THE LAW OF THE PEOPLE'S REPUBLIC OF CHINA ON INDUSTRIAL ENTERPRISES OWNED BY THE WHOLE PEOPLE

THE LAW OF THE PEOPLE'S REPUBLIC OF CHINA ON
INDUSTRIAL ENTERPRISES OWNED BY THE WHOLE PEOPLE

(Adopted on April 13, 1988, at the First Session of
the Seventh National People's Congress)

SUBJECT: COMPANIES & ENTERPRISES

ISSUING-DEPT: NATIONAL PEOPLE'S CONGRESS

ISSUE-DATE: 04/13/1988

IMPLEMENT-DATE: 08/01/198

LENGTH: 4839 word

TEXT:

CHAPTER I GENERAL PROVISIONS

[Article 1] This Law is formulated in accordance with the Constitution of the People's Republic of China with a view to ensuring the consolidation and development of the economic sector under ownership by the whole people, defining the rights and obligations of industrial enterprises owned by the whole, safeguarding their lawful rights and interests, enhancing their vitality, and promoting socialist modernization.

[Article 2] An industrial enterprise owned by the whole people (hereinafter referred to as the enterprise) shall be a socialist commodity production and operation unit which shall, in accordance with law, make its own managerial decisions, take full responsibility for its own profits and losses and practice independent accounting.

The property of the enterprise shall be owned by the whole people, and shall be operated and managed by the enterprise with the authorization of the State in line with the principle of the separation of ownership and managerial authority. The enterprise shall enjoy the rights to possess, utilize and dispose of, according to law, the property which the State has authorized it to operate and manage.

The enterprise shall obtain the status of a legal person in accordance with law and bear civil liability with the property which the State has authorized it to operate and manage.

The enterprise may, in accordance with the decision of the competent department of the government, adopt contract, leasing or other forms of systems of managerial responsibility.

[Article 3] The fundamental tasks of the enterprise are to develop commodity production, create wealth, increase savings and satisfy society's growing material and cultural requirements by acting in line with State plans and market demands.

[Article 4] While achieving socialist material growth, the enterprise must persistently promote socialist cultural and ideological progress and build up a contingent of well-educated and self-disciplined staff and workers with high ideals and moral integrity.

[Article 5] The enterprise must observe the laws and regulations and keep to the socialist orientation.

[Article 6] The enterprise must effectively utilize the property which the State has authorized it to operate and manage and realize the multiplication of its assets. The enterprise must, according to law, pay taxes and fees and hand in profits.

[Article 7] The enterprise shall implement the factory director (manager) responsibility system.

The factory director shall exercise functions and powers according to law, which shall be protected by law.

[Article 8] The grass roots organization of the Chinese Communist Party in the enterprise shall guarantee and supervise the implementation of the guiding principles and policies of the Party and the State in such an enterprise.

[Article 9] The State shall ensure that the staff and workers enjoy the status of the masters and the lawful rights and interests of the staff and workers shall be protected by law.

[Article 10] The enterprise shall, through the staff and workers congress and other forms, practice democratic management.

[Article 11] The trade union in the enterprise shall represent and safeguard the interests of the staff and workers and conduct its work independently according to law. The trade union in the enterprise shall organize the staff and workers for participation in democratic management and democratic supervision.

The enterprise shall bring the role of the young and women staff and workers and of scientific and technical personnel into full play.

[Article 12] The enterprise must strengthen and improve its operation and management, implement the economic responsibility system, promote scientific and technological progress, practise economy, combat waste, improve economic results and further the transformation and development of the enterprise.

[Article 13] The enterprise shall implement the principle of distribution according to work. It may also adopt other forms of distribution within the scope prescribed by law.

[Article 14] The property which the State has authorized the enterprise to operate and manage shall be protected by law and shall not be infringed upon.

[Article 15] The lawful rights and interests of the enterprise shall be protected by law and shall not be infringed upon.

CHAPTER II ESTABLISHMENT, MODIFICATION AND TERMINATION OF THE ENTERPRISE

[Article 16] The establishment of the enterprise must comply with the law and the relevant provisions of the State Council, and the application for the establishment must be submitted to the government or the competent department of the government for examination and approval. The enterprise shall obtain the status of a legal person after being approved by and registered with the administrative authorities for industry and commerce and issued a business license.

The enterprise shall engage in its productive and operational activities within its approved and registered scope of operation.

