Laws of the People's Republic of China

Ministry of Commerce, Ministry of Finance, General Administration of Customs, State Administration of Taxation

Notice on Printing and Distributing the Interim Measures for the Inspection of Exportation of Products of Foreign-funded Enterprises of the Permitted Category Whose Products Are to Be Wholly Exported Directly

Shang Zi Fa [2006] No.1

To the competent departments of commerce, the public finance offices or bureaus, and the administrations of state taxation of all the provinces, autonomous regions, municipalities directly under the Central Government, and cities under separate state planning, as well as Xinjiang Production and Construction Corp., Guangdong Branch of the General Administration of Customs, and all customs offices directly under the General Administration of Customs, and the financial supervisor's offices of the Ministry of Finance at all the provinces, autonomous regions, municipalities directly under the Central Government, and cities under separate state planning,

For the purpose of implementing the Notice on Adjusting Some Preferential Policies concerning Import Taxes (No.146 [2002] of the Ministry of Finance), the Ministry of Commerce, Ministry of Finance, General Administration of Customs, and State Administration of Taxation have jointly formulated the Interim Measures for the Inspection of Exportation of Products of Foreign-funded Enterprises of the Permitted Category Whose Products Are to Be Wholly Exported Directly, which are hereby printed and distributed to you, please implement them accordingly. In case you have any question in the process of implementation, please timely contact the relevant departments.

Ministry of Commerce

Ministry of Finance

General Administration of Customs

State Administration of Taxation

March 1, 2006 Annex:Interim Measures for the Inspection of Exportation of Products of Foreign-funded Enterprises of the Permitted Category Whose Products Are to Be Wholly Exported Directly

Article 1

For the purpose of regulating the business operation activities of "foreign-funded enterprises of the permitted category whose products are to be wholly exported directly", the present Measures are formulated in pursuant to the requirements of the Notice on Adjusting Some Preferential Policies concerning Import Taxes (Cai Shui[2002] No.146) of the Ministry of Finance, the former State Development and Planning Commission, the former State Economic and Trade Commission, the former Ministry of Foreign Trade and Economic Cooperation, General Administration of Customs, and the State Administration of Taxation, in accordance with the relevant provisions of the relevant foreign investment laws and regulations and customs supervisions laws and regulations.

Article 2

The present Measures shall be applicable to the "foreign-funded enterprises of the permitted category whose products are to be wholly exported directly" (hereinafter referred to as the "enterprises whose products are to be wholly exported"), namely, the foreign-funded enterprises which are approved by the competent department for ratification and determined as "enterprises whose products are to be wholly exported", and enjoy tax reduction and exemption policies for importing equipment therefrom.

The present Measures shall not be applicable to the "enterprises whose products are to be wholly exported" that were established before October 1, 2002, enterprises with the business scope of their products falling within the fields of other encouragement categories, or any other foreign-funded enterprises.

Article 3

The inspection on exportation of products as mentioned in the present Measures shall include checking and investigation. Checking shall refer to the inspection conducted on the exportation of products of the "enterprises whose products are to be wholly exported" that were established after October 1, 2002 by the competent departments of commerce of all the provinces, autonomous regions, municipalities directly under the Central Government, cities under separate state planning, and Xinjiang Production and Construction Corp. (hereinafter referred to as the competent provincial departments of commerce) jointly with the financial supervisors' offices of the Ministry of Finance at the local regions, local customs offices, and the departments of state taxation (hereinafter referred to as the relevant departments). Investigation shall refer to the inspection conducted on the exportation of products of the "enterprises whose products are to be wholly exported" that were established before October 1, 2002 by the competent provincial departments of commerce jointly with the relevant departments.

Article 4

The Ministry of Commerce shall be responsible for the administration of the inspection of exportation of products of the "enterprises whose products are to be wholly exported", and shall guide the inspection work countrywide jointly with the Ministry of Finance, General Administration of Customs, and State Administration of Taxation. The competent departments of commerce at the provincial level shall be responsible for the inspection on the "enterprises whose products are to be wholly exported" within their jurisdictions jointly with the relevant departments.

Article 5

The time limit for checking shall be five years of the Gregorian Calendar from the day when the "enterprises whose products are to be wholly exported" commence production. If these enterprises commence production after September 1 of the current year, the time limit for checking shall be calculated from January 1 of the next year.

Article 6

Any "enterprise whose products are to be wholly exported" under the checking on its exportation of products shall submit the report on the production, exportation, or sale of its products in the previous year (hereinafter referred to as the "Report") in duplicate and the customs declaration documents of import/export concerning the export products to the competent department of commerce at the provincial level where it is located before January 31 of each year.

The report submitted by any "enterprise whose products are to be wholly exported" shall be signed by the legal representative of the enterprise and affixed with the seal of the enterprise, and the contents of the report shall include: the name of the enterprise, time for establishment, time for putting into production, output of the previous year, exportation conditions, whether the products are to be sold in domestic market, and the tax payment of the enterprise in the current year, etc,. (For the detail, see the annexed form), and shall be attached with the financial statements of the enterprise.

