Laws of the People's Republic of China

the Ministry of Commerce

Order of the Ministry of Commerce of the People's Republic of China

No. 16

The Policies for Automobile Trade, which were adopted at the executive meeting of the Ministry of Commerce upon deliberation, are hereby promulgated and shall be put in force as of the day of promulgation.

Minister of the Ministry of Commerce Bo Xilai

August 10, 2005

Policies for Automobile Trade

Chapter I General Provisions

Article 1

In order to establish a uniform, open, competitive and orderly automobile market, safeguard the legitimate rights and interests of automobile consumers, advance the sound development of our automobile industry, promote consumption and expand domestic demand, the present Policies are specially formulated.

Article 2

The state encourages the development of automobile trade and guides the automobile trade industry to work out an overall plan, to layout in a reasonable way, to adjust the structure to actively employ modern information technologies, logistic technologies and advanced operational mode, to promote the electronic commerce, to advance the automobile trade and to realize an intensified, scale, brand and diversified business operation.

Article 3

In order to create a fair and competitive automobile market environment, bring into play the basic role of the market in resource allocation, we shall uphold the socialist market economy law, further introduce the competition mechanism, further open up both internally and externally, break regional blockade and promote the free circulation of automobile products throughout the country.

Article 4

We shall guide automobile trade enterprises to carry out their operations on a legal and credit base, to guarantee the quality of both products and services and to provide satisfactory services to consumers.

Article 5

In order to elevate the level of our automobile trade as a whole, the state encourages those overseas investors with comparatively strong economic strength, advanced experience of commercial operations, marketing technologies as well as sound international sales network to invest in the field of automobile trade.

Article 6

We shall bring into full play the functions of industrial organizations, accreditation organizations and inspection institutions as a bridge or link, establish and improve an independent, impartial and standardized intermediary service system concerning appraisal, consultation, accreditation and inspection, and actively advance the marketization process of automobile trade.

Article 7

We shall actively establish and improve the pertinent regulations and systems, accelerate the legalization construction of automobile trade. The establishment of an automobile trade enterprise shall meet the relevant requirements as prescribed by laws or administrative regulations. The competent department of commerce of the State Council shall, in conjunction with other relevant departments, deliberate and formulate and improve the administrative measures, regulations and standards in terms of automobile brand sale, circulation of second-hand automobiles, circulation of automobile parts and reclamation of discarded automobiles so as to maintain fair competition in the market.

Chapter II Police Target

Article 8

By way of implementing the present Policies, we shall basically realize the brand sale and services of automobiles, form a circulation layout of second-hand automobiles with diversified operational subjects and modes, and build up the functions and the system concerning the sale and after-service of automobiles and second-hand automobiles so that the source, quality and price of automobile parts are open and transparent, the counterfeit, false and low-quality parts are effectively cracked down, the reclamation and dismantlement rate of discarded automobiles are increased significantly and a favorable market order of automobile trade takes shape.

Article 9

By 2010, a modern automobile trade system shall be established which is brought in line with the international practice and has its competitive advantage, and we will have a group of automobile trade enterprises with their own strength, and achieve a considerable increase in trade volume, a noticeable progress in the level of trade , and a remarkable elevation in the capability of foreign trade, a coordinated development between the automobile trade and the automobile industry being realized.

Chapter III Sale of Automobiles

Article 10

Automobile manufacturers both home and abroad that sell self-produced automobiles within the territory of China shall establish and improve their brand sale and service system of automobiles as soon as possible so as to ensure that consumers may receive good service in the process of purchase and use as well as to maintain the legitimate rights and interests thereof. An automobile manufacturer may, according to the relevant regulations of the state, make investment by itself or authorize its general distributor to establish a brand sale and service system.

Article 11

The brand sale and service of automobiles shall be implemented. From April 1, 2005, the brand sale and service shall be implemented for passenger vehicles. From December 1, 2006, the brand sale and services shall be implemented for all automobiles, with the exception of special purpose vehicles.

Anyone who engages in the automobile brand sale shall have acquired the authorization from an automobile manufacturer or an authorized general distributor thereof. The dealers of automobiles (including second-hand automobiles) shall conduct their automobile business within the scope as verified by the administrative department of industry and commerce.

Article 12

An automobile supplier shall work out a plan for the brand sale and service network of automobiles. In order to safeguard the interest of consumers, the automobile brand sale network may not be more than 150 kilometers away from its service location that supply automobile parts and provide after-service.