[Article 17] With respect to the establishment of the enterprise, the following qualifications must be met:

(1) Its products are needed by society;

(2) It has such access to energy sources, raw and processed materials, and communication and transportation facilities:

(3) It possesses a name of its own and premises for production and operation:

(4) It possesses funds in conformity with State provisions;

(5) It possesses its own organizational structure;

(6) It has a definite scope of operation;

(7) Other qualifications as provided by the law and regulations.

[Article 18] The merger of enterprises or the division of an enterprise shall be subject to approval by the government or the competent department of the government in accordance with the provisions of the laws and administrative regulations.

[Article 19] The enterprise shall be terminated for any of the following reasons:

(1) Being revoked due to its violation of the laws and regulations;

(2) Being dissolved by decision of the competent department of the government made in accordance with the provisions of the laws and regulations;

(3) Being declared bankrupt in accordance with law; or

(4) Other reasons.

[Article 20] When the enterprise is merged, divided or terminated, its property must be protected and its claims and debts shall be liquidated according to law.

[Article 21] The modification of registered items such as the merger of the enterprises and the division or termination of the enterprise, and the scope of operation shall be subject to approval by and registration with the administrative authorities for industry and commerce.

CHAPTER III RIGHTS AND OBLIGATIONS OF THE ENTERPRISE

[Article 22] The enterprise shall, under the guidance of State plans, have the right to arrange on its own the production of products needed by society or the provision of services or society.

[Article 23] The enterprise shall have the right to request the adjustment of mandatory plans when there are no needed goods and materials supplied according to plan or no arrangements for product sales.

The enterprise shall have the right to accept or reject production assignments given by any department or unit outside the mandatory plans.

[Article 24] The enterprise shall have the right to sell its products on its own, except as otherwise provided by the State Council.

The enterprise undertaking production according to a mandatory plan shall have the right to market for itself products manufactured in excess of planned quotas and products it retains as its share under the plan.

[Article 25] The enterprise shall have the right to choose the suppliers for itself and to purchase goods and materials needed for production.

[Article 26] The enterprise shall have the right to determine for itself the prices of its products and the service charge, except for those which, as stipulated by the State Council, are under the control of the price authorities and the relevant competent department.

[Article 27] The enterprise shall have the right to negotiate and sign contracts with foreign parties in accordance with the provisions of the State Council.

The enterprise shall have the right to withdraw and use, according to the provisions of the State Council, the foreign exchange revenues it retains as its share.

[Article 28] The enterprise shall have the right to budget for and use its retained funds in accordance with the provisions of the State Council.

[Article 29] The enterprise shall have the right, in accordance with the provisions of the State Council, to lease out or transfer against compensation the fixed assets that the State has authorized it to operate and manage, but the proceeds therefrom must be used for the renewal of equipment and technical transformation.

[Article 30] The enterprise shall have the right to determine such forms of wages and methods of bonus distribution as are appropriate to its specific conditions.

[Article 31] The enterprise shall have the right to employ or dismiss its staff members and workers in accordance with the provisions of the State Council.

[Article 32] The enterprise shall have the right to decide on its organizational structure and the number of its personnel.

[Article 33] The enterprise shall have the right to reject the exaction of its manpower, materials and financial resources, in the form of apportionment by any State organ or unit, except as otherwise stipulated by the laws and regulations: and any demand made on the enterprise by any State organ or unit, in any form, for the provisions of manpower, materials and financial resources, shall be exaction by apportionment.

[Article 34] The enterprise shall have the right, in accordance with law and the provisions of the State Council, to engage in joint operations with other enterprises or institutions, to invest in other enterprises or institutions and to hold shares of other enterprises.

The enterprise shall have the right to issue bonds in accordance with the provisions of the State Council.

[Article 35] The enterprise must fulfil the mandatory plans.

The enterprise must perform the economic contracts concluded according to law.

[Article 36] The enterprise must ensure the normal maintenance of fixed assets, and upgrade and renew its equipment.

[Article 37] The enterprise must observe State provisions concerning finance, labour and wages, price control, etc, and accept supervision by the financial, auditing, labour and wage, price, and other administrative authorities.

[Article 38] The enterprise must guarantee the quality of its products and services and be responsible to users and consumers.

[Article 39] The enterprise must raise labour efficiency, economize in the use of energy and materials and strive to reduce costs.

[Article 40] The enterprise must strengthen its security work, maintain the order of production and protect State property.

[Article 41] The enterprise must implement the system of safe production, improve labour conditions, do good work in labour protection and environmental protection, and carry on production in a safe and civilized manner.

