Laws of the People's Republic of China

Regulations for the Supervision and Administration over Cotton Quality

July 4, 2006

(Promulgated by Order No. 314 of the State Council of the People's Republic of China on August 3, 2001, and amended in light of the Decision of the State Council on Amending the Regulations on the Supervision and Administration over Cotton Quality promulgated on July 4, 2006)

Chapter I General Provisions

Article 1

With a view to strengthening the supervision and administration over cotton quality, maintaining the order of cotton market, and protecting the lawful rights and interests of each party to cotton trading, the present Regulations are formulated.

Article 2

When cotton business operators (including cotton purchasers, processors, sellers and storage undertakers, the same hereafter) engage in cotton business activities, the undertaking of supervision and administration over cotton quality by cotton quality supervision institutions shall accord with the present Regulations.

Article 3

When a cotton business operator intends to engage in cotton processing business, it shall obtain its qualification certification according to the relevant provisions of the state.

The cotton business operator shall establish an internal cotton quality management rules and improve them, strictly carry out position-based quality norms, quality responsibilities and corresponding assessment measures.

Article 4

The competent department of quality supervision, inspection and quarantine of the State Council shall be responsible for the national cotton quality supervision work, and its subordinate China Fiber Inspection Institute shall take charge of organizing and implementing such work.

The quality supervision department of the people's government of a province, autonomous region, or municipality directly under the Central Government shall be responsible for the cotton quality supervision work within its own jurisdiction. At a place where a professional fiber inspection institution is set up, the professional fiber inspection institution shall undertake supervision over cotton quality within its jurisdictional division; at a place where no professional fiber inspection institution is set up, the quality supervision department shall undertake supervision over cotton quality within its jurisdictional division (when a professional fiber inspection institution and a local quality supervision department are coordinately used, they shall be uniformly referred to as cotton quality supervision institutions).

Article 5

The local people's governments at each level and the functionaries thereof may not enshield or connive the illegal acts related to cotton quality within their respective regions, or obstruct or interfere with the cotton quality supervision institution's lawful investigation and shall punish the violations of the present Regulations in cotton purchase, processing, sale or storage undertaking.

Article 6

Any entity or individual shall have the right to impeach any illegal act concerning cotton quality.

Chapter II Obligations Concerning Cotton Quality

Article 7

Cotton business operators shall, when intending to purchase cotton, establish and perfect the quality inspection and acceptance rules for the purchase of cotton, and shall have the physical standards for cotton grades and the indispensable equipment and instruments for cotton quality inspection.

Cotton business operators shall, when purchasing cotton, determine the category, grade and quantity of the cotton purchased in light of the national standards and technical norms after excluding the foreign fibers and other noxious materials; if the purchased cotton goes beyond the national moisture standard, it shall be subject to technical treatment such as airing in the sun or drying with machine and etc., so as to guarantee the cotton quality.

Cotton business operators shall place purchased cotton by category or by grade.

Article 8

Cotton business operators shall, when processing cotton, satisfy the following requirements:

(1)

It shall, in light of national standards, select and exclude the foreign fibers and other noxious substances in the cotton for processing;

(2)

It shall, in light of national standards, grade and process cotton, pack the processed cotton and attach marks compatible to the cotton quality;

(3)

It shall, in light of national standards, pack the processed cotton and place it in batches.

Cotton business operators may not process cotton by using leather rollers, cotton ginning machine, packaging machine or other cotton processing equipment, which are prohibited by the state through public proclamation.

Article 9

Cotton business operators shall, when selling cotton, satisfy the following requirements:

(1)

Each batch of cotton shall be attached with a quality voucher;

(2)

The cotton packages or marks shall meet national standards;

(3)

The category, grade and weight of the cotton shall be consistent with the quality voucher or mark; and

(4)

The cotton having passed the notarization inspection shall be attached with an accredited inspection certificate, or shall, if it is state-reserved cotton, be affixed with an accredited inspection mark.

Article 10

Cotton business operators shall, when undertaking storage of state-reserved cotton, establish and perfect quality inspection and acceptance rules on the entry of cotton into or exit from warehouse, and guarantee that the category, grade and quantity of the state-reserved cotton entering into or exiting from the warehouse are consistent with the accredited inspection certificate and the accredited inspection mark.

Cotton business operators shall, when undertaking storage of state-reserved cotton, maintain and repair the undertaking facilities according to the relevant provisions of the state, so that the quality of the state-reserved cotton can be guaranteed to exempt from any quality variance caused by human elements.

