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Regulations on Shanghai Waigaoqiao Free Trade Zone
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| (Adopted by the 32th Session of the Standing Committee of the 10th Shanghai Municipal People's Congress on December 19,1996) Chapter I General Provisions Article 1 With a view to further opening up to the outside world, developing international trade and promoting economic prosperity, the present Regulations are hereby formulated in accordance with the relevant State laws and regulations, in the light of international practices with regard to free trade zones and with due consideration given to the actual circumstances in Shanghai. Article 2 Established with the approval of the State council, Shanghai Waigaoqiao Free Trade Zone (hereinafter referred to as the Free Trade Zone) is situated in Waigaoqiao district of Pudong New Area of Shanghai. It is a zone for economic and trade activities with enclosure facilities where special administration is exercised. Goods may be freely carried in or out between the Free Trade Zone and outside Chinese mainland territory, exempt from customs duties and importª²related taxes and free from inspection of licenses and routine supervision procedures of the Customs, except for imports and supervision procedures of the Customs, except for imports and exports prohibited and goods specially designated by the State. Article 3 The Free Trade Zone mainly develops businesses such as import and export trade, entrepot trade, processing trade, storage and transport of goods, exhibition and transaction of commodities, financial services, etc.. Article 4 The Shanghai Municipal People's Government (hereinafter referred to as the Municipal People's Government) has authority over the Free Trade Zone and the Customs exercises supervision and control over customs proceedings. Article 5 Enterprises, institutions, individuals and their respective economic activities in the Free Trade Zone must abide by the present Regulations. Article 6 The legitimate rights and interests of investors in the Free Trade Zone shall be protected by law. Chapter II Administration and Service Agencies Article 7 Shanghai Waigaoqiao Free Trade Zone Administrative Committee (hereinafter referred to as the Administrative Committee) is the agency of the Municipal People's Government that shall keep unified control over administrative affairs of the Free Trade Zone and manage financial revenues and expenditures as an independent accounting unit. The Municipal People's Government shall appoint the director of the Administrative Committee. Article 8 The functions of the Administrative Committee are as follows: 1. To take charge of the implementation of the laws, regulations and the present Regulations in the Free Trade Zone, to formulate and promulgate specific rules for administering the Free Trade Zone; 2. To draw up plans of development planning and industrial policies of the Free Trade Zone and see to the implementation thereof upon approval of the Municipal people's Government; 3. To take charge of administrative work in such aspects as planning, Stateª²owned assets, investment, foreign economic trade, public finance, local taxation, statistics, industrial and commercial administration, public security, labour and personnel, foreign affairs, transportation, infrastructure, land and real estate, environmental conservation and sanitation, and public utilities, etc.; 4. To coordinate the work of such departments as the Customs, State taxation, finance, commodities inspection, etc. in the Free Trade Zone; 5. To perform other functions and powers authorized by the Municipal People's Government. Where the administrative work listed in Paragraph 3 above involves the examination and issuance of certificates and licenses, the relevant municipal regulatory departments shall entrust corresponding administrative departments of the Administrative Committee to handle such work. Article 9 The Customs in the Free Trade Zone shall exercise special supervision and control over the Free Trade Zone: putting on file and checking goods and articles moving between the Free Trade Zone and places outside Chinese mainland territory and goods circulating within the Free Trade Zone; routine supervision and control over goods, means of transportation and articles moving between the Free Trade Zone and non free trade areas inside Chinese mainland territory (hereinafter referred to as non free trade areas) . Article 10 The Waigaoqiao Port Area and the Free Trade Zone shall be under uniform administration and the port authorities shall take charge of the port administration. Article 11 The Free Trade Zone Development Corporation shall, as authorized by the Administrative Committee, undertake the construction and management of public works in the Free Trade Zone and provide services for the enterprises and institutions in the Free Trade Zone. Article 12 Agencies for customs declaration, inspection, labour, notarization and lawyer service may be set up according to law by the Free Trade Zone to provide services for the enterprises and institutions in the Free Trade Zone. Chapter III Establishment of Enterprises Article 13 Investors may, according to the laws, regulations and the present Regulations, apply for establishment of enterprises in the Free Trade Zone. Any projects that may cause