[Article 42] The enterprise shall strengthen ideological and political education, legal education, national defence education, and scientific and cultural education as well as technical and vocational training so as to raise the quality of its staff and workers.

[Article 43] The enterprise shall support and reward its staff and workers in carrying on scientific research, invention and creation and engaging in activities for technical innovation, for making rationalization proposals and for socialist labour emulation.

CHAPTER IV THE FACTORY DIRECTOR

[Article 44] Except as otherwise stipulated by the State Council, the selection of the factory directors shall be made by the competent department of the government in the light of the specific conditions of the enterprise by one of the following methods:

(1) Appointment or employment by the competent department of the government; or

(2) Election by the staff and workers' congress of the enterprise.

With respect to the person to be appointed or employed as factory director by the competent department of the government, the opinions of the staff and workers shall be solicited; the factory director elected by the staff and workers' congress of the enterprise shall be reported to the competent department of the government for approval.

The removal or dismissal of the factory director appointed or employed by the competent department of the government shall be decided upon by such department, while opinions of representatives of the staff and workers shall be solicited; the factory director elected by the staff and workers' congress of the enterprise shall be recalled by such congress and reported to the competent department of the government for approval.

[Article 45] The factory director shall be the legal representative of the enterprise.

The enterprise shall establish a system of production, operation and management headed by the factory director. The factory director shall occupy the central position in the enterprise and assume overall responsibility for building up a materially developed and culturally and ideologically advanced enterprise.

The factory director shall exercise leadership in the production, operation and management of the enterprises by exercising the following functions and powers:

(1) To decide on the various plans of the enterprise or report them for examination and approval in accordance with law and the provisions of the State Council;

(2) To decide on the administrative set-up of the enterprise;

(3) To propose to the competent department of the government the appointment or removal, employment or dismissal of leading administrative cadres at the level of vice-director of the factory, except as otherwise stipulated by law and the provisions of the State Council;

(4) To appoint or remove, employ or dismiss the intermediate-level leading administrative cadres of the enterprise, except as otherwise stipulated by law;

(5) To propose plans for wage adjustment and bonus distribution and important rules and regulations and refer them to the staff and workers' congress for examination and approval. To propose programmes for the use of the welfare fund and make suggestions regarding such other matters as are important for the well-being and benefits of the staff and workers, and to refer them to the staff and workers' congress for deliberation and decision; and

(6) To reward or punish the staff members and workers according to law, and to submit to the competent department of the government proposals for rewarding or punishing leading administrative cadres at the level of vice-director of the factory.

The storage of goods under Customs control at a place outside the Customs surveillance zone shall be approved by the Customs and subject to Customs control.

[Article 27] Rules governing the inbound and outbound containers, rules governing the salvage of inbound and outbound goods and sunken ships, rules governing import and export goods under small-scale border trade and rules govering other inbound and outbound goods not specified in this Law shall be drawn up by the customs General Administration independently or in conjunction with the relevant department under the State Council.

CHAPTER IV INBOUND AND OUTBOUND ARTICLES

[Article 28] Inbound and outbound luggage carried by individuals and inbound and outbound articles sent by post shall be for personal use, in reasonable quantities and subject to Customs control.

[Article 29] All inbound and outbound articles shall be accurately declared with the Customs by the owner, and be subject to Customs examination.

Seals affixed by the Customs shall not be opened or broken by any person without authorization.

[Article 30] The loading, unloading, conveyance and translate of inbound and outbound mail bags shall be subject to Customs control, and a covering way bill shall be loaded with the Customs by the units engaged in postal service.

The units engaged in postal service shall inform the Customs in advance of the time for the opening and sealing of international mail bags; the Customs shall dispatch officers to the spot to exercise control over the bags in time.

[Article 31] Inbound and outbound articles sent by post shall be delivered or handed over only after they have been examined and released by the Customs.

[Article 32] Inbound and outbound articles registered with the Customs and temporarily exempted from Customs duty upon approval shall be brought out or into the territory again by the person on his own.

Persons passing through the territory shall not leave behind the articles they carry in the territory without Customs approval.

[Article 33] Inbound and outbound articles that are abandoned by the owner with a statement, unclaimed for which Customs formalities are not completed within the specified time limit, or postal articles which can neither be delivered nor sent back, shall be disposed of by the Customs in accordance with Article 21 of this Law.