Cotton business operators may not put any cotton without passing accredited quality inspection into the warehouse as state-reserved cotton or take it out of the warehouse as state-reserved cotton.

Government authorities or the functionaries thereof may not compel any cotton business operator to put any cotton without passing accredited quality inspection into the warehouse as state-reserved cotton or take it out of the warehouse as state-reserved cotton.

Article 11

Cotton business operators may not, when purchasing, processing, selling or undertaking storage of cotton, forge, alter or pretend to use any cotton quality voucher or mark, or any accredited inspection certificate or accredited inspection mark.

Article 12

Cotton business operators shall be strictly prohibited from, during their business activities such as purchase, processing, sale or storage undertaking of cotton, adulterating any cotton, substituting any qualified cotton with inferior one or using any fake cotton as genuine one.

Chapter III Cotton Quality Supervision

Article 13

The state shall adopt the accredited cotton quality inspection system.

The term "accredited cotton quality inspection" as mentioned in the preceding paragraph shall refer to the activities through which a professional fiber inspection institution inspects the quality and quantity of cotton in light of national standards and technical norms, and issues an accredited inspection certificate.

Article 14

Cotton business operators that sell cotton to cotton consuming enterprises may, before either party to the transaction makes cotton transaction settlement, entrust a professional fiber inspection institution to make an accredited inspection of the cotton in bargain. After the accredited inspection, the professional fiber inspection institution shall issue an accredited cotton quality inspection certificate, which may be used as the basis of the cotton quality or quantity.

Article 15

The entry of state-reserved cotton into or the exit thereof from the warehouse shall be subject to accredited cotton quality inspection; upon the accredited inspection, the professional fiber inspection institution shall issue an accredited cotton quality inspection certificate, which shall be used as the basis for the state treasury to pay the expenses needed in storing the state-reserved cotton.

The state-reserved cotton having passed the accredited inspection shall be affixed by the professional fiber inspection institution with an accredited inspection mark that is unanimously prescribed by the China Fiber Inspection Institute.

Article 16

The professional fiber inspection institution shall, when undertaking an accredited cotton quality inspection, implement the national standards as well as its inspection methods, technical norms and time requirements, so as to guarantee the inspection to be objective, impartial and timely. The accredited cotton quality inspection certificate issued by the professional fiber inspection institution shall reflect the quality and quantity of the cotton truthfully and objectively.

The content of the accredited cotton quality inspection certificate shall contain the product name, the (entrusting) entity under inspection, the batch number, the number of packages, the inspection basis, the inspection result, the inspecting entity, the inspectors and etc.

The format of the accredited cotton quality inspection certificate shall be prescribed by the department for quality supervision, inspection and quarantine of the State Council.

Article 17

The professional fiber inspection institution may not charge any fee when making an accredited cotton quality inspection, and the expenses needed in the inspection shall be listed as expenditures in accordance with the related provisions of the state.

Article 18

The department for quality supervision, inspection and quarantine of the State Council shall, throughout China, arrange for the sample supervisory inspection on the cotton having passed accredited cotton quality inspection, and the quality supervision department of the people's government of a province, autonomous region, or municipality directly under the Central Government shall arrange for the sample supervisory inspection on the cotton having passed accredited cotton quality inspection within its respective jurisdiction.

The content of a sample supervisory inspection shall be: whether the accredited cotton quality inspection certificate and the accredited inspection mark are consistent with the physical product or not; and whether the accredited cotton quality inspection made by the professional fiber inspection institution is objective, impartial and timely or not.

The samples needed in a sample supervisory inspection shall be drawn from the reserved samples have passing the accredited inspection at random, and an inspection conclusion shall be made within 10 days as of the day when the sample is drawn.

Article 19

The cotton quality supervision institution may, with regard to the cotton beyond the accredited cotton quality inspection, undertake supervisory inspection of cotton purchase, processing, sale or storage undertaking on the spot.

The content of a supervisory inspection shall be: whether the quality, quantity and package of the cotton meet the national standards or not; and whether the mark and quality voucher of the cotton accord with the physical product or not.