environmental pollution, endanger national security or damage social public interests shall be prohibited in the Free Trade Zone. Article 14 Investors who intend to establish foreign invested enterprises in the Free Trade Zone shall apply to the Administrative Committee. The Administrative Committee shall, jointly with the relevant departments, decide on whether or not to approve within 20 days upon the receiving date of the complete and legally permissible application documents (hereinafter referred to as the application documents) and the industrial and commercial administration of the Administrative Committee shall issue the business licence within 3 days upon the approval date. Investors who intend to establish other enterprises in the Free Trade Zone shall apply to the industrial and commercial administration of the Administrative Committee, which shall, jointly with the relevant departments, decide on whether or not to approve the registration within 15 days upon the receiving date of the application documents and issue business licences to those approved for registration. The industrial and commercial administration of the Administrative Committee shall report the applications beyond its authority of examination and approval to the Administrative Committee for examination and approval. The Administrative Committee shall refer the applications beyond its authority of examination and approval to the relevant municipal department for examination and approval within 10 days upon the receiving date of the application documents. Enterprises shall go through registration procedures for customs, taxation, foreign exchange control and commodity inspection,etc. within 30 days upon the obtaining date of business licences. Investors shall make contributions as scheduled and undergo verification of investment. Article 15 Enterprises in the Free Trade Zone shall operate according to law within their authorized business scopes. Enterprises shall establish sound statistical, financial and accounting systems, set up special account books for goods and regularly submit relevant reports and statements according to law to the Administrative Committee, the Customs and the relevant departments. Enterprises shall meet the requirements of environmental conservation in the process of construction, production and operation, and go through required procedures with the Administrative Committee according to law. Chapter IV Rules on Business Operation Article 16 Enterprises in the Free Trade Zone may freely carry on trade between the Free Trade Zone and outside Chinese mainland territory, being free from quotas and licences unless otherwise stipulated by the State. Enterprises in the Free Trade Zone may freely carry on trade within the Free Trade Zone. Enterprises in the Free Trade Zone may, according to the relevant State regulations, carry on trade with non free trade areas and with other domestic free trade zones or bonded areas. Enterprises in the Free Trade Zone may, subject to the approval of the department in charge of foreign economic cooperation and trade of the State, act as import and export trade agents for enterprises in non free trade areas. Article 17 Enterprises inside and outside China (including enterprises in the Free Trade Zone) may hold international commodities exhibitions in the Free Trade Zone. Enterprises in the Free Trade Zone may set up commodities trade markets, freely take part in import and export commodities exhibitions, engage in commodities exhibitions and wholesale businesses in the Free Trade Zone, and may take part in import and export commodities exhibitions and fairs in non free trade areas. Subject to approval, enterprises in the Free Trade Zone may engage in bonded commodities exhibition activities in non free trade areas. Article 18 Enterprises inside and outside Chinese mainland territory are encouraged to store goods in the Free Trade Zone. The storage period shall have no limit. Enterprises may do processing business of a commercial nature such as grading, packing, sorting, subpackaging, labeling and marking of goods in the Free Trade Zone. Article 19 Products manufactured by enterprises in the Free Trade Zone shall be mainly sold to places outside Chinese mainland territory. Processing projects with raw materials imported from abroad and with products exported overseas are subjected to restrictions in the Free Trade Zone unless prohibited by the State industrial policies. Subject to approval, enterprises in the Free Trade Zone may commission enterprises in non free trade areas to process materials and parts brought in from abroad and also may be commissioned by enterprises in non free trade areas to do processing business. Article 20 Enterprises in the Free Trade Zone are encouraged to undertake international transshipment and delivery of goods. Subject to approval, enterprises in the Free Trade Zone may engage in container transport, forwarding agency, shipping agency and bonded transport entering and/or departing via the Free Trade Zone. Article 21 Other international service trades may be carried on in the Free Trade Zone. Chapter V Administration Over Exit and Entry Article 22 Goods and articles transported directly into the Free Trade Zone from outside Chinese mainland territory or from the Free Trade Zone to places outside Chinese mainland territory shall be filed with the