[Article 34] Inbound and outbound articles intended for official or personal use by foreign missions or personnel enjoying diplomatic privileges and immunity shall be dealt with in accordance with the Regulations on Diplomatic Privileges and Immunity of the People's Republic of China.

CHAPTER V CUSTOMS DUTIES

[Article 35] Unless otherwise provided for in this Law, Customs duties shall be collected in accordance with the Import and Export Tariff (schedules) on goods permitted to be imported or exported and articles permitted to enter or leave the territory. The Tariff shall be made public.

[Article 36] The consignee of import goods, the consignor of export goods and the owner of inbound and outbound articles are obligatory Customs duty payer.

[Article 37] The obligatory duty payer of import or export goods shall pay the amount levied within 7 days following the date of issuance of the duty memorandum. At the expiration of this time-limit, a fee for delayed payment shall be collected by the Customs. Where the delay exceeds 3 months, the Customs may either instruct the guarantor to pay the duty or sell off the goods for compensation. When deemed necessary, the Customs may request the bank to deduct the amount of duties from the deposits of the guarantor or the obligatory duty payer.

The payment of duty on inbound or outbound articles shall be made by the obligatory duty payer prior to their release.

[Article 38] The price for duty assessment of import goods shall be the normal CIF price, which shall be recognized by the Customs; the price for duty assessment of export goods shall be the FOB price, which shall be recognized by the Customs, minus the export duty. Where the CIF or FOB price can not be ascertained, the price for duty assessment shall be estimated and fixed by the Customs.

[Article 39] Duty reduction or exemption shall be granted for the import and export goods and inbound and outbound articles listed below:

(1) Advertising matters and trade samples of no commercial value;

(2) Materials by foreign governments or international organizations;

(3) Goods suffering damage or loss prior to Customs release;

(4) Articles of a quantity or value below the fixed limit;

(5) Other goods and articles enjoying duty reduction or exemption in accordance with the laws and regulations;

(6) Goods and articles enjoying duty reduction or exemption in accordance with the international treaties to which the People's Republic of China is either a contracting or an acceding party.

[Article 40] Duty reduction or exemption shall be granted to goods imported or exported by the Special Economic Zones and other specified areas, and by Sino-foreign joint ventures, contractual joint ventures and wholly foreign-owned enterprises, and to goods imported or exported for specific purposes, and to materials donated for public welfare. The State Council will specify the exact items and enact rules on such reduction and exemption.

The State Council or the department empowered by the State Council shall also specify the duty reduction or exemption items of small-scale border trade and draw up detailed rules on such reduction or exemption.

[Article 41] All import goods and articles to which duty reduction or exemption is granted in accordance with the preceding article shall be used only in specified areas and enterprises and for specific purposes. They shall not be utilized otherwise unless Customs approval is obtained and duties duly paid.

[Article 42] Duty reduction or exemption of an odd nature and beyond the ambit of Articles 39 and 40 of this Law shall be examined and approved by the Customs General Administration independently or jointly with the financial department under the State Council in accordance with the regulations of the State Council.

[Article 43] Temporary duty exemption shall be granted to goods temporarily imported or exported and to bonded import goods upon Customs approval after a guarantee or a deposit equal to the duty has been lodged with the Customs by the consignee or the consignor of the goods.

[Article 44] Upon discovery of a short-or non-payment of Customs duty on import or export goods, or inbound or outbound articles after their release, the Customs shall collect the money payable for the obligatory duty payer within 1 year of the previous duty payment or the release of the goods or the articles. If the short-or non-payment of the duty is due to a breach of the Customs regulations by the obligatory duty payer, the Customs is entitled to recover the unpaid duty within 3 years.

[Article 45] Where an over-levy of duty is discovered, the Customs, shall refund the money without delay; the duty payer is entitled to ask the Customs for the refunding within 1 year of the date of duty payment.

[Article 46] Where the obligatory duty payer is involved in a dispute over duty payment with the Customs, he shall first make the payment of the duty, the then apply to the Customs in writing for a reconsideration of the case within 30 days of the issuance of the duty memorandum. The Customs shall reach a decision within 15 days after receipt of the application. In case the obligatory duty payer still has objection against the decision, he is entitled to apply to the Customs General Administration for a reconsideration of the case within 15 days after receipt of the decision. If the decision of the Customs General Administration is still considered unacceptable, the obligatory duty payer may take legal action at the People's Court within 15 days after receipt of the decision.