Article 20

The cotton quality supervision institution may, during the process of cotton quality supervisory inspection, exercise the following powers, when investigating an act suspected to violate the present Regulations on the basis of the evidence or tip-off on any suspected illegal act:

(1)

making an on-site inspection on the place where any business activity suspected to violate the present Regulations is conducted;

(2)

investigating the related persons of the cotton business entity to obtain information about the business activity suspected to violate the present Regulations;

(3)

consulting and photocopying the contracts, documents, account books and other materials on the cotton business operation; and

(4)

sealing up or distraining the suspected adulterated cotton, inferior cotton used to substitute qualified one, fake cotton used as genuine one, or any other cotton with serious quality problems, and the equipment and instruments specially used to produce the aforesaid cotton.

Article 21

When required by a supervisory inspection, the cotton quality supervision institution may inspect the cotton quality. The samples needed in the inspection shall be randomly drawn from the purchased, processed, for-sale or reserved cotton in light of the related national standards. And an inspection conclusion shall be made within 3 days as of the drawing of sample for inspection.

No fee may be charged for the inspection in accordance with the preceding paragraph, and the necessary inspection expenses shall be listed as expenditures in accordance with the related provisions of the state.

Article 22

Where a cotton business operator or a cotton consuming enterprise has any objection to the result of an accredited cotton quality inspection or a cotton quality supervisory inspection made according to the present Regulations, it may, within 5 days as of receipt of the inspection result, apply to the cotton quality supervision institution of the province, autonomous region, or municipality directly under the Central Government or China Fiber Inspection Institute for re-inspection, which shall, within 7 days as of receiving the application, make a re-inspection conclusion and notify the applicant. If the cotton business operator or the cotton consuming enterprise still has any objection to the re-inspection conclusion, it may bring a lawsuit to the people's court under law.

Article 23

Other fiber inspection institutions recognized by the department for quality supervision, inspection and quarantine of the State Council may be entrusted to conduct cotton quality inspection. The specific measures shall be formulated by the department for quality supervision, inspection and quarantine of the State Council in conjunction with other related departments of the State Council.

Chapter IV Penalty Provisions

Article 24

Where a cotton business operator, when purchasing cotton, violates Paragraph 2 or 3 of Article 7 of the present Regulations by failing to meet the national standards or technical norms to exclude foreign fibers and other noxious substances before determining the category, grade and quantity of the purchased cotton, or by failing to conduct technical treatment on the purchased cotton which goes beyond the national moisture standard, or by failing to classify and grade the purchased cotton for placement, it shall be ordered by the cotton quality supervision institution to make corrections, and imposed upon a fine up to RMB 30,000 Yuan.

Article 25

Where a cotton business operator, when processing cotton, violates Paragraph 1 of Article 8 of the present Regulations by failing to meet the national standards to select and exclude foreign fibers and other noxious substances, or by failing to meet the national standards to process the cotton by grade, to pack and mark the cotton, or by failing to meet the national standards to place the cotton by batches, it shall be ordered by the cotton quality supervision institution to make corrections, and may, in light of the severity of the circumstance, be imposed upon a fine of RMB100,000 Yuan. If the circumstances are serious, its cotton processing qualification shall be revoked by the original accreditation organ.

Where a cotton business operator, when processing cotton, violates Paragraph 2 of Article 8 of the present Regulations by using any cotton processing equipment of express prohibition of the state, the aforesaid prohibited cotton processing equipment shall be confiscated by the cotton quality supervision institution and be destroyed under supervision thereof, and the operator shall be imposed upon a fine twice up to ten times of the actual value of the illegal equipment. If the circumstances are serious, its cotton processing qualification shall be revoked by the original accreditation organ.

Article 26

Where a cotton business operator, when selling cotton, violates Article 9 of the present Regulations due to the fact that the for-sale cotton has no quality voucher or no package or mark meeting the national standards, the quality voucher or the mark does not accord with the physical product, the cotton having passed the accredited inspection has no accredited inspection certificate or the state-reserved cotton is not affixed with an accredited inspection mark, it shall be ordered by the cotton quality supervision institution to make corrections, and may, in light of the severity of the circumstance, be imposed upon a fine up to RMB 100,000 Yuan.

Article 27

Where a cotton business operator, when undertaking the storage of state-reserved cotton, violates Paragraph 1, 2 or 3 of Article 10 of the present Regulations by failing to establish quality inspection and acceptance rules for entry of cotton into or exit thereof from the warehouse, or due to the fact that its physical state-reserved cotton entering into or exiting from the warehouse is inconsistent with the accredited inspection certificate or mark, or that it fails to comply with the provisions of the state to maintain or repair the storage undertaking facilities and thus results in variance of the quality of the state-reserved cotton, or that it uses any cotton having not passed the accredited inspection as state-reserved cotton for entry into or exit from the warehouse, it shall be ordered by the cotton quality supervision institution to make corrections, and may be imposed upon a fine up to RMB 100,000 Yuan; if any heavy loss is caused, the person-in-charge and other persons directly liable shall be demoted or be given a severer disciplinary sanction; if any crime is constituted, he shall undertake criminal liabilities under law.

