Laws of the People's Republic of China

The Ministry of Foreign Economic Relations and Trade

Supplementary Provisions to Measures of the Ministry of Foreign Economic Relations and Trade for the Implementation of Examination and Confirmation of Products Export Enterprises and Technologically-advanced Enterprises with Foreign Investment

the Ministry of Foreign Economic Relations and Trade

March 2, 1992

To improve the system of examination and confirmation of the two types of enterprises, the Ministry of Foreign Economic Relations and Trade (MOFERT) hereby promulgates the following supplements for its "Measures for the Implementation of Examination and Confirmation of Products Export Enterprises and Technologically-Advanced Enterprises with Foreign Investment" promulgated on January 27, 1987.

Article 1

Any enterprise with foreign investment which applies to be confirmed as an export-oriented enterprise or a technologically-advanced enterprise (hereinafter referred to as two-type enterprises) shall be an enterprise turning out tangible products with the exception of circumstances provided for in Paragraph 2 of Article 5 of these supplements.

Article 2

Organs for examining and confirming the two-type enterprises (EC organs) shall be MOFERT and foreign economic relations and trade departments of provinces, autonomous regions, municipalities directly under the Central Government, municipalities separately listed on the State plan and special economic zones (hereinafter referred to as provincial-level EC organs). MOFERT may entrust in writing provincial-level EC organs to examine two-type enterprises approved and confirmed by MOFERT. MOFERT shall examine two-type enterprises set up by organizations under ministries, commissions and bureaus of the State Council, or MOFERT may entrust in writing such ministries, commissions and bureaus to do the job.

If provincial-level EC organs need to entrust examination/ confirmation work of export-oriented enterprises to foreign economic relations and trade departments of a lower level because of excessive EC work load, they shall obtain prior MOFERT approval.

Article 3

After registering at administrations of industry and commerce and obtaining business licenses, enterprises with foreign investment can apply to EC organs for confirmation of their two-type-enterprise status. Such organs shall do their job by examining documents such as the contracts of Chinese-foreign joint or contractual ventures, application forms of foreign-capital enterprises and reports of feasibility studies, or by examining the exports, adoption of advanced technologies and contract fulfillment of the enterprises in question.

Article 4

Examination of export-oriented enterprises.

1)

Any enterprises with foreign investment confirmed as export-oriented shall apply to an EC organ for examination within 90 days of the termination of its first complete calendar year of operation; and, from then on, it shall, before the end of March every year, submit to its EC organ a report of its exports of the previous year and an annual report of its balance of payments in foreign exchange (forex).

2)

A favorable balance of payments in forex of a calendar year refers to greater forex earnings than expenditures within the same year, excluding the amount carried over from the previous year.

3)

For a product, the value of exports shall be calculated according to the actual producer's price of the time; when there is not a home-sale price to compare with, the value of its exports shall be calculated as the RMB value of forex earnings of the exports converted according to the forex-buying rate of the day of the receipt of forex at the local forex-swap center.

For processing with overseas-supplied materials, export goods purchased by foreign-trade firms and export goods processed by enterprises on behalf of such firms, their export value shall be calculated with the following methods: for processing with overseas-supplied materials, export value shall be limited to processing fees; for the other two kinds of export goods handled by foreign-trade firms, their export value shall be calculated according to producer's prices and be limited to processing fees respectively. The value of products sold on the home market for forex shall not be included in the export value of the enterprise in question.

The above provisions are applicable to calculating the export value of export-oriented enterprises. The existing system of statistical compilation remains unchanged with regard to its scope and definition for statistical compilation of the exports of enterprises with foreign investment.

4)

Examination of export-oriented enterprises shall be conducted once every year by EC organs in collaboration with finance, taxation, forex control and customs departments of the government at the same level.

Article 5

Confirmation and examination of technologically-advanced enterprises (TAEs).

1)

TAEs shall meet the following requirements:

A.

They shall generally engage in business lines or projects where foreign investment is encouraged by the State;

B.

They shall use internationally advanced and suitable technology and equipment and turn out products which are deemed as newly-developed in China or are indeed superior in terms of quality and technology compared with identical or similar home-made products;

C.

They shall generally have signed agreements on technology transfers or special articles on technology transfers in their joint venturing or cooperation agreements; such agreements or articles shall stipulate details on technology transfers, steps for the transfer of technology and product standards, time limits for the attainment of technology and product standards, and production localization progress for parts and components; Processing enterprises which are limited to importing equipment which is superior to home-made machinery in function and efficiency or those which are engaged mainly in assembling supplied parts shall not be confirmed as TAEs.

2)

High-tech and new-tech enterprises engaged in developing authentic advanced technologies may apply for TAE status confirmation even though they do not turn out tangible products.

3)

Examination and confirmation of TAEs shall be done by industrial departments in charge or science and technology departments organized by EC organs; or it shall be done by such organs on the basis of prior appraisal by specialists organized by departments in charge.

4)

A enterprise with foreign investment with a TAE status shall apply to an EC organ for examination within 90 days of the termination of its first complete calendar year of operation. An applying enterprise with foreign investment shall submit to an EC organ a detailed report on its production, sales, technology transfers, product quality and the progress of production localization.

5)

TAEs, after being confirmed as such, will not generally be submit to annual examination unless otherwise stipulated by their EC organs.

Article 6

Apart from stipulated content, examination of two-type enterprises shall cover how well investors of an enterprise fulfil the terms of their contract. An enterprise shall fail to qualify as a TAE if it or its investors have seriously violated or failed to fulfil the contract in question, thus failing to carry out obligations contained in their investment application.

Article 7

For enterprises which apply for confirmation as two-type enterprises after they have gone into operation, examination can proceed simultaneously with confirmation.

Article 8

Enterprises which fail examinations for three consecutive years shall be deprived of their two-type-enterprise status.

Article 9

EC organs shall send a list of two-type enterprises which have passed or failed to pass annual examinations to banks as well as the finance, taxation, customs and land-management departments of the government at the same level before May 31 every year.

Article 10

Provincial-level EC organs shall submit a list of confirmed two-type enterprises of the previous year to MOFERT for the record before January 31 every year. They shall submit the result of examinations of two-type enterprises of the previous year to MOFERT for the record before May 31 every year. They shall also submit to MOFERT a list of enterprises which have failed examinations for three consecutive years and are deprived of their two-type-enterprise status.

Article 11

These Provisions shall apply wherever they are contravened by stipulations of the "Measures for the Implementation of Examination and Confirmation of Products Export Enterprises and Technologically Advanced Enterprises with Foreign Investment."