CHAPTER VI LEGAL RESPONSIBILITIES

[Article 47] Any one of the following acts to evade Customs control constitutes a crime of smuggling:

(1) To transport, carry or send by post into or out of the territory drugs, weapons and counterfeit currencies which are prohibited by the State from importation or exportation; to transport, carry or send pay post obscene objects into or out of the territory aiming at commercial gain or dissemination, or to transport, carry or send by post out of the territory precious cultural relics which are prohibited by the State from exportation;

(2) For the purpose of commercial gain, to transport, carry or send by post into or out of the territory the goods or articles which are not listed above but also prohibited by the State from importation or exportation, and goods and articles in relatively large quantities or of relatively high value which are restricted by the State from importation or exportation or subject to Customs duties in accordance with laws and regulations;

(3) To sell without Customs approval and payment of duties, the bonded goods imported upon special permission or goods enjoying specified duty reduction or exemption in relatively large quantities or of relatively high value.

Any armed smuggling of goods and articles or resistence by violence to Customs examination over smuggled goods and articles constitutes a crime of smuggling, regardless of the quantity or value of the goods and articles involved.

Criminal sanctions imposed by the People's Court on persons guilty of smuggling shall include a fine and confiscation of the smuggled goods and articles, the means of transport carrying them and illegal incomes obtained therefrom.

Where an enterprise, an undertaking, a government department or a social organization commits a crime of smuggling, criminal sanctions shall be imposed on the person in charge and the person directly responsible for the offence by the judicial organ, a fine and confiscation of the smuggled goods and articles, the means of transport carrying them and the illegal incomes obtained therefrom may also be imposed on such unit.

[Article 48] If the smuggled goods and articles involved in one of the acts listed under 2 and 3 of Article 47 of this Law are not large in quantity, nor high in value or where the carrying or sending by post of obscene objects into or out of the territory does not yet constitute a crime of smuggling, the Customs, while confiscating the goods, articles or illegal incomes obtained therefrom, may at the same time impose a fine on the person concerned.

[Article 49] Any of the following acts shall be dealt with as a crime of smuggling and punishable in accordance with the provisions of Article 47 of this Law:

(1) To purchase directly and illegally from the smuggler articles which are prohibited by the State from importation, or to purchase directly and illegally from the smuggler other smuggled goods and articles in relatively large quantities or of relative high value.

(2) To transport, purchase or sell on coastal or territorial waters articles which are prohibited by the State from importation and exportation, or transport, purchase or sell without legal certification goods and articles which are restricted by the State from importation or exportation in relatively large quantities or of relatively high value.

Where an act listed above does not yet constitute a crime of smuggling, the provisions concerning punishments under Article 48 shall be applied.

[Article 50] Any individual who carries or sends by post articles for personal use into or out of the territory in a quantity exceeding the reasonable limit and fails to declare them to the Customs shall be made to pay the duties and a fine.

[Article 51] A penalty may be imposed for any of the following acts which violate the regulations on Customs control:

(1) For a means of transport, to enter or level the territory at a place without Customs office;

(2) Failure to inform the Customs of the arrival and the departure time of the means of transport and the place of its intended stay or any change of the place during its stay;

(3) Failure to declare to the Customs accurately the import and export goods and the transit, transshipment and through goods;

(4) Failure to submit to the checking and examination by the Customs of the means of transport, goods and articles in accordance with relevant regulations;

(5) For an inbound or outbound means of transport, to load or unload inbound or outbound goods and articles, or to embark and disembark passengers without Customs approval;

(6) For an inbound or outbound means of transport staying at a place where a Customs office is located, to leave without Customs approval;

(7) For inbound or outbound means of transport intended from one place having a Customs office to another place having a Customs office, to move out of the territory or to a point in the territory where there is no Customs office before completing the clearance formalities and obtaining the Customs approval.

(8) For an inbound and outbound means of transport, to engage concurrently in, or change to, water transport within the territory without Customs approval;

(9) For an inbound or outbound vessel or aircraft which by force majeure stops or lands at a place without a Customs office, or jettisons or discharges the cargo in the territory, to fail to report to the Customs nearby without a valid reason;

(10) To open, pick up, deliver, forward, replace, repack, mortgage or transfer goods that are under Customs control without Customs approval;

(11) To open or damage sales affixed by the Customs;

(12) Violatilaw shall come into force as of August 1, 1988.

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Laws of the People's Republic of China

THE LAW OF THE PEOPLE'S REPUBLIC OF CHINA ON INDUSTRIAL ENTERPRISES OWNED BY THE WHOLE PEOPLE