Article 28

Where a cotton business operator conceals, transfers or damages any article sealed up or sequestered by the cotton quality supervision institution, it shall be fined by the cotton quality supervision institution twice up to five times of the value of the concealed, transferred or damaged cotton; if any crime is constituted, he shall be subject to criminal liabilities under law.

Article 29

Where a cotton business operator violates Article 11 of the present Regulations by forging, altering or imitating any cotton quality voucher or mark, any accredited inspection certificate or any accredited inspection mark, it shall be fined by the cotton quality supervision institution at the amount of RMB 50,000 Yuan up to RMB 100,000 Yuan. If the circumstances are serious, the case shall be transferred to the administrative department for industry and commerce for revocation of its business license; if any crime is constituted, he shall be subject to criminal liabilities under law.

Article 30

Where a cotton business operator, when undertaking cotton business activities, violates Article 12 of the present Regulations by adulterating cotton, substituting any qualified cotton with inferior one or using any fake cotton as genuine one, if any crime is constituted, he shall be subject to criminal liabilities under law; if no crime is constituted, the adulterated cotton, the inferior cotton used to substitute the qualified one, or the fake cotton used as genuine one and the illegal proceeds shall be confiscated by the cotton quality supervision institution, a fine twice up to five times of the value of the illegal cotton shall be imposed upon, and the case shall be transferred to the administrative department for industry and commerce for revocation of the business license under law.

Article 31

Where a professional fiber inspection institution violates Article 16 of the present Regulation by refusing to execute the national standards or its inspection methods, technical norms or time requirements, or by issuing an untrue accredited cotton quality inspection certificate, it shall be ordered by the administrative department of quality supervision, inspection and quarantine of the State Council or the local quality supervision administrative department to make corrections; the responsible person-in-charge and other persons directly liable shall be imposed upon the administrative sanction of demotion or dismissal from post under law.

Article 32

Where a professional fiber inspection institution violates Article 17 of the present Regulations by charging any fee for accredited inspection, it shall be ordered by the administrative department of quality supervision, inspection and quarantine of the State Council or the local quality supervision administrative department to refund the charged fee; the responsible person-in-charge and other persons directly liable shall be imposed upon the administrative sanction of heavy demerit record or demotion under law.

Article 33

In case a professional fiber inspection institution practices fraud by way of fabricating or issuing an accredited inspection certificate or by affixing any accredited inspection mark before making an accredited inspection, its responsible person-in-charge and other persons directly liable shall be imposed upon the administrative sanction of demotion or dismissal from post by the administrative department of quality supervision, inspection and quarantine of the State Council or the local quality supervision administrative department under law. If any crime is constituted, he shall be subject to criminal liabilities under law.

Article 34

Where a governmental office or any of its functionaries violates Paragraph 4 of Article 10 of the present Regulations by compelling any cotton business operator to put any cotton having failed the accredited quality inspection into or take it out of the warehouse as state-reserved cotton, the responsible person-in-charge and other persons directly liable shall be imposed upon the administrative sanction of demotion or removal from post under law.

Article 35

Where a governmental office or any of its functionaries covers up or connives any local illegal act related to cotton quality, or obstructs or interferes with any cotton quality supervision institution from investigating under law the acts in violation of the present Regulations, it/he shall be imposed upon the administrative sanction of demotion or removal from post under law. If any crime is constituted, it/he shall be subject to criminal liabilities under law.

Article 36

The value of cotton as prescribed in Article 28 and Article 30 of the present Regulations shall be computed at the listed price of the illegally purchased, processed or sold cotton or on the basis of the settlement note; if there is no such listed price or settlement note, the value shall be computed at the market price of the cotton of the same category.

Article 37

As to the administrative penalty of fine given according to the present Regulations, the decision on the fine shall be separated from the collection thereof according to the related laws and administrative regulations, and the collected fines shall be fully turned in to the state treasury.

Chapter V Supplementary Provisions

Article 38

The supervision and administration on the qualities of wool, fine hair, cocoon silk and hemp fibers shall be conducted by referring to the present Regulations.

Article 39

The present Regulations shall enter into effect as of the date of the promulgation thereof.