Laws of the People's Republic of China

    Article 1  These Procedures are formulated in accordance with the
provisions of the "Income Tax Law of the People's Republic of China for
Enterprises with Foreign Investment and Foreign Enterprises", "Law of the
People's Republic of China on the Administration of Tax Collection" and the
"Interim Regulations of the People's Republic of China for Sales Tax" with a
view to strengthen the administration of tax collection on the transportation
revenue accrued from China by foreign companies engaged in international
shipping operations employing vessels.

    Article 2  Sales tax and enterprise income tax shall be paid by foreign
companies from their transportation revenue and income by carrying and
transporting passengers, goods and mail out of the country from Chinese ports
employing vessels in accordance with these Procedures.

    Article 3  A carrier that gains transportation revenue of a foreign
company which carries and transports passengers, goods and mail out of the
country from Chinese ports employing vessels shall be the taxpayer. Taxpayers
shall include:

    (1) in the case of time charter by a buyer, the foreign ship chartering
company shall be the taxpayer;

    (2) in the case of voyage charter, the foreign shipowner shall be the
taxpayer;

    (3) a ship of foreign nationality chartered by China subchartered to a
foreign company in time charter, the foreign company shall be the taxpayer;

    (4) a ship of Chinese nationality time chartered by a foreign company,
the foreign company shall be the taxpayer;

    (5) in the case of other ships of foreign nationalities, the ship company
shall be the taxpayer.

    Companies approved according to law to operate foreign ship agency
business(hereinafter referred to as foreign ship agents) shall be the
withholding agents of the tax payable.

    Article 4  The amount of tax payable by the taxpayer shall, in accordance
with the total amount of revenue gained by the taxpayer each time it carries
and transports passengers, goods or mail out of the country from a Chinese
port, be calculated and taxed according to the aggregate rate of calculation
and taxation of 4.65%, among which 3% is sales tax and enterprise income tax
is 1.65%.

    Article 5  The total amount of revenue referred to in Article 4 of these
Procedures shall mean the aggregate of the revenue of passenger
transportation and the revenue of shipping of goods each time a ship operated
by the taxpayer carries and transports passengers, goods or mail starting
from a Chinese port to its destination, and no charges or expenditures shall
be deducted therefrom. The revenue of passenger transportation shall include
the revenue of the ship tickets and excess baggage charges, charges for
meals, insurance premiums, service charges and entertainment fees etc. The
revenue of shipping of goods shall include those of the basic shipping
charges and other additional charges.

    Article 6  A foreign company which carries and transports passengers,
goods or mail out of the country from a Chinese port employing a ship shall
notify its ship agent its shipping rate while informing the ship agent of the
address of the carrier, the national flag the ship flies, the state of
passenger transportation, the types and amount of goods carried and the
expected time of arrival at the port.   

    Article 7  A foreign company which carries and transports passengers,
goods or mail out of the country from a Chinese port employing a ship
entrusts a foreign ship agent to calculate and withhold shipping charges, the
foreign ship agent shall, upon receipt of the shipping charges, withhold the
amount of tax payable directly from the total amount of revenue of the
taxpayer in accordance with the aggregate rate of calculation and taxation as
prescribed in Article 4 of these Procedures.

    Article 8  A foreign company which carries and transports passengers,
goods or mail out of the country from a Chinese port does not entrust a
foreign ship agent to withhold shipping charges, the foreign ship agent shall
calculate the estimated amount of tax according to the aggregate rate of
calculation and taxation as prescribed in Article 4 of these Procedures and
notify the taxpayer to remit the estimated amount of tax together with the
reserve fund for port charges and the amount of tax shall be withheld by the
foreign ship agent.

    Upon departure of a ship of a foreign company carrying and transporting
passengers, goods or mail from the country, its foreign ship agent shall
notify the taxpayer to report to the tax authorities its total amount of
transportation revenue, the amount of tax payable enclosed with vouchers of
shipping charge settlement, while inform the taxpayer telegraphically of the
actual number of passengers and amount of goods or mail carried and
transported by the ship. The taxpayer shall report to the tax authorities and
pay the amount of tax within the time period not exceeding 60 days commencing
from the date of departure of the ship from the port.

    Article 9  Foreign ship agents shall withhold and collect tax payments as
prescribed in Articles 7 and 8 of these Procedures and deposit the amount of
tax payment actually collected in the State Treasury within ten days
commencing from the date of withholding and collection, and submit to the tax
authorities of the port where the agent is located summary of foreign ship
agency business operations, statistical report of shipping charge settlement,
"tax declaration of foreign ship transportation revenue withheld and remitted
or collected and remitted" and other required information before the
fifteenth of the following month.