Customs in the Free Trade Zone for record. Goods that may adversely affect security, public sanitation and environmental conservation shall be subjected to legal tests and inspections. Goods and articles transported from the Free Trade Zone to non free trade areas shall be regarded as imports and those transported into the Free Trade Zone from non free trade areas shall be regarded as exports. Such goods and articles shall go through import and export procedures. Machinery, equipment, components, spare parts, raw materials, means of transportation's, building materials and office appliances that are brought into and used in the Free Trade Zone from non free trade areas shall be passed after registration of the Customs in the Free Trade Zone. Article 23 Motor driven vehicles entering or leaving the Free Trade Zone shall go through designated gates at checkpoints after presenting the pass issued by the public security department of the Administrative Committee and be subjected to inspection by the spot inspection authorities. Trucks carrying bonded goods shall meet the requirements for supervision stipulated by the Customs. Article 24 International ships calling at or leaving the wharves of the Waigaoqiao Port Area shall apply to the port authorities in advance and be subjected to the port inspection. Article 25 Persons entering and leaving the Free Trade Zone shall pass through designated checkpoints by presenting valid certificates permitted for use by the public security department of the Administrative Committee. Article 26 No person may reside in the Free Trade Zone without permission of the Administrative Committee. Chapter VI Financial Management Article 27 Subject to approval by the department in charge of State financial affairs, the use of the designated foreign currencies may be allowed in the Free Trade Zone. Article 28 Enterprises in the Free Trade Zone may open spot exchange accounts in foreign exchange according to provisions. Goods brought into or taken out of the Free Trade Zone in a trade item shall be valuated and settled in foreign currency; fees of administrative agencies in the Free Trade Zone shall be settled in Renminbi; other fees may be settled either in foreign currency or in Renminbi. Article 29 Enterprises in non free trade areas shall undertake verification and canceling procedures in collecting export proceeds and import payments for goods moving between the Free Trade Zone and non free trade areas. Enterprises in the Free Trade Zone need not undertake foreign exchange verification and canceling procedures for goods moving between the Free Trade Zone and outside Chinese mainland territory but shall make statistical reports of international balance of payment. Article 30 Subject to approval by the department in charge of State financial affairs or its authorized agency, domestic or overseas financial institutions may establish branch operation offices in the Free Trade Zone to conduct relevant financial transactions. Article 31 Subject to approval by the department in charge of State financial affairs or its authorized agency, foreign wholly owned banks in the Free Trade Zone may engage in Renminbi transactions, Chinese and foreign financial institutions in the Free Trade Zone may engage in offª²shore finance, overseas financing, foreign guaranteeing and other specially permitted businesses. Chapter VII Construction and Real Estate Management Article 32 Enterprises and institutions in the Free Trade Zone that need to use land shall sign land use transfer contracts with the Free Trade Zone Development Corporation and go through land use procedures with the Administrative Committee. Article 33 Enterprises and institutions in the Free Trade Zone that need to build construction projects shall apply to the administrative department for planning of the Administrative Committee for the construction project planning permits according to laws and regulations. The administrative department for planning of the Administrative Committee shall decide on whether or not to approve within 25 days upon the receiving date of the application documents. When approval is granted after examination, project planning permits shall be issued. The administration of construction projects in the Free Trade Zone shall be carried out according to the relevant laws and regulations. Article 34 Enterprises and institutions in the Free Trade Zone shall, according to law, apply to the real estate administrative department of the Administrative Committee for registration within 30 days after the construction project is completed and passed final acceptance. The real estate administrative department of the Administrative Committee shall issue the real estate title deed within 10 days upon the receiving date of the application documents. Article 35 Enterprises and institutions in the Free Trade Zone may transfer, lease or mortgage the real estate that is legally obtained but shall register with the real estate administrative department of the Administrative Committee and pay taxes according to law. Article 36 Within 30 days after the building in the Free Trade Zone is made available to users, the owner of the building shall set up a property management organization to undertake property management according to law after reporting to and gaining approval from the real estate administrative department of the