Laws of the People's Republic of China

No.155

The Measures of the Customs of the People's Republic of China for the Administration of the Unit Consumption in Processing Trade have been deliberated and adopted at the executive meeting on December 21, 2006, are hereby promulgated and shall enter into force on March 1, 2007. The Measures of the Customs of the People's Republic of China for Administering the Unit Consumption in Processing Trade promulgated by the Order No.96 of the General Administration of Customs of the People's Republic of China on March 11, 2002 shall be concurrently repealed. Director Mou Xinsheng

January 4, 2007

Measures of the Customs of the People's Republic of China for the Administration of the Unit Consumption in Processing Trade Chapter I General Provisions

Article 1

Under the provisions of the Customs Law of the People's Republic of China and other relevant laws and administrative regulations, the present Measures are formulated for the purpose of regulating the administration of unit consumption in processing trade (hereinafter referred to as unit consumption) and promoting the sound development of processing trade .

Article 2

The present Measures shall apply to the administration of unit consumption by the customs.

Article 3

"Unit consumption" means the materials quantity consumed for processing unit finished product by a processing trade enterprise under the normal processing conditions. Unit consumption can be sorted into net consumption and technique consumption.

Article 4

A processing trade enterprise shall, in the archival filing link of processing trade, report the unit consumption to the customs for record.

Article 5

The administration of unit consumption shall abide by the principles of declaring in accordance with the facts as well as verifying and writing-off in light of the facts.

Article 6

In case a processing trade enterprise provides materials involving business secrets and requires the customs to keep them confidential by submitting written application to the customs, the customs shall keep confidential in accordance with law. No processing trade enterprise may, under the pretext of keeping secret, refuse to provide the related materials to the customs.

Chapter II Standards for Unit Consumption

Article 7

"Standards for unit consumption" means the norms on the materials quantity consumed by unit finished product, which are for general purpose or may be used repeatedly. A maximum upper value shall be set for the standards for unit consumption and a minimum lower value shall be set for the standards for the unit consumption of the export taxable finished products in addition.

Article 8

The standards for unit consumption shall be made by the customs in conjunction with the departments concerned according to the related provisions.

Article 9

The form of public announcement of the customs shall be adopted to publicize the standards for unit consumption.

Article 10

The standards for unit consumption shall be applicable to the processing trade enterprises beyond the areas under the special customs supervision or bonded supervision while processing trade enterprises within such areas may not apply to the standards.

Article 11

A processing trade enterprise beyond the areas under the special customs supervision or the bonded supervision shall, within the standards for unit consumption, make archival filing of or declare the unit consumption to the customs.

In case the unit consumption declared by a processing trade enterprise beyond the areas under the special customs supervision or the bonded supervision falls within the standards for unit consumption, the customs shall, on the basis of the declared unit consumption, verify and write-off the bonded materials; if the declared unit consumption is beyond the standards, the customs shall, on the basis of the maximum upper value or minimum lower value of the standards for unit consumption, verify and write-off the bonded materials.

Article 12

In case the standards for unit consumption are not published yet, a processing trade enterprise shall declare the unit consumption to the customs in accordance with the facts, and the customs shall verify and write-off the bonded materials in accordance with the actual unit consumption of the processing trade enterprise.

Chapter III Declaration of Unit Consumption

Article 13

Declaration of unit consumption means the act that processing trade enterprises report unit consumption to the customs.

Article 14

Before a finished product is exported, carried forward by deep processing or sold in domestic market, a processing trade enterprise shall, declare its unit consumption to the customs in accordance with the facts.

In case a processing trade enterprise fails to declare its consumption on schedule by virtue of justified reasons, it shall retain the sample of a finished product and the related documents and file a application in written form before the export, deep processing and domestic sale of the finished product, the processing trade enterprise may, upon the approval of the competent customs, declare its unit consumption before reporting it for verification.

Article 15

A processing trade enterprise shall declare the following contents for its unit consumption:

(1)

name, serial number, unit, specification, mode and quality of the materials and finished products under the processing trade;

(2)

unit consumption for the finished products under the processing trade; and

(3)

in case a same kind of materials for processing trade is composed of both bonded ones and non-bonded ones, the proportion, name, unit, specification, mode and quality of the non-bonded materials shall be declared.