    Article 10  Where a taxpayer is unable to provide complete and precise
information as prescribed in Articles 6 and 8 of these Procedures and to
correctly calculate the total amount of revenue, the foreign ship agent shall
report the case timely to the tax authorities of the port. The tax
authorities of the port may, in conjunction with the foreign ship agent,
verify and determine  the total amount of revenue of the taxpayer with
reference to the normal price of shipping passengers or goods in the world
under same or similar circumstances or according to the shipping rate fixed
by the relevant department of China and collect the tax on those basis.

    Article 11  A foreign company employing the same ship carrying and
transporting passengers, goods or mail out of the country from a number of
Chinese ports shall, in accordance with the transportation revenue from
shipping passengers, goods or mail at those ports, separate taxation shall be
paid at the ports of shipment. However, the same voyage chartered ship
shipping goods or mail out of the country successively from a number of
Chinese ports whose transportation revenue follows the contractual lump-sum
method of calculation, taxation on the total transportation revenue shall be
levied at the first port of shipment of goods or mail; for ships adopting
contractual lump sum shipping charge in addition to surcharge of additional
ports, taxation on the contractual lump sum transportation revenue shall be
levied at the first port of shipment of the goods or mail and taxation on
revenue of surcharge of additional ports shall be levied at the port of
shipment of the goods or mail separately.

    Article 12  For a ship carrying and transporting passengers, goods or
mail out of the country from a Chinese port for transit shipment to its
destination via another country or region, the sales tax shall be calculated
and collected in accordance with the balance of the entire voyage shipping
charge after deducting the shipping charge paid to the successive carrier,
the enterprise income tax shall be calculated and collected in accordance
with the total amount of transportation revenue of the entire voyage
according to the bills of lading.

    Article 13  Where a foreign ship agent withholds or collects tax in
accordance with these Procedures, the tax authorities shall pay handling fees
to the withholding agent for withholding or collecting tax in accordance with
relevant provisions.

    Article 14  For failure to fulfill the obligations in compliance with
these Procedures on the part of a taxpayer or a withholding agent, penalty
shall be meted out in accordance with the provisions of the "Law of the
People's Republic of China on the Administration of Tax Collection" and the
Rules for the Implementation of this Law.

    Article 15  The "Declaration Form of Transportation Revenue Tax Withheld
and Remitted or Collected and Remitted" to be filled out and submitted by
foreign ship agents shall be uniformly printed by the State Taxation
Administration.

    Article 16  For companies of Hongkong, Macao and Taiwan carrying and
transporting passengers, goods or mail out of the country from ports in the
country employing vessels, taxation on their transportation revenue and
income shall be levied with reference to these Procedures, unless otherwise
provided for.

    Article 17  Tax reduction or tax exemption shall be implemented in
accordance with the provisions of the relevant agreements concluded between
the People's Republic of China and foreign countries.

    The agreements referred to in the preceding paragraph shall mean the
agreements on the avoidance of double taxation on income(and property) and on
tax evasion, agreements on mutual exemption of taxation on transport business
revenue of shipping enterprises, shipping agreements as well as other
relevant agreements or exchanges of letters.

    Article 18  Foreign companies carrying and transporting passengers, goods
or mail out of the country employing vessels from Chinese ports whose
transportation revenue and income may enjoy tax reduction or tax exemption in
accordance with the agreements as prescribed in Article 17 of these
Procedures shall provide relevant information in compliance with the
provisions of Article 6 of these Procedures. The tax authorities shall
examine and verify the following certifications:

    (1) for taxation on ship transportation revenue and income to be levied
by the concluding country wherein the actual managing organization or the
headquarters of the enterprise is located or for tax reduction or tax
exemption by the revenue originating country on the revenue and income gained
from operating international shipping business by resident companies of the
other party of the concluding countries, such foreign companies shall provide
certificates of the actual managing organizations or their headquarters or
the resident companies of the place wherein they are located issued by the
tax authorities of the concluding country of the relevant agreements;

    (2) for tax reduction or tax exemption by the revenue originating
country on transportation revenue and income gained by merchant ships
flying the national flag of the other party of the concluding countries or by
merchant ships flying the national flag of a third country operated by the
shipping enterprise of the other party of the concluding countries of the
relevant agreements, such foreign companies shall provide certificates issued
by the department in charge of shipping of the other party of the concluding
countries.

    Those failing to provide relevant certificates shall not enjoy the
treatment of tax reduction or tax exemption.

    Article 19  These Procedures shall go into effect as of the date of
promulgation. "Provisions for the Taxation of Transportation Revenue by
Vessels of Foreign Nationalities" approved by the State Council and
promulgated by the Ministry of Finance in June 1974 is annulled as of the
same date.