Article 13

An automobile supplier shall strengthen the management of brand sale and service networks, regulate the sale and service and shall, after the administrative department of industry and commerce of the State Council puts it on record and promulgate it to the general public, inform the general public on a periodic basis the name list of the enterprises that engage in the brand sale and service of automobiles and whose authorization has been granted or abolished, and may not provide any automobile resources to a dealer that has not been authorized or doesn't satisfy the relevant conditions of business operations. An automobile supplier shall be responsible for informing the general public in a timely manner of the automobile type whose production has been ceased and take active measures to ensure the parts supply within a reasonable time limit.

Article 14

An automobile supplier or dealer shall specify each other's the rights and obligations by concluding a written contract. An automobile supplier shall offer guidance and technical support to dealers, may not require a dealer to accept an unequal term for cooperation or determine the sales quantity or carry out any tie-in sale in a compulsive manner, or terminate the cooperative relation with its dealer at will.

Article 15

An automobile supplier shall, in accordance with the relevant laws and regulations of the state as well as its promise as made to consumers, perform the obligation of guaranteeing the quality of automobiles and providing after service.

An automobile dealer shall clearly indicate to consumers in its business place the quality guaranty and after service of automobiles as promised by the relevant automobile supplier and shall, under the stipulation of the authorization contract and the requirements of service standards, provide the relevant after service.

No automobile supplier or dealer may supply or sell any automobile that does not comply with the state security technical standards of automobiles and fails to obtain the compulsory product accreditation of the state and be included in the Announcement of Motor Automobile Manufacturer and Products. Any imported automobile that fails to pass the inspection as prescribed by the Law of the People's Republic of China on Import and Export Commodity Inspection and the Rules for Implementation thereof may not be sold or used.

Chapter IV Circulation of Second-hand Automobiles

Article 16

The state encourages the circulation of second-hand automobiles. We shall establish a competition mechanism, open up the circulation channels, support competent operational subjects, such as automobile brand dealers, to undertake the second-hand automobile business and establish branches or sub-branches in different places in the form of chain operation.

Article 17

We shall actively create necessary conditions to simplify the procedures for the transaction and transfer of second-hand automobiles, improve the efficiency of answering any inquiry on the legality and security of automobiles, lower transaction costs, and standardize the transaction invoice uniformly; we shall intensify the quality management of second-hand automobiles and set an impetus to the dealers of second-hand automobiles to provide high-quality after service.

Article 18

We shall accelerate the cultivation and buildup of the second-hand automobile market, guide the change in the concept on the second-hand automobile market, intensify the market administration, and expand the service functions of the market.

Article 19

A voluntary appraisal system of second-hand automobiles shall be adopted. The transaction value of a second-hand automobile shall be determined through the negotiation of both parties unless it belongs to the state-owned asset. A party concerned may, on a voluntary basis, entrust a qualified appraisal and evaluation organization of second-hand automobiles to carry out an appraisal for reference. No entity or department may overtly force them to conduct an appraisal on a traded automobile or do so in any disguised form except under the provisions of laws or administrative regulations.

Article 20

We shall actively regulate the appraisal and evaluation of second-hand automobiles. An appraisal and evaluation organization shall, upholding the principle of "being objective, authentic, impartial and open", carry out the appraisal and evaluation of second-hand automobiles, produce relevant reports on the appraisal and evaluation of second-hand automobiles and clarify the technical condition thereof (including such contents as whether the automobile is involved in an traffic accident) according to the relevant laws and regulations of the state.

Article 21

Where an enterprise that engages in the business operation or auction of second-hand automobiles sells or auctions a second-hand automobile, it shall provide the authentic information for the buying party, and may not conceal any facts or conduct any fraudulent practice. An automobile as sold or auctioned shall have the motor vehicle plate, the Registration Certificate of Motor Automobiles, the Operational License of Motor Automobiles, the valid mark of passing the security technical examination, the policy of insurance of the automobile, and the proof of payment of relevant taxes and fees.

Article 22

Where an enterprise that engages in the business operations of second-hand automobiles sells a second-hand automobile, it shall make a promise regarding the quality guaranty and after service to the buying party. Within the warranty period, an automobile supplier shall, in accordance with the relevant laws and regulations of the state and the promise as made to consumers, commit itself to quality assurance and after service of automobiles.