Article 16

Technique consumption may not cover the following circumstances:

(1)

any consumption of bonded materials, semi-finished or finished products owing to the sudden failure of power, water or gas or any other artificial reason in the process of production;

(2)

any consumption of bonded materials, semi-finished or finished products owing to lose, damage or for any other reason;

(3)

any consumption as the loss, damage or lack in amount of bonded materials, semi-finished or finished products due to force majeure;

(4)

any consumption incurred from the increase of materials because the quality or specification of any import bonded material or finished product fails to comply with the requirements of the contract;

(5)

any consumption of the non-bonded materials used as technical ingredients; and

(6)

any consumption of consumptive materials in the processing process.

Article 17

A processing trade enterprise shall adopt the form of paper or electronic to declare its unit consumption.

Article 18

A processing trade enterprise may not apply to the customs for conducting the formalities for changing or revoking the unit consumption, in case it is under any of the following conditions:

(1)

export declaration for the bonded finished product has already been finished;

(2)

deep processing for the bonded finished product has already been carried forward;

(3)

the bonded finished product has already been applied to be distributed in domestic market;

(4)

the customs has already verified the unit consumption; or

(5)

the processing trade enterprise has already been put on record by the customs for investigation.

Chapter IV Verification of Unit Consumption

Article 19

Verification of unit consumption means the act that the customs verifies whether the unit consumption declared by a processing trade enterprise complies with the related provisions and whether it accords with the actual situation in the processing process.

Article 20

In order to verify the authenticity and accuracy of unit consumption, the customs may exercise the following powers:

(1)

to consult and copy any material, sample of finished products, images, pictures, qualities, compositions, specifications, modes, processing contracts, order forms, processing plans, processing statements, cost accountings and other accounting books and materials;

(2)

to consult and copy technical flow charts, discharge diagrams, bills of quantity, burdens, standards for quality inspection and any other material, which can reflect the technical requirements, technical processing processes and corresponding consumptions of materials of the finished products;

(3)

to require a processing trade enterprise to provide the method for calculation and formula for verification of unit consumption;

(4)

to examine any bonded material or finished product or select samples for inspection or testing;

(5)

to inquire of the legal representative, chief person in charge and the related personnel of a processing trade enterprise about the situation and problems relevant to unit consumption;

(6)

to enter the storing or processing place of a processing trade enterprise to examine the goods relevant to the unit consumption and their processing condition; and

(7)

to carry out on-spot measurement on the unit consumption of processed products and retain samples if necessary.

Article 21

The customs shall verify the unit consumption declared by a processing trade enterprise and accept it in case of its compliance with the related provisions.

Article 22

In case the customs is in doubt of the authenticity or accuracy of the unit consumption declared by a processing trade enterprise, it shall formulate and issue the Notice of the Customs of the People's Republic of China Concerning the Challenge of Unit Consumption in Processing Trade (hereinafter referred to as Notice Concerning the on the Challenge of Unit Consumption, see Appendix for its format) to notify the reasons for challenge to the legal representative or agent of the processing trade enterprise.

Article 23

The legal representative or agent of a processing trade enterprise shall provide the related written materials to the customs within 10 workdays as of the acceptance of the Notice Concerning the Challenge of Unit Consumption.

Article 24

In case a processing trade enterprise fails to provide the related materials within the time limit specified by the customs, the provided materials are insufficient or it is impossible to determine the unit consumption with the provided materials, the customs shall check and determine the unit consumption.

Article 25

Such methods as technical analysis, actual measurement and cost accounting may be adopted either solely or comprehensively by the customs to check and determine the unit consumption declared by a processing trade enterprise.

Article 26

By paying guaranty money or providing bank guarantee, a processing trade enterprise may, upon the approval of the customs, beforehand go through the customs formalities for the import and export, carrying forward by deep processing or domestic sales of the materials and finished products of processing trade before the unit consumption is verified; if the processing trade enterprise carry out actual operation of bank guarantee money and the amount in the actual operation is not less than the taxable amount, provision of guarantee exempted.

