Laws of the People's Republic of China

Ministry of Commerce

Supplementary Agreement No.2 on Mainland and Macao Closer Economic Partnership Arrangement

Ministry of Commerce

October 21, 2005

In order to further increase the level of economic exchanges and cooperation between the mainland and Macau Special Administrative Region (hereinafter referred to as Macau), and in accordance with Mainland and Macao Closer Economic Partnership Arrangement (CEPA) (hereinafter referred to as CEPA) signed on October 17, 2003, Appendix of CEPA signed on September 29, 2003 and Supplementary Agreement of CEPA signed on October 29, 2004, both sides decide to subscribe this Agreement on mainland's expanding opening for Macau for trade in goods and trade in services fields.

1.

Trade in Goods

(1)

As of January 1, 2006, Mainland implements Zero Tariff for imported Goods of Macau Origin. The Zero Tariff goods shall accord with the standards of place of origin negotiated and settled by both sides.

The standards of place of origin of goods of Macau Origin have been settled by both sides is listed in the Appendix 1 of this Agreement, which is the supplement of Chart 1 in Appendix 2 of CEPA.

Both sides decided to amend the specific measures in Article 5 in Appendix 1, namely About the Implementation of Zero Tariff of Trade in Goods, of CEPA to:

I. Submission

(A)

As of January 1, 2006, manufacturing enterprises in Macau could submit detailed list of goods that enjoy zero tariff to Macao Economic Services .

(B)

Macao Economic Services shall submit the lists, after verification and cognizance of the Macau SAR government, to Ministry of Commerce before March 1 and September 1 annually.

II. Negotiation and Promulgation

After the cognizance of Ministry of Commerce, the list shall be transferred to General Administration of Customs, where negotiation will take place with Macao Economic Services about the standards of place of origin of the goods. The negotiation shall be terminated before June 1 and December 1 annually, with adding the standards of place of origin of the goods to Chart 1 in Appendix 2 of CEPA and making promulgation.

III. Implementation

The mainland shall qualify the zero-tariff-import of goods according to CEPA, based on the Certificate of Place of Origin issued by Macao Economic Services, no later than July 1 of the year or January 1 of the next year.

(2)

Amend the content in Article 5 in Appendix 2, namely About the Rules on Place of Origin of Trade in Goods, of CEPA to:

" V. In Item 2 of Article 2 of the Appendix, the cognizance standards of "substantial processing" shall adopt following standards agreed by both sides:

(1)

The cognizance of "substantial processing" could adopt "manufacturing or processing procedure", "change of tax code", "ad valorem percent", "other standards" and "mixed standards".

(A)

Manufacturing or processing procedure means the main manufacturing or processing procedure, conducted in the boundary of one side, that provides the fundamental features of the goods after the procedure.

(B)

Change of tax code means that after processing in the boundary of one side, the outcome of the non-single-side material of origin changes the four-digit tax classify, and shall no longer change the four-digit tax classify in any other country or region to produce, process or manufacture.

(C)

Ad valorem percent could be calculated in the following formula:

(Value of Raw Material + Value of Component Parts + Value of Labor + Payment Value of Product Development) / FOB Value of Exporting Finished Products*100% ¡Ý30%

(D)

Other standards means other substantial processing methods agreed by both sides, besides the above-mentioned "manufacturing or processing procedure", "change of tax code", "ad valorem percent.

(E)

Mixed standards means use two or more standards to settle the place of origin.

(2)

Other additional conditions.

When the above-mentioned "substantial processing" standards are not enough for settling the place of origin, other additional conditions could be adopted with the consensus of both sides.

2.

Trade in services

(1)

As of January 1, 2006, on the basis of CEPA and Supplementary Agreement of CEPA commitment on opening up service trade, condition on market access will be further loosened on fields like law, accounting, audiovisual, construction, distribution, banking, tourism, transportation, individual owned businesses. See Appendix 2 for details.

(2)

Appendix 2 of this Agreement is the supplement and amendment of Chart 1 of Appendix 4 in CEPA and Appendix 3 of Supplementary Agreement of CEPA. Any conflict occurs, please subject to Appendix 2 of this Agreement.

(3)

"Service provider" in Appendix 2 of this Agreement shall be in line with relative regulations mentioned in Appendix 5 of CEPA.

3.

Appendix:

The Appendix shall be considered as part of the Agreement.

4.

Take Effect

This Agreement shall take effect as of the date of formal subscription of both sides.

This Agreement is written in the Chinese languages in duplicate.

This Agreement was signed on October 21, 2005, Macao.

Vice Minister of Ministry of Commerce of PRC

Secretary for Economy and Finance of Macao Special Administrative Region of PRC