Article 23

The business operations concerning auction or appraisal and evaluation of second-hand automobiles shall be subject to the examination and approval of the administrative department of commerce at the provincial level.

Chapter V Circulation of Automobile Parts

Article 24

The state encourages the circulation of automobile components to develop into large scale, good brand and networked circulation by way of franchise and chain operation, supports the component circulation enterprises to carry out integration so as to realize the structural upgrading and improve the economy of scale as well as service quality.

Article 25

A supplier or dealer of automobiles or automobile components shall intensify the quality management and improve the product quality as well as service quality.

No supplier or dealer of automobiles or automobile components may supply or sell any automobile component that fails to comply with the relevant laws, administrative regulations, compulsory standards and the requirements of compulsory product certification of the state.

Article 26

A supplier of automobiles or automobile parts shall inform the general public of the name list of franchised dealers of automobile parts whose accreditation has been granted or abolished on a periodic basis.

A dealer of automobile parts shall give clear indications of the names, manufacturers and prices of the automobile parts and any other automobile articles as sold and shall indicate the parts from original plant, the parts that have been accredited by automobile manufacturer and the reclaimed articles of discarded automobiles as well as renovated components in a separate way. The product identification of automobile parts shall meet the requirements of the Law on Product Quality.

Article 27

We shall accelerate the circulation of reclaimed articles of discarded automobiles. For the parts that have been dismantled by an enterprise that engages in the reclamation and dismantlement of discarded automobiles under the relevant provisions and may be sold out, the sign "reclaimed articles of discarded automobiles" shall be noticeably indicated on the parts.

Chapter VI Discarding of Automobiles and Reclamation of Discarded Automobiles

Article 28

The state adopts a compulsory automobile discarding system., we shall, in light of the different security technical states and purposes of automobiles, amend the present Automobile Discarding Standards in effect and formulate different compulsory discarding standards accordingly.

Article 29

An owner of a discarded automobile shall sell or turn over the discarded automobile timely to an enterprise as qualified to engaging in the reclamation and dismantlement of discarded automobiles.

Article 30

The local administrative department of commerce shall, in accordance with the relevant requirements of the Measures for the Administration of Discarded Automobile Reclamation (Order No. 307 of the State Council), work out an overall plan as well as a rational layout for the discarded automobile reclamation and dismantlement industry.

Anyone who engages in the business operations of reclamation and dismantlement of discarded automobiles shall have the relevant qualifications as prescribed by the relevant laws and regulations. The administrative department of commerce of the State Council shall inform the general public of those qualified enterprises that engage in the reclamation and dismantlement of discarded automobiles.

Article 31

An enterprise that engages in the business operations of reclamation and dismantlement of discarded automobiles shall, in strict accordance with the relevant laws and regulations of the state, carry out its business operations and dismantle the discarded automobiles as reclaimed in a timely manner. The "five assemblies" of engine, front and rear axles, gearshift, steering gear and frame as dismantled shall be used as waste iron or steel, which may be sold to an iron and steel works as the raw materials for smelting.

Article 32

The administrative departments of commerce at all levels shall, in conjunction with the relevant public security organs, establish an information exchange system regarding the management of discarded automobile reclamation, realizing the real-time control in the reclamation process of discarded automobiles so as to prevent the discarded automobiles or the "five assemblies" from flowing into the market.

Article 33

In order to use the resources in a reasonable and effective manner, the state shall formulate relevant measures for the administration of reclamation and utilization of discarded automobiles.

Article 34

We shall improve the measures for the administration of subsidy funds for the discarding and renewal of old automobiles and encourage the discarding and renewal of old automobiles.

Article 35

The storage, transfer and disposal, etc. of the parts of discarded automobile and other waste, harmful materials (e.g., oil, liquid, battery and harmful metal, etc.) shall comply with the requirements as prescribed in such laws and regulations as the Environmental Protection Law and the Law on the Prevention and Control of Atmospheric Pollution so as to ensure that they are safe and pollution-free (or to minimize the pollution).

Chapter VII Foreign Trade of Automobiles

Article 36

Since January 1, 2005, the state implements the automatic import licensing administration over automobiles, under which no bonded area at an import port of automobiles is allowed to store automobiles with the purpose of entering the domestic market.

