Laws of the People's Republic of China

the Ministry of Commerce, the State Administration for Industry and Commerce

Order of the Ministry of Commerce and the State Administration for Industry and Commerce

No.22

The Measures for the Administration on the Depositing, Payment and Using of the Deposit of Direct Selling Companies, which were deliberated and adopted at the 15th executive meeting of the Ministry of Commerce on October 19, 2005, and approved by the State Administration for Industry and Commerce, are hereby promulgated and shall go into effect as of December 1st, 2005.

Bo Xilai, the Minister

Wang Zhongfu, the Director General

November 1st, 2005

Measures for the Administration of the Depositing, Payment and Using of the Deposit of Direct Selling Companies

Article 1

The present Measures are formulated according to the provisions of paragraph 2 of Article 34 of the Regulations on Direct Selling Administration.

Article 2

When applying for direct selling, a company shall submit its credence of the special deposit account opened by it at the designated bank. The amount shall be RMB 20 million Yuan and the deposit shall be in cash.

Article 3

The following items shall be contained in the agreement on the special deposit account concluded by a direct selling company with its designated bank:

1.

The designated bank shall pay the deposit in pursuance of the written decision of the Ministry of Commerce and the State Administration for Industry and Commerce (hereinafter referred to as the SAIC);

2.

The direct selling company shall not use the deposit without permission by violating the Regulations on Direct Selling Administration, and shall not make guarantee to other parties on the deposit or use it for paying off debts in violation of the provisions of the Regulations on Direct Selling Administration;

3.

The designated bank shall report the conditions on the deposit account to the Ministry of Commerce and the SAIC in a timely manner, and the Ministry of Commerce and the SAIC may inquire about the deposit account of the direct selling company; and

4.

The rights and obligations of the direct selling company and the designated bank and the ways of dispute resolution.

The company, when applying for establishment, shall submit the agreement on opening the special deposit account signed by the designated bank.

Article 4

Three months after a direct selling company starts to undertake direct selling operation, the amount of the deposit shall be adjusted by month. The direct selling company shall issue the effective certificate documents of its sale amount of the last month to the designated bank before the 15th day of the next month, and shall put them on archives at the Ministry of Commerce and the SAIC through the website for the administration on direct selling industry. The direct selling company shall be responsible for the truthfulness and completeness of the certificate documents issued by it, and the designated bank shall make formal examination on the certificate documents.

The amount of deposit of a direct selling company shall be kept at 15% of the sales income of its direct sales products of the last month. The balance of the account shall be at least RMB 20 million Yuan, and shall not exceed RMB 100 million Yuan.

If it is necessity to increase the amount of deposit pursuant to the monthly sales amount of a direct selling company,, the direct selling company shall, within 5 days after sending the certificate documents on the monthly sales amount to the designated bank, transfer the money into the deposit account of the designated bank; if it is necessity to decrease the amount of deposit, it shall be handled in light of the agreement signed by the company with the designated bank.

Article 5

In case any of the following circumstances occurs, the Ministry of Commerce and the SAIC may jointly decide to use the deposit:

1.

The direct selling company does not pay remuneration to the sales promoters without justifiable reasons, or can not pay the sales promoters or the consumers for the returning of goods;

2.

The direct selling company is subject to such conditions as stopping business operation, merger, dissolution, transfer or bankruptcy, and etc., and is unable to pay remuneration to the sales promoters or is unable to pay the sales promoters and consumers for the returning of goods; or

3.

In case any direct selling company causes damage to any consumer due to the quality of the direct selling product, it shall make compensation according to law; but the direct selling company refuses to make compensation without justifiable reasons or is unable to make compensation.

Article 6

In case any sales promoter or consumer require to use the deposit according to the Regulations on Direct Selling Administration and the provisions of Article 5 of the present Measures, he/she shall, upon the strength of the effective judgment of the court or the conciliation statement, file an application with the competent department of commerce at the provincial level or the administrative department of industry and commerce, which shall submit the application materials to the Ministry of Commerce and the SAIC within 10 workdays after receiving the application.

The sales promoter shall, besides the effective judgment and conciliation statement of a court, show his identity card, the certificate of sales promoters and the sales contract concluded with the direct selling company. The consumer shall, besides the effective judgment and conciliation statement of a court, show his/her identity card, the receipt for selling the goods or the invoice thereof.

The Ministry of Commerce and the SAIC shall, within 60 days after receiving the application materials, make a decision on whether or not to pay the compensation by using the deposit t, and inform the designated bank, the direct selling company and the applicant for using the deposit in written form.

In case any sales promoter violates the relevant provisions of the Regulations on Prohibition of Pyramid Selling, his/her application shall not be accepted.

Article 7

After the deposit is paid pursuant to the provisions of the present Measures, the direct selling company shall, within 30 days as of the day of paying the deposit, make up the amount of the special deposit account to the level as prescribed in paragraph 2 of Article 4 of the present Measures.

Article 8

The use of the deposit by a direct selling company shall be disclosed to the public through the websites of the Ministry of Commerce and the SAIC for the administration of direct selling industry.

Article 9

Where a direct selling company does not conduct direct selling operation any more, it may take back the deposit from the designated bank upon the strength of the written credence issued by the Ministry of Commerce and the SAIC.

Where any company fails to get approval for its application for direct selling, it may go to the designated bank to go through formalities for withdrawing the deposit upon the strength of the written credence issued by the Ministry of Commerce.

Article 10

In case any direct selling company violates the present Provisions, it shall be punished in accordance with Article 51 of the Regulations on Direct Selling Administration.

Article 11

The Ministry of Commerce and the SAIC shall be jointly responsible for the routine supervision and administration on the direct selling deposit.

Article 12

The power to interpret the present Measures shall remain with the Ministry of Commerce and the SAIC.

Article 13

The present Measures shall go into effect as of December 1st, 2005.