Article 27

In case any processing trade enterprise has any objection to the verification results of its unit consumption, it may file a application in written form for recheck to the next higher customs, and the next higher customs shall make rechecking decision within 45 days after its receipt of the application for recheck.

Chapter V Supplementary Provisions

Article 28

For the purpose of the present Measures,

net consumption means the quantity of the materials that exist in or are converted into the unit finished product through physical change or chemical reaction after being processed;

technique consumption means, excluding net consumption, the quantity of the materials that must be consumed in the normal processing course but may not exist in or be converted into the finished product because of processing technique, and includes tangible consumption and intangible consumption. Technique consumption rate means the proportion of technique consumption to the consumed materials. Unit Consumption = Net Consumption / (1 ¨C Technique Consumption Rate);

method of technical analysis means the method that the customs verifies the unit consumption of unit finished product by analyzing and calculating such elements affecting the unit consumption of finished product as structure, ingredient, composition, technique and so on;

method of actual measurement means the method that the customs measures the unit consumption of finished product in the processing course by weighing and calculating and then verifies it through comprehensive analysis;

method of cost accounting means the method that the customs calculates and verifies the unit consumption of finished product by contrasting and analyzing such statistical data on the consumption of raw materials as accounting book, processing record, warehouse accounting book and so on.

Article 29

Where any smuggling act is done or any administrative provision of the customs is violated by violating these Measures, the violator shall be punished by the customs under the related provisions of the Customs Law of the People's Republic of China and the Regulations of the People's Republic of China on the Implementation of Customs Administrative Punishments. In case a crime is constituted, the violator shall be subject to criminal liabilities.

Article 30

The General Administration of Customs shall be responsible for the interpretation of the present Measures.

Article 31

The present Measures shall enter into force as of March 1, 2007. The Measures of the Customs of the People's Republic of China on the Administration of Unit Consumption in Processing Trade promulgated by the Order No.96 of the General Administration of Customs of the People's Republic of China on March 11, 2002 shall be concurrently abolished.

Appendix: Notice of the Customs of the People's Republic of China Concerning the Challenge of Unit Consumption in Processing Trade

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Appendix:

Notice of the            Customs of the People's Republic of China concerning on the Challenge of Unit Consumption in Processing Trade

             Guan Dan Hao Zhi Yi [200      ] No.        

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                        :

This customs hereby put forward doubts on the                      (number of the manual/accounting book ) declared by your company/entity on (month/day/year) by virtue of the following:

¡¾¡¡¡¿the relatively large variance between the unit consumption declared by you and the risk parameter of unit consumption fixed by the customs ;

¡¾¡¡¡¿the relatively large variance between the unit consumption declared by you and that of the product of the same or similar processing enterprise;

¡¾¡¡¡¿the relatively large variance between the unit consumption declared by you and the average unit consumption of the same or similar product ;

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Under the provisions of Articles 22, 23 and 24 of the Measures of the Customs of the People's Republic of China on the Administration of Unit Consumption in Processing Trade, please submit the following documents and materials within 10 workdays after you receipt of this Notice. If you can't provide, fail to provide within the time limit, or the materials you provide are not sufficient to prove the authenticity or accuracy of the unit consumption declared by you, the customs will refuse your declaration as well as check and ratify the unit consumption separately in accordance with law.

¡¾¡¡¡¿samples, images, pictures, qualities, compositions, specifications, modes and other related data of materials and finished products;

¡¾¡¡¡¿such materials that can reflect the technical requirements, technical processing process and corresponding consumption of materials of the finished products as technical flow charts, discharge diagrams, bills of quantity, burdens, standards for quality inspection and so on ;

¡¾¡¡¡¿processing contracts, order forms, processing plans, processing statements, cost accountings and other related accounting books and materials, calculating methods, calculating formulas and the explanations.

Customs (Seal)

Addressee (Signature or Seal)

(month/day/year)

(This Notice shall be in duplicate with the first served to the processing trade enterprise and the second retained by the customs)