Article 37

The state prohibits the import of any old automobile, or the assembly, parts thereof or any automobile whose steering wheel is on the right (except for the sample automobiles with a right steering wheel that are imported for the purpose of developing products for export).

Article 38

Imported automobile shall have obtained the Certificate for China Compulsory Product Certification, be labeled with the China Compulsory Certification mark (CCC), and have passed the sampling inspection conducted by the inspection and quarantine administration and shall be accompanied by the instructions in Chinese as well.

Article 39

Any unfair deal in the import of automobiles and the relevant products shall be prohibited. The competent organ of the State Council shall take anti-dumping and countervailing measures as well as safeguard measures for the automobile industry, organize the relevant industrial associations to establish and improve an early warning system against any damage in the automobile industry and carry out investigation and researches on the competitive power of the automobile industry. An automobile supplier or dealer shall be obliged to offer the relevant information to the relevant department of the State Council in a timely and accurate manner.

Article 40

We shall encourage the foreign trade development of automobiles and the relevant products. We shall support and develop the national export base of automobiles and parts and components, guide the relevant automobile suppliers and dealers to establish the sales and service network abroad by diversified means, which may be in the form of joint venture, cooperative business operation or sole investment, so as to optimize the structure of exported products and expand the access to the international market.

Article 41

We shall support the foreign trade development of automobiles and the relevant products by utilizing the Central Foreign Trade Development Fund.

Article 42

Suppliers or dealers of export automobiles and the relevant products shall establish a necessary sales and service system according to the relevant laws and regulations of the destination regions.

Article 43

Intergovernmental consultations shall be intensified, and support shall be provided to exporters of automobiles and related commodities in their participation of responding to anti-dumping, countervailing and safeguard measures so as to protect the legitimate rights and interests of China's exporters of automobiles and related commodities.

Article 44

The automobile industrial association shall intensify the industrial self-discipline and establish competitive and orderly foreign trade orders for automobiles and related commodities.

Chapter VIII Other Matters

Article 45

The establishment of a foreign-invested automobile trade enterprise shall, in addition to fulfilling the relevant qualifications, comply with the provisions of the relevant laws and regulations on foreign investment and be subject to the examination and approval of the administrative department of commerce of the State Council after having passed the preliminary examinations conducted by the administrative department of commerce at the provincial level.

Article 46

The development of automobile consumption credit shall be accelerated and scale expanded. Support will be provided to the qualified automobile suppliers for the establishment of automobile financing companies serving the whole industry. And guidance shall be provided to the automobile financing institutions in their development of cooperative mechanism with other financial institutions, so as to remarkably elevate the scale of economy and degree of specialization of the automobile consumption credit market and further improve the risk management system.

Article 47

We shall build up the automobile insurance market, encourage the insurance products to develop toward the direction of individualization and diversification and improve the automobile insurance service, so as to preliminarily realize a professional and intensified operation of the automobile insurance industry.

Article 48

All the policies, institutions and regulations as formulated by the people's governments in all regions concerning automobile trade shall be in line with the present Policy and shall uphold the principle of being open and transparent. Any discriminative policy in such respects as the circulation, service and use of the automobiles that are not locally produced or traded may not be adopted. We shall resolutely prevent anyone from compelling local consumers to buy the locally-produced automobiles or doing so in any disguised form, or interfering with the choice of an operator on the state licensing production or sale of automobiles by any means.

Article 49

The present Policy shall go into effect as of the day of promulgation. The administrative department of commerce of the State Council shall be responsible for the interpretation of the present Policy.

Annex:Explanation on the terms as used in the Policies for Automobile Trade

1.

The term "automobile trade" includes the sale of new vehicles, the circulation of second-hand automobiles and automobile parts, the discarding of automobiles, the reclamation of discarded automobiles as well as the automobile foreign trade.

2.

Unless any automobile brand sale is involved, the term "automobiles" as mentioned in the present Policy includes low-speed product vehicles, three-wheeled motor car (former agricultural transport vehicles), trailers and motorcycles.

3.

The term "second-hand automobile" refers to an automobile that is traded and whose ownership is transferred in the duration from the date when the formalities for its registration have been handled to the date when the national compulsory discarding standards are satisfied.

4.

The term "supplier" refers to a manufacturer of automobiles or automobile parts as well as the general distributor thereof.

5.

The term "dealer" refers to a retailer of automobiles and automobile parts.