to Section IX within the territory of Hong Kong.

ArticleV

These processing or disposals listed as follows, whether independently completed or cooperatively completed, shall all regarded as small processing and disposals, and shall be excluded from consideration while determining they are fully acquired or not.

i.

Processing or disposals for transportation or stockpile; and

ii

Processing or disposals for facilitating the handing and loading of goods; and

iii

Such processing or disposals as packaging, exhibiting etc. for the sale of goods.

ArticleVI

The 'procedure of manufacturing or processing' refers to such main procedures as endow the processed goods with their basic characteristics, and such procedures as are completed within the territory of Hong Kong shall be regarded as substantial processing.

The 'change of duty paragraph' refers to changes of the four-digit taxation categories in the Customs Tariff of Import and Export of the People's Republic of China for such products using the non-Hong-Kong materials as are processed within the territory of Hong Kong, and as are subject to no production, processing or manufacturing that will change the four-digit taxation categories in the countries or regions without the territory of Hong Kong.

The 'ad valorem percentage' refers to the ratio between the total amount of the paid values for such raw materials, component parts, value of labor power and product development as are fully acquired within the territory of Hong Kong and the FOB of the finished products for export; those with a ratio of more than or equivalent to 30%, and with the last manufacturing or processing procedures of these products being completed within the territory of Hong Kong shall be regarded as substantial processing, and the formula for this is as follows:

Value of Raw Materials+Value of Component Parts+Value of Labor Power+

Value Paid for Product Development

-------------------------------------------------------------------------------------------¡Á100%¡Ý30%

FOB of Finished Products for Export

The 'product development' as mentioned in the formula refers to the product development conducted for producing or processing relevant finished products for export within the territory of Hong Kong. And the value paid for product development shall be related with these finished products for export, including the outlays paid for the self-developing of producers and processors themselves, for the developing of consigned natural persons or legal persons within the territory of Hong Kong and for purchasing the designs, patent rights, proprietary technologies, trademark rights or copyrights possessed by natural persons or legal persons within the territory of Hong Kong; and this value concerned shall be specified in accordance with the generally-accepted accounting standards and with relevant provisions in the Agreement on Implementation of ArticleVII of the General Agreement on Tariffs and Trade 1994.

The calculation of the 'ad valorem percentage' shall be conducted in accordance with the generally-accepted accounting standards and with relevant provisions in the Agreement on Implementation of ArticleVII of the General Agreement on Tariffs and Trade 1994.

The 'other criteria' refer to other ways jointly adopted by authorities in charge of the Mainland and Hong Kong for determining places of origin, besides the aforesaid criteria of 'procedure of manufacturing or processing', of 'change of duty paragraph', and of 'ad valorem percentage'.

The 'mixed criteria' refer to using two or more than two of the aforesaid criteria when determining places of origin.

Other additional conditions refer to those such as brand requirements etc., with the consensus of authorities in charge of the Mainland and Hong Kong, which shall be applied when the aforesaid determining criteria for 'substantial processing' are not enough to determine places of origin."

ArticleVII

Simple dilution, blending, packaging, bottling, desiccation, assembling, classification or ornamentation shall not be regarded as substantial processing.

The processing or pricing measures for the purpose of evading these Provisions shall not be regarded as substantial processing.

ArticleVIII

The places of origin for the energies, factories, equipments, machineries and tools used in the process of manufacturing goods and the places of origin for the materials not constituting component ingredients or parts of goods shall be excluded from consideration while determining the places of origin for goods.

ArticleIX

Such packaging, packaging materials, containers and accessories, spare parts, tools and introductory materials as enter in with goods and are categorized with goods in the Customs Tariff of Import and Export of the People's Republic of China shall be ignored while determining the places of origin for goods.

ArticleX

Imported goods subject to the CEPA shall be directly transported to the customs ports of the Mainland from Hong Kong.

ArticleXI

Where the imported goods subject to the CEPA go through the formalities of customs declaration, the recipients of goods shall initiatively inform the customs authorities upon request that these goods concerned are subject to zero tariff and submit the effective Certificate of Origin conforming to the provisions in the Issuing and Verification Procedure for Certificate of Origin subject to the CEPA. Where the Certificate of Origin is verified correct via the customs electronic network, the customs authorities shall handle the formalities of importing goods under zero tariff, otherwise not.

Where the customs authorities upon request cannot verify via the customs electronic network and the recipients of goods require clearance, the customs authorities hereof may give clearance to these goods concerned after collecting guarantee fund equivalent to the payable duty in accordance with the tax rate applicable to goods non-subject to the CEPA, and handle the formalities of import as required and conduct customs statistics. And the customs authorities upon request shall, within 90 days as of the date of clearance of these goods concerned, verify their Certificate of Origin and handle the formalities of returning the guarantee fund or of transferring the guarantee fund to import duty in accordance with the results of verification, and the customs statistical data shall also be revised correspondingly.

ArticleXII

Where the customs authorities upon request doubt the authenticity of the Certificate of Origin, they may, via the General Administration of Customs or its authorized customs authorities, forward requests of assistant verification to the Hong Kong Customs. During the period of waiting for the verification results from the Hong Kong Customs and validation of the related Certificates of Origin, the customs authorities upon request may give clearance to these goods concerned after collecting guarantee fund equivalent to the payable duty in accordance with the tax rate applicable to goods non-subject to the CEPA, and handle the formalities of import as required and conduct customs statistics. After the verification of the Hong Kong Customs, the customs authorities upon request shall immediately handle the formalities of returning the guarantee fund or of transferring the guarantee fund to import duty in accordance with the results of verification, and the customs statistical data shall also be revised correspondingly.

ArticleXIII

The customs authorities shall be responsible for keeping secret the documents provide by the recipients of imported goods for the verification of their Certificates of Origin. Without the consensus from the recipients of goods, the customs authorities shall not leak these documents or use them for other purposes except those stipulated in laws, administrative regulations and other relevant judicial interpretations.

ArticleXIV

Those acts in violation of these Provisions shall be subject to the provisions in the Customs Law of the People's Republic of China and the Implementation Regulations on the Customs Administrative Penalties of the People's Republic of China by the customs; in case crime is constituted, one shall be prosecuted for the criminal responsibilities according to law.

ArticleXV

The General Administration of Customs is responsible for the interpretation of these Provisions.

ArticleXVI

These Provisions shall enter into force as of the date of January 1, 2004.