Laws of the People's Republic of China

No. 20

The Measures for Administering the Establishment of Direct Selling Service Network have been adopted at the 8th ministerial meeting of the Ministry of Commerce on August 21, 2006. They are hereby promulgated and shall enter into force as of October 20, 2006. Minister of the Ministry of Commerce Bo Xilai

September 20, 2006

Measures for the Administration of the Establishment of Direct Selling Service Network

Article 1

For the purpose of regulating the direct sale and intensifying the supervision over direct sale, these Measures are constituted under the Regulation on Direct Selling Administration (hereinafter referred to as the Regulation).

Article 2

The application materials as submitted by an applicant enterprise shall cover a project of service network in the target direct selling zone. A project of service network shall satisfy the requirements as follows:

(1)

It shall meet the requirements of end customers and direct salesmen as to know about the product property, price and return and exchange of products;

(2)

It may not be set up in such places as residence, schools, hospitals, armies and government organs; and

(3)

It shall meet the related requirements of the people's government at or above the county level for the establishment of direct selling service network.

Article 3

The organs at the municipal or county level are designated as the elemental entities to grant approval for direct selling business by The Ministry of Commerce. In each districted city, an applicant enterprise shall establish no fewer than 1 service network in each district of the city. Any direct selling activity in any other district/county of the city shall be declared under these Measures.

The commerce department at or above the county level shall conduct examination on the project of service network as submitted by an applicant enterprise in accordance with Paragraph 2, Article 10 of the Regulation. In the case of approval, a written Letter of Authorization (see Appendix I for model format) certifying that the project of service network that meets the requirements of Article 2 of these Measures shall be shown to the commerce department at the provincial level.

Article 4

When the commerce department at the provincial level transfers the application materials of an enterprise to the Ministry of Commerce, it shall show the Confirmation Letter of the Project of Service Network (see Appendix II for model format) simultaneously. The Confirmation Letter shall cover the following contents:

(1)

The enterprise's project of service network has been confirmed by the local commerce department at or above the district/county level; and

(2)

The enterprise's project of service network in the target direct selling zone in the province meets the requirements of paragraph 2, Article 10 of the Regulation.

Article 5

An enterprise that has gained a Licence for Direct Selling Business in accordance with law shall complete the establishment of service network in light of the project of service network as reported to and approved by the Ministry of Commerce within 6 months as of the day when the approval document is issued. In case any enterprise fails to complete the establishment of the aforesaid service network, it may not conduct any direct selling business in any zone for which its project of service network has not been carried out. If the enterprise plans to conduct any direct selling business in the aforesaid zone, it shall make separate declaration in accordance with the Regulation.

Article 6

The commerce department of the related province, autonomous region or municipality directly under the Central Government shall, jointly with the commerce department at or above the district/county level where the service network is located, conduct examination on the service network that has been set up in the province, autonomous region or municipality directly under the Central Government in accordance with the Regulation as well as the related provisions, and shall report the result of the examination to the Ministry of Commerce for archival purpose in a one-off manner. The Ministry of Commerce shall, upon archival filing, publicize the zones and networks where a direct selling enterprise may engage in direct selling business through the management website of direct selling service. A direct selling enterprise may not carry out any direct selling activity before the related examination and archival filing is completed.

Article 7

A direct selling enterprise may expand its service networks in those districts where it has been approved to undertake the direct selling business in accordance with the requirements for business development without going through any examination and approval, but it shall report its project of expansion to the Ministry of Commerce for archival purpose through the commerce department at the provincial level. The Ministry of Commerce shall, upon archival filing, publicize the expanded service network in the districts where the related direct selling enterprise has been approved to undertake the direct selling business through the management website of direct selling service.

The local commerce department may require a direct selling enterprise to expand its service network in accordance with paragraph 2, Article 10 of the Regulation, and shall give the related explanations thereto.

In case a direct selling enterprise adjusts its project of service networks, or reduces the service network shall be reported to the original department of examination for approval and shall be put on archives in accordance with the related provisions.

Article 8

Anyone who disobeys the provisions of these Measures shall be imposed upon a punishment in accordance with the provisions of Article 39 of the Regulation.

Article 9

The related commerce department as well as the functionaries thereof shall perform their responsibilities in accordance with the law and take charge of the administration of the foundation of service network. Anyone who disobeys the provisions these Measures shall be imposed upon a punishment in accordance with the provisions of Article 38 of the Regulation.

Article 10

The Ministry of Commerce shall be responsible for interpreting these Measures.

Article 11

These Measures shall enter into force as of October 20, 2006.

Appendix 1 Letter of Authorization about the Service Network of XX (Name of the Applicant Enterprise for Direct Selling Business)

XX (Name of the commerce department of a province/municipality directly under the Central Government/ autonomous region):

Upon deliberation, the project of service network of XX (name of the applicant enterprise for direct selling business) as set up in this county /city/ district will facilitate and satisfy the requirements of the customers and direct salesmen in the county, city or district to know about the product capability, price and return and exchange of products of XX(name of the applicant enterprise for direct selling business). And the service network thereof is not set up in such places as residence, schools, hospitals, armies and government organs.

Appendix: Project of the Service Network under Application of XX (Name of the Applicant Enterprise for Direct Selling Business)

The commerce department at the county/city/region district level (Seal)

Date Month Year Appendix 2 Confirmation Letter of the Service Network under Application of XX (Name of the Applicant Enterprise for Direct Selling Business)

The Ministry of Commerce:

1.XX (Name of the applicant enterprise for direct selling business) plans to engage in the direct selling business in our province/municipality directly under the Central Government/autonomous region, covering "YY, YY¡­"(Name of the related counties/cities/ districts). And its project of service network has been reported to the aforesaid county/ city/ district.

2.The project of service network of XX (Name of the applicant enterprise for direct selling business) has been certificated by the commerce department of the aforesaid county/city/district, for which a Letter of Authorization has been produced.

3.The project of service network of XX (Name of the applicant enterprise for direct selling business) in this county/city/region district meets the requirements as prescribed in paragraph 2, Article 10 of the Regulation on Direct Selling Administration.

4. The principal of the (Department/Commission/Bureau) of Commerce of this Province (Municipality directly under the Central Government/Autonomous Region) has examined and approved this Confirmation Letter.

Commerce department at the provincial level (Seal)

Date Month Year