Laws of the People's Republic of China

the General Administration of Customs

Order of the General Administration of Customs

No. 142

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/Macao Closer Economic Partnership Arrangement, which was deliberated and adopted at the executive meeting of the General Administration of Customs on December 27, 2005, is hereby promulgated and shall come into force as of January 1st, 2006.

Mu Xinsheng, the General Director of the General Administration of Customs

December 30, 2005

Decision of the GAC on Amending the Provisions of the Customs of the PRC on Executing the Rules of Origin for Trade in Goods under the Mainland/Macao CEPA

With a view to promoting the closer economic partnership between the Mainland and Macao, the General Administration of Customs has decided to amend 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/Macao Closer Economic Partnership Arrangement (promulgated by Order No. 107 of the General Administration of Customs, hereinafter referred to as the Provisions) as follows:

1.

Article 6 of the Provisions shall be amended to be:

Article 6 The term "substantial processing" as mentioned in Item (2) of Article 3 of the present Provisions shall be determined by adopting the criterion of "manufacturing or processing procedure", criterion of "change of tariff code", criterion of "ad valorem percentage", other criteria or combined criteria. And other additional conditions may be adopted under the prescribed circumstances. The concrete determination shall be carried out in light of the Table of Criteria of the Origin for Goods of Macao Entitled to Preferential Treatment for Trade in Goods. And the table shall be part hereof and be separately promulgated by the General Administration of Customs.

The term "manufacturing or processing procedure" refers to the major operation that endows the processed goods with basic characteristics. Where such an operation is finished in Macao, it shall be deemed that substantial processing has been conducted.

The term "change of tariff code" means that where any raw material whose origin is not Macao is processed and produced within Macao, the four-digit tariff category of the processed products in the Customs Import and Export Tariff of the People's Republic of China has changed, and such products are not to undergo any production, processing or manufacture in any other country or region that will cause any change of their four-digit tariff category

The term "ad valorem percentage" refers to the ratio of the total value of the raw materials, components and labor obtained in Macao to the FOB price of the export finished products. If such a percentage is 30% or more, and the final manufacture or processing procedure of the products is finished within Macao, the products shall be deemed as having undergone substantial processing. The formula is as follows:

(Value of raw materials + value of components + value of labor + cost for the development of products) / FOB price of the export finished products ¡Á100% ¡Ý 30%

The term "product development" as mentioned in the above formula refers to the product development conducted within Macao for producing or processing relevant export finished products. The cost for product development shall be related to those finished products for export, including the cost for the development by producers or processors themselves, the cost for entrusting natural persons or legal persons within Macao to undertake development, and the cost paid for the purchase of the design, patent, know-how, trademark right or copyright owned by any natural person or legal person within Macao. Such costs shall be able to be clearly determined in light of the universally acknowledged accounting standards and relevant provisions of the Agreement on Implementing Article 7 of the General Agreement on Tariffs and Trade 1994.

Calculation of the "ad valorem percentage" shall be in conformity with the universally acknowledged accounting standards and relevant provisions of the Agreement on Implementing Article 7 of the General Agreement on Tariffs and Trade 1994.

The term "other criteria" refers to the other methods than the abovementioned criteria of "manufacturing and processing procedure", "change of tariff code" and "ad valorem percentage" for determining the origins, which are approved by both authorities of the Mainland and Macao.

The term "combined criteria" refers to that two or more of the above-mentioned criteria are used at the same time for determining the origin.

The term "other additional conditions" refers to the conditions, like brand requirement, whose adoption is approved by both the authorities of Mainland and Macao, when it is not sufficient to determine the origin by adopting the relevant criteria for "substantial processing".

2.

Article 15 of the Provisions shall be amended to be:

"The customs shall, according to the Customs Law of the People's Republic of China and the Implementation Rules of the Customs of the People's Republic of China on Administrative Punishment, deal with any violation of these Provisions; if any crime is constituted, the violator shall be subject to criminal liabilities".

The present Decision shall come into force as of January 1st, 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/Macao Closer Economic Partnership Arrangement shall be correspondingly amended according to the present Decision and shall be re-promulgated.

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

(Promulgated by Order No. 107 of the General Administration of Customs on December 30, 2003 and amended through the Decision of the General Administration of Customs about the Implementation of 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/Macao Closer Economic Partnership Arrangement promulgated by Order of 142 of the General Administration of Customs on December 30, 2005)

Article 1

In order to promote the economic and trade activities between the mainland and Macao, and to correctly determine the origin of the imported goods under the Mainland/Macao Closer Economic Partnership Arrangement (hereinafter referred to as CEPA), the present Provisions are formulated in accordance with the Customs Law and the CEPA.