Article 7

The competent department of commerce at the provincial level shall make examination on the report within 60 days from the date when it received the report jointly with the relevant departments. If the exportation of products complies with the provisions of Article 11 of the present Measures, the competent department of commerce shall, together with the local financial supervisor's office, customs house and department of state taxation, indicate the words of "The exportation of products complies with the facts" in the Report submitted by the "enterprise whose products are to be wholly exported", and affix the common seal. The competent departments of commerce at the provincial level shall, collect the information on the examined exportation of products of the "enterprises whose products are to be wholly exported" within their jurisdictions and report it to the Ministry of Commerce before April 15 each year,.

Article 8

The "enterprises whose products are to be wholly exported" that were established after October 1, 2002 and have accepted and passed the annual checking shall apply for going through the relevant formalities for tax refund according to the relevant provisions within 15 days from the date when they have received the Report on the Quantity of Products for Export/Sale, which is sealed with the common seals of the competent provincial departments of commerce and the local customs offices, administrations of state taxation, and financial supervisor's offices.

Article 9

The specific date of starting and ending the investigation shall be:

1.

For the "enterprises whose products are to be wholly exported" which were established and commenced production before October 1, 2002 and need continue importing equipment within the total investment after October 1, 2002, the time limit for investigation shall start from October 1, 2002 till five years after the enterprises commenced production. If the equipment imported has not been actually put into production and use at the time when the enterprises commenced production, the time limit for investigation on such equipment shall be the five years after the day when the equipment imported is actually put into production.

2.

For the "enterprises whose products are to be wholly exported" which were established before October 1, 2002 but had not commenced production, and need continue importing equipment within the total investment after October 1, 2002, the time limit for investigation shall be five years of the Gregorian Calendar from the day when the enterprises commenced production. If the enterprises commence production after September 1 of the current year, the time limit for checking shall be calculated from January 1 of the next year.

3.

For the "enterprises whose products are to be wholly exported" which were established before October 1, 2002 and no longer import equipment after October 1, 2002, the time limit for investigation shall start from October 1, 2002 till five years after the enterprises commenced production..

Article 10

The competent departments of commerce and the relevant departments at the provincial level shall make selective investigation on the exportation of products of the "enterprises whose products are to be wholly exported" that still need investigation before the end of March of each year. The competent departments of commerce at the provincial level shall send notice to the "enterprises whose products are to be wholly exported", and the enterprises that have received the notice shall submit the Report on the Quantity of Products for Export/Sale of the enterprises in the previous year to the competent departments of commerce at the provincial level where the enterprises are located within 15 days after receiving the notice. The contents of the report submitted and the ways of submission shall be consistent with those of the Report on the Quantity of Products for Export/Sale as prescribed in Article 6 of the present Measures.

The competent departments of commerce at the provincial level shall report the summary of investigation information on the "enterprises whose products are to be wholly exported" within their jurisdictions to the Ministry of Commerce, and inform the local customs offices of the name list of the enterprises that have not passed the investigation before May 1 each year.

Article 11

The total volume of products exported directly by the "enterprises whose products are to be wholly exported" in the previous year shall reach 100% of the product sales revenue of the enterprises in the previous year.

Article 12

The "enterprises whose products are to be wholly exported" shall ensure that the materials submitted to the competent departments of commerce at the provincial level are authentic and correct.

Article 13

In case any "enterprise whose products are to be wholly exported" that has enjoyed the policies of import tax refund or tax exemption has the act of selling its products in domestic market in the inspection period afterwards due to the change of management environment or market, it shall take initiative to apply to the local customs office for making up the import duty that has been refunded or exempted within one month, and its refundable import duty of the current year and the following year shall not be refunded any longer. After these procedures are gone through, it may be reduced or exempted from administrative punishment for the act of selling its products in domestic market.

In case any "enterprise whose products are to be wholly exported" that has act of selling its products in domestic market in the inspection period fails to apply for making up the tax within the time limit, or purposely disguises the facts or falsely reports that the exportation of the enterprise has reached the examination standard in the Report on the Quantity of Products for Export/Sale submitted to the competent department of commerce at the provincial level and is discovered to fail to reach the examination standard afterwards, its refundable import duty in the current year or the following year shall no longer be refunded, and it shall be mandated to pay the import duty that has been refunded or exempted in the previous years. The relevant departments shall impose punishment on it for the aforesaid acts. If the enterprises sell or transfer equipments that are under customs supervision without permission, the customs shall give them punishment.

Article 14

The competent departments of commerce at all levels and the relevant departments shall be diligent in the work of supervision and inspection on the exportation of products of the enterprises, and shall hold on to principles and handle the problems discovered in the checking and investigation according to the law.

Article 15

The Ministry of Commerce shall complete the inspection report of the previous year on the exportation of products of the "enterprises whose products are wholly exported" before the end of June each year jointly with the Ministry of Finance, General Administration of Customs, and State Administration of Taxation, and report it to the State Council.

Article 16

The power to interpret the present Measures shall remain with the Ministry of Commerce jointly with the Ministry of Finance, General Administration of Customs, and State Administration of Taxation. The present Measures shall be come into force as of the date of promulgation.