Administrative Committee or shall entrust a property management company with the necessary qualifications to manage the property. Chapter VIII Tax Provisions Article 37 The following goods and articles brought into the Free Trade Zone from outside Chinese mainland territory shall be exempted from customs duties and import related taxes unless otherwise stipulated by the State: 1. Imported goods; 2. Transit goods; 3. Goods stored in the Free Trade Zone; 4.Raw materials, components, spare parts and packing materials needed for production by enterprises in the Free Trade Zone; 5. Machinery, equipment and capital construction materials needed for construction projects in the Free Trade Zone; 6. Machinery, equipment and reasonable quantities of office appliances, fuel and spare parts for maintenance and repair to be used by enterprises and institutions themselves in the Free Trade Zone. Article 38 Goods transported to places outside Chinese mainland territory from the Free Trade Zone shall be exempted from customs duties unless otherwise stipulated by the State. Goods exported via the Free Trade Zone shall have tax refunded according to the State regulations on export tax refunds. Article 39 When goods are transported to non tree trade areas from the Free Trade Zone, customs duties and import related taxes shall be levied thereon according to the State regulations governing goods importation unless otherwise stipulated by the State. Article 40 Products manufactured by enterprises in the Free Trade Zone to be sold in the Zone or to be transported to places outside Chinese mainland territory shall be exempted from productionª²related taxes. Production related taxes of products shall be levied on products to be sold in nonª²free trade areas and customs duties and import related taxes shall be levied in proportion to the amount of imported materials and parts used in the said products. Article 41 The enterprise income tax on manufacturing enterprises in the Free Trade Zone shall be levied at the rate of 15 per cent. An enterprise with a period of operation of over 10 years shall be exempted from enterprise income tax starting from the first profit making year for 2 consecutive years and shall then be allowed a 50 per cent reduction in enterprise income tax during the third to the fifth years. Article 42 The enterprise income tax on enterprises of a non manufacturing nature such as trading and storage businesses in the Free Trade Zone shall be levied at the rate of 15 per cent. Any enterprise with a period of operation of over 10 years shall be exempted from enterprise income tax for 1 year starting from the first profit making year and shall then be allowed a 50 per cent reduction in enterprise income tax during the second to the third years. Article 43 Apart from the provisions in Article 37 to Article 42, the tax regulations of the State and Shanghai Municipality for Pudong New Area shall be applicable to other business operations. Chapter IX Labour Management Article 44 Enterprises in the Free Trade Zone may determine, at their own discretion, their organizational pattern and personnel establishment as required by production and operation. They may decide the qualifications, wages standards and distribution forms of their employees according to law. Enterprises shall practise the labour contract system. Article 45 Enterprises in the Free Trade Zone shall do a good job in labour safety and hygiene according to the relevant regulations of the State and Shanghai Municipality. Enterprises shall provide social insurance for and protect the legitimate rights and interests of their staff and workers. Chapter X Legal Liability Article 46 Should any enterprise, institution or individual in the Free Trade Zone violate the provisions of the present Regulations, it is subject to administrative punishment. The administrative department concerned of the Administrative Committee or the Customs shall give punishment according to law in accordance with its respective functions. Article 47 Should any staff member of the Administrative Committee or other agencies commit negligence of duties, abuse of power or malpractice for selfish ends, he/she shall be given administrative discipline by his/her work unit or the higher level organization. Those found guilty of a crime shall be prosecuted according to law for the criminal liability. Article 48 If the party concerned finds unacceptable any specific administrative action of the relevant administrative department of the Administrative Committee or of the Customs, it may apply for administrative reconsideration or may file an administrative suit according to the provisions in the Regulations on Administrative Reconsideration or the Administrative Procedure Law of the People's Republic of China. Chapter XI Supplementary Provisions Article 49 The establishment of enterprises in the Free Trade Zone by investors from Hong Kong, Macao and Taiwan and Chinese citizens residing abroad and, economic trade activities between the Free Trade Zone and Hong Kong, Macao and Taiwan shall be handled by reference to the present Regulations. Article 50 The Municipal People's Government is responsible for the interpretation of the present Regulations in its implementation. Article 51 The present Regulations shall become effective on January 1, 1997. |
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