Article 2

The present Provisions shall apply to the goods imported from Macao under the CEPA (see the Customs Import and Export Tariff of the People's Republic of China for details of the list of goods), however, the goods imported by the way of processing trade shall be excluded.

Article 3

With respect to any goods directly imported from Macao under the CEPA, the origin thereof shall be determined according to the following principles:

(1)

For any goods fully obtained in Macao, the origin thereof shall be Macao; and

(2)

For any goods not fully obtained in Macao, the origin thereof may be determined as Macao only if such goods have gone through substantial processing in Macao.

Article 4

The term "goods fully obtained in Macao" used in Item (1) of Article 3 hereof refers to:

(a)

mineral products exploited or extracted in Macao;

(b)

plants or their products harvested or collected in Macao;

(c)

live animals borne and bred in Macao;

(d)

Products obtained in Macao from the animals mentioned in Item 3) of this Article;

(e)

products obtained from hunting or fishing in Macao;

(f)

the aquatic and other marine products obtained from the high sea by ships with the license of Macao and hanging the regional flag of the Macao Special Administrative Region;

(g)

products obtained from processing of the products mention in Item 6) of this Article on the ships with the license of Macao and hanging the regional flag of the Macao Special Administrative Region;

(h)

discarded and waste materials collected in Macao that are generated in the course of consumption in Macao and that are fit only for recycling of raw materials;

(i)

waste and piecemeal materials that are generated in the course of processing and manufacturing in Macao and that are fit only for the recycling of raw materials; and

(j)

products obtained from processing of the products as mentioned in Sub-items (a) through (i) of this Article.

Article 5

The following processing or disposal, no matter whether they are finished separately or conjunctly, shall all be deemed as minor processing and disposal, and shall be disregarded in determining whether the goods are fully obtained:

(1)

processing or disposal conducted for the transport or storage of goods;

(2)

processing or disposal conducted for the convenience of the carriage of goods; and

(3)

processing or disposal, such as packing or display, etc., conducted for the sale of goods.

Article 6

The term "substantial processing" as mentioned in Item (2) of Article 3 of these Provisions shall be determined by employing the criterion of "manufacturing or processing operation", criterion of "change of tariff code", criterion of "ad valorem percentage", "other criteria" or "combined criteria" . Under the prescribed circumstances, it may be determined by employing other additional conditions. The concrete determination shall be carried out in accordance with the Table of the Criteria of Origin for the Goods of Macao Entitled to Preferential Treatment for Trade in Goods. That table shall be part hereof and be separately promulgated by the General Administration of Customs (GAC).

The term "manufacturing or processing operation" refers to the major operation that endows the goods obtained after the processing with the basic characteristics. Where such an operation is finished in Macao, it shall be deemed that substantial processing has been conducted.

The term "change of tariff code" means that where any material whose origin is not Macao are processed within Macao, the four-digit tariff category of the processed products in the Customs Import and Export Tariff of the People's Republic of China has changed, and such products are not to undergo any production, processing or manufacturing that will change their four-digit tariff category in any country or region other than Macao.

The term "ad valorem percentage" refers to the percentage that the total value of the raw materials, components, and labor obtained in Macao and the product development cost account for in the FOB price of the export products. If such a percentage is 30% or more, and the final manufacturing or processing operation of the products is finished within Macao, substantial processing shall be deemed as having been conducted. See the formula below:

(Value of raw materials + value of components + value of labor + cost for product development) / FOB price of the export product ¡Á100% ¡Ý 30%

The term "product development" in the above formula refers to the product development carried out within Macao for producing or processing the relevant export products. The cost for product development must be related to those export products, including the cost for development by the producer or processor himself/itself, the sum paid for development by the entrusted natural person or legal person within Macao, and the sum paid for purchase of the design, patent, know-how, trademark right or copyright owned by any natural person or legal person within Macao. Such cost shall be able to be clearly determined according to the universally acknowledged accounting standards and relevant provisions of the Agreement on Implementation of Article VII of the General Agreement on Tariffs and Trade 1994.

Calculation of the "ad valorem percentage" shall be in conformity with the universally acknowledged accounting standards and relevant provisions of the Agreement on Implementation of Article VII of the General Agreement on Tariffs and Trade 1994.

