MEASURES OF THE GENERAL ADMINISTRATION OF CUSTOMS FOR NETWORKED SUPERVISION AND ADMINISTRATION OF PROCESSING TRADE ENTERPRISES

No. 105

The Measures of the General Administration of Customs for Cyber-Supervision and Administration of Processing Trade Enterprises, which
were discussed and adopted at the executive meeting of the General Administration of Customs on May 30, 2006, are hereby promulgated,
and shall come into force on August 1, 2006. “Measures of the Customs of the People’s Republic of China on Applying Computer Networked
Surveillance to Processing Trade Enterprises” promulgated by the General Administration of Customs in its No. 100 Decree on March
19, 2003 shall be abolished simultaneously.

Mu Xinsheng, Director General

June 14, 2006

Measures of the General Administration of Customs for Networked Supervision and Administration of Processing Trade Enterprises

Article 1

For the purpose of regulating the customs’ administration of processing trade enterprises, these measures are formulated in accordance
with the provisions of the Customs Law of the People’s Republic of China and other relative laws, administrative laws and regulations.

Article 2

The customs’ networked Supervision and administration of processing trade enterprises refers to a mode of the customs’ supervision
and administration of processing trade by which the processing trade enterprises report to the customs the data of logistics, production,
operation, etc. meeting with the customs’ requirements via data exchange network or other computer network, and by which the customs
checks, calculates and verifies the data according to real objects.

Article 3

A processing trade enterprise conducting networked Supervision and administration (hereinafter referred to as networked-enterprise)
shall satisfy the following requirements:

1.

To have qualifications for processing trade business;

2.

To be registered with the customs;

3.

To be a production enterprise.

These measures do not apply to the processing trade enterprises within the areas under the customs’ special supervision and administration
and bonded supervision and administration places.

Article 4

Any processing trade enterprise that needs networked Supervision and administration may submit an application to the authorized customs.
After examination and verification, the customs shall carry out networked Supervision and administration to the enterprise if it
meets the requirements as stipulated in Article 3 of these measures.

Article 5

A networked-enterprise shall conduct its identity attestation for networked Supervision and administration of processing trade before
reporting the data to the customs via the data exchange network or other computer networks.

Article 6

A networked-enterprise shall report to the authorized customs the inventory list of materials to be imported, finished products to
be exported and the corresponding number of the commodities needed for processing trade business. If necessary, corresponding materials
shall also be provided for confirming the number of the commodities according to the customs’ requirements.

The authorized customs shall, in light of the needs of supervision and administration and according to the requirements of the name
and code of the commodities, and calculation unit, merge the commodities subject to grade of material number with the commodities
subject to grade of item number or divide them, establishing a corresponding relationship of one-to-many or many-to-one.

Article 7

A networked-enterprise shall, before the import of the materials and the export of the finished products, go through separately record
and change formalities in the customs for the materials to be imported and the finished products to be exported.

A networked-enterprise shall go through record and change formalities for per- unit-cost according to relative rules of the General
Administration of the Customs.

Article 8

The customs shall, according to the materials for record submitted by the networked-enterprise, establish an electronic account and
carry out administration of the electronic account to the networked-enterprises. The electronic account includes electronic account
book and electronic handbook.

The electronic account book is an electronic account, regarding an enterprise as a unit, established by the customs for a networked-enterprise.
The networked-enterprise conducting the administration of electronic account book shall establish only one such account book. The
customs shall, according to the production status of the enterprise and the needs of the customs’ verification and administration,
set the period for the cancellation after verification, and carry out the administration of cancellation after verification to the
networked-enterprise conducting administration of electronic account book.

The electronic handbook is an electronic account, regarding the processing trade contract as a unit, established by the customs for
a networked-enterprise. The networked-enterprise conducting the administration of electronic handbook shall establish an electronic
handbook for each processing trade contract. The customs shall, according to the period of validity of the processing trade contract,
set the date for the cancellation after verification, and carry out the administration of periodic cancellation after verification
to the networked-enterprise conducting electronic handbook administration.

Article 9

A networked-enterprise shall report the data of the logistics, stock and production control of processing trade commodities and other
dynamic data meeting the needs of the customs supervision and administration.

Article 10

An authorized customs record system is carried out for outward-processing of a networked-enterprise. A processing trade enterprise
shall, before outward processing, register for a record in the authorized customs the name of the enterprise undertaking the outward-processing,
name of the commodities and turnover quantity.

Article 11

The customs may check the networked-enterprise by data verification and spot check in the factory. The check in the factory includes
special check and stock-taking check.

Article 12

A networked-enterprise may, upon approval by the authorized customs, handle duty repayment for domestic sales monthly. A networked-enterprise
shall handle duty repayment for domestic sales in the same month after selling processing trade commodities in domestic market.

Article 13

A networked-enterprise shall pay the interests of delayed payment of duties to the customs in accordance with rules after selling
the processing trade commodities in domestic market.

The starting date to pay the interests of delayed payment of duties shall be set according to the following measures:

1.

For the enterprise conducting electronic handbook administration, the starting date shall be the date of the import of the first lot
of materials under the processing trade contract to which the materials or finished products for domestic sales are corresponding;

2.

For the enterprise conducting electronic account book administration, the starting date shall be the latest date for cancellation
after verification of the electronic account book to which the materials or finished products for domestic sales are corresponding.
If the date for cancellation after verification is not available, the starting date shall be that of the import of the first lot
of materials in the electronic account book to which the materials or finished products for domestic sales are corresponding.

The expiry date to pay the interests of delayed payment of duties shall be the date that the customs issues the duty payment book.

Article 14

A networked-enterprise shall apply for verification within 30 days from the ending date set by the customs for cancellation after
verification. If the application for verification fails to be submitted with proper reasons within the time limit, the period may
be prolonged with the approval of the authorized customs, but the extension may not exceed 60 days.

Article 15

A networked-enterprise shall inform the customs before stock-taking. The customs may, integrating with the enterprise’s stock-taking,
carry out verification and cancellation.

The customs shall, while integrating the stock-taking to carry out the verification and cancellation, compare the calculation of the
electronic account with the real stock of the networked-enterprise and handle them separately as follows:

1.

If the real stock is more than the calculation of the electronic account, the customs shall adjust current balance of the electronic
account according to real stock;

2.

If the real stock is less than the calculation of the electronic account and the networked-enterprise may give proper reasons, the
customs shall order the networked-enterprise to apply for domestic dales to the shortage;

3.

If the real stock is less than the calculation of the electronic account and the networked-enterprise fails to give proper reasons,
the customs may order the networked-enterprise to apply for domestic sales to the shortage, and may also punish it according to the
Implementation Regulations of the General Administration of Customs of the People’s Republic of China for Administrative Punishment.

Article 16

The customs may ask the networked-enterprise to provide margin or bank’s Letter of Guarantee as form of guarantee if the networked-enterprise
is in one of following circumstances:

1.

The enterprise’s administrative classification is adjusted to a lower grade;

2.

The data to the customs according to the facts has not been submitted;

3.

Refuse to provide corresponding account book, bills and certificates and data while the customs is carrying out the verification and
cