Laws of the People's Republic of China

No. 17

Measures for the Administration of Fair Dealing of Retailer and Supplier has been deliberated and adopted at the 7th meeting of the ministry on July13, 2006, and approved by National Development and Reform Commission, Ministry of Public Security, State Administration of Taxation and State Administration for Industry and Commerce. Now it is hereby promulgated and shall come into effect as of November15, 2006. Minister of Ministry of Commerce Bo Xilai

Director of National Development and Reform Commission Ma Kai

Minister of Ministry of Public Security Zhou Yongkang

Director of General of State Administration of Taxation Xie Xuren

Director of General of State Administration for Industry and Commerce Wang Zhongfu

October12, 2006

Measures for the Administration of Fair Dealing of Retailer and Supplier

Article 1

In order to regulate the dealing of retailers and suppliers, maintain fair dealing order and protect the legal rights of consumers, these Measures are hereby formulated.

Article 2

The relevant dealing conducted by retailers and suppliers in China shall apply to these Measures.

Article 3

The term "retailers" as mentioned in the present measures refers to the enterprises and their branches which register at the administration for industry and commerce, directly sell commodities to consumers and the annual sales amount (for the enterprises conducting chain business, whose sales amount includes the sales amount of chain stores) over 10 million RMB. The term "suppliers" as mentioned in the present measures refers to the enterprises and their branches, individual business, including manufacturers, distributors and other agents, which directly provide retailers with commodities and relevant service.

Article 4

The dealing conducted by retailers and suppliers shall be in accordance with the principle of legitimacy, willingness, fairness, good faith and may not interfere the market dealing order of fairness and competition and may not infringe the legal rights of the counter parties.

Article 5

Retailers and suppliers are encouraged to use the standard contract recommended by the administrative department in charge of commerce and the authorities of administration for industry and commerce in dealing.

Article 6

The retailers may not abuse the advantageous position to conduct the following unfair dealing:

(1)

to refuse to accept the commodities after entering into a supply contract on special commodities and agreeing the special specification, type, design of the commodities, unless these may be attributed to suppliers or upon the consent of suppliers, retailers is liable for the occurred loss;

(2)

to request suppliers to bear the liabilities for the loss of the commodities unstipulated in advance;

(3)

retailers has no justifiable reasons to remove the commodities of suppliers without stipulating the conditions in advance or non-compliance with the stipulated conditions to remove the commodities, unless retailers remove the commodities of suppliers in accordance with the laws and regulations or the administrative decisions made by administrative authorities under law.

(4)

to impel suppliers to unconditionally return sales profits or stipulating return of sales profit based on a certain sales amount, however, accept the rebate without accomplishment of agreed sales amount. or

(5)

to impel suppliers to purchase the designated commodities or accept the designated service.

Article 7

Retailers may not conduct the following dealing which disturb fair competition:

(1)

to restrain the price of commodities directly sold by suppliers to consumers and other operators; or

(2)

to restrain commodities supplying or providing sales service by suppliers to other retailers.

Article 8

Retailers may not require suppliers to dispatch personnel to provide service at the business place of retailers, unless the following circumstances:

(1)

Upon the consent of suppliers and the dispatched personnel only conduct the relevant sales service relating to the commodities provided by the suppliers; or

(2)

to negotiate and reach mutual agreement on the job responsibility, work time, work term and etc. of the personnel dispatched by suppliers and the cost of the dispatched personnel shall be paid by retailers.

Article 9

Suppliers are entitled to returning the commodities under any of the following circumstances:

(1)

where retailers request to return the commodities due to contamination, damage, deterioration or expiration caused by retailers themselves, and refuse to bear the losses suppliers suffer;

(2)

where retailers request to return the commodities due to adjustment of storage, transformation of business place or change of goods shelf and refuse to bear the losses suppliers suffer; or

(3)

where retailers purchase the commodities at low price during promotion and return the remaining commodities at normal price after promotion.

Article 10

If retailers charge suppliers with promotion service fee, they shall obtain the suppliers' consent in advance, enter into the contract, clearing stipulating the item, content and term of service; item, standard, amount, use, method of project or liabilities for breaching of contract, etc.

The promotion service fee in these Measures refers to the fee charged by retailers with suppliers on the condition that retailers provide the relevant service, such as printing poster, conduct promotion and advertising in order to promote the sales of specific barnd or specific commodities of suppliers according to the contract.

Article 11

After charging promotion service fee, retailers shall provide relevant service to suppliers according to the provisions of the contract and may not suspend service or decrease the service standard. In case retailers do not fully provide relevant service, retailers shall return part of the fee with regard to the service that has not provided.

Article 12

Retailers shall record the charged promotion service fee into account and issue invoices to suppliers and pay tax under the regulations.

Article 13

Retailers may not charge or charge in disguised form the following fees:

(1)

fee charged due to entering into the contract or renewing the contract;

(2)

fee charged with suppliers due to the purchase of in-store code while suppliers has already gained the commodities code under the relevant national regulations, which can be normally used in the retailers' business place;

(3)

code fee charged with suppliers over the actual cost due to the use of in-store bar code;

(4)

decoration fees charged with suppliers, which are not specially used for decorating the special commodities sales area of suppliers, when restructuring or decorating stores;

(5)

fees charged due to holiday celebration, store celebration, new store opening, reopening, enterprises listing, merger without providing promotion service; or

(6)

other fees charged without direct relationship with the commodities sales and shall be afforded by retailers or without providing service.

Article 14

Retailers and suppliers shall stipulate the term for payment to commodities price in the contract based on the nature of commodities, however, the maximum payment term shall not be beyond 60 days after accepting commodities.

Article 15

Retailers shall check accounts with suppliers in time unless otherwise stipulated in the contract or suppliers fail to provide necessary documents.

Article 16

Suppliers are entitled to check the sales conditions of unpaid commodities of retailers in case retailers sell commodities on a commission basis and retailers shall provide convenience and may not refuse.

Article 17

Retailers may not make overdue payment to commodities price to suppliers based on the following circumstances:

(1)

to fail to timely supply the individual commodities of suppliers;

(2)

to fail to go through the return goods formalities with regard to the individual commodities of suppliers;

(3)

the sales amount of suppliers fails to reach the retailers' set amount;

(4)

suppliers fail to renew the supply contract with retailers; or

(5)

other circumstances violating the principle of fairness raised by retailers.

Article 18

When supplying commodities, suppliers may not conduct the following activities disturbing unfair competition:

(1)

impel to tie-sell commodities retailers do not order;

(2)

restrain retailers to sell other suppliers' commodities.

Article 19

Industry associations shall be encouraged to establish commercial credit files, the credit status of retailers and suppliers shall be recorded and reflected correctly, timely and completely. Retailers and suppliers shall be led to strengthen self-discipline and legally operate.

Article 20

The industry association shall be encouraged to establish retailers' loan balance risks warning system, in case the amount of retailers' overdue payment to suppliers is relatively large and the term is long, the industry association shall report to commercial authorities in charge and remind the relevant suppliers.

Article 21

The departments of commerce, price, tax and administrations for industry and commerce shall supervise and administer the activities stipulated in these Measures within their respective jurisdictions. With regard to the activities possibly deemed as crime, they shall report to public security authorities to handle under law.

The commercial authorities above county level shall supervise the fair dealing of retailers and suppliers with other relevant departments, make risk warning and timely make countermeasures.

Article 22

Any unit or individual is entitled to report the activities violating the stipulation of these Measures to the aforementioned departments. The relevant departments shall investigate and prosecute according to law after receiving the report.

Article 23

Retailers or suppliers violating the provisions of these Measures shall be punished according to the provisions of the laws and regulations; if there are not such provisions, otherwise, they shall be ordered to correct their behaviors; in case there is illegal income, they shall be fined with below 3 times of illegal income but not more than 30,000 RMB; in case there is no illegal income, they shall be fined with below 10,000 RMB and publicized to the public.

Article 24

If local commercial, price, tax, administration for industry and commerce departments above county level find the retailer suspicious of being involved in obtaining the suppliers' payment for commodities by deception, they shall transmit the clue of suspectable crime to the local public security authorities. The public security authorities shall timely conduct investigation. In case of suspectable crime, the case shall be filed and investigation shall be conducted.

Article 25

All provinces, autonomous regions, municipalities directly under the Central Government may set down relevant regulations on the fair dealing of retailers and suppliers according to the local actual situation.

Article 26

These Measures shall come into effect as of November15, 2006.