The term "other criteria" refers to the methods other than the abovementioned criteria of "manufacturing and processing operation", "change of tariff code" and "ad valorem percentage" for determining the origin, which are agreed upon by both authorities of the Mainland and Macao.

The term "combined criteria" refers to two or more of the above-mentioned criteria that are used at the same time in determining the origin.

The term "other additional conditions" refers to the additional conditions like brand requirement which both authorities of the Mainland and Macao agree to adopt when it is not sufficient to determine the origin by employing the relevant criteria on "substantial processing".

Article 7

Simple dilution, mixing, packing, bottling, drying, assembling, classification or decoration shall not be regarded as substantial processing.

Any processing or pricing measure aiming to avoid the present Provisions shall not be regarded as substantial processing.

Article 8

The producing areas of the energy, plants, equipment, machines, and tools used in the manufacturing of the goods, as well as the producing areas of the components that are not part of the goods and those of the materials of such components, shall be disregarded in determining the origin of goods.

Article 9

The packages, package materials, and containers, as well as the attachments, spare parts, tools, and introductory materials, that are declared for import together with the goods and that are included in the Customs Import and Export Tariff of the People's Republic of China shall be overlooked in determining the origin of the goods.

Article 10

The goods imported under the CEPA shall be transported from Macao directly to the ports of the mainland.

Where any import goods are transported from Macao to mainland via Hong Kong and where the following conditions are satisfied at the same time, they shall be deemed as being transported directly from Macao:

(1)

simply due to geographic reasons or transport needs;

(2)

not being traded or consumed in Hong Kong; and

(3)

not going through any processing in Hong Kong other than such processing that is needed for loading and unloading and for keeping the goods in good conditions.

Article 11

In customs declaration of the goods imported under the CEPA, the consignee shall voluntarily declare to the customs office that zero tariff shall apply to those goods, and shall submit a valid certificate of origin that are in conformity with the Procedures for Issuing and Checking of the Certificate of Origin under the CEPA.

For the import goods that are transported to a port of mainland via Hong Kong, the consignee shall, apart from meeting the provisions of the preceding paragraph, supplement the following documents to the customs office of the place where the goods are declared:

(1)

the through bill of lading issued in Macao;

(2)

the invoice of the goods issued by the original producer; and

(3)

relevant certificates in conformity with the second paragraph of Article 10 hereof.

Article 12

Where the certificate of origin is valid upon network check, the customs office shall handle the import formalities of those goods at zero tariff. Where certificate is invalid upon the check, zero tariff shall not be applied.

Where the customs office of the place where the goods are declared can not make the network check due to certain reasons, and the consignee require clearance of the goods, the customs office may release those goods after collecting a security of the value equal to the amount of taxes payable at the rate applied to those goods if they were not under the CEPA, handle the import formalities and make the customs statistics. The customs office of the place where the goods are declared shall, within 90 days from the day of clearance of those goods, verify the validity of its certificate of origin, and refund the security or change the security to tariff according to the result of the verification, and shall modify the customs statistics data correspondingly.

Article 13

Where the customs office of the place where the goods are declared has doubt over the validity of the contents of the certificate of origin, it may file a request through GAC or a customs office authorized thereby to the Macao Customs or Macao Economic Services for assistance in the verification. During the period when the Macao Customs or Macao Economic Services makes the verification for confirmation of the relevant certificate of origin, the customs office of the place where the goods are declared may release those goods after collecting a security of the value equal to the amount of taxes payable at the rate applied to those goods if they were not under the CEPA, handle the import formalities and make the customs statistics. After the Macao Customs or Macao Economic Services finishes the verification, the customs office of the place where the goods are declared shall, according to the result of the verification, immediately refund the security or change the security to import tariff, and modify the customs statistics data correspondingly.

Article 14

The customs offices have the obligation to keep confidential of the materials provided by the consignee of the import goods for verification of the certificate of origin. Without the consent of the consignee, the customs offices may not disclose those materials or use them for any other purpose, however, except the laws, administrative regulations and relevant judicial interpretations have otherwise provisions.

Article 15

The customs shall, in accordance with the Customs Law of the People's Republic of China and the Implementation Rules of the Customs of the People's Republic of China for Administrative Punishment, deal with any violation of these Provisions; if any crime is constituted, the violator shall be subject to criminal liabilities.

Article 16

The power to interpret the present Provisions shall remain with the GAC.

Article 17

The present Provisions shall come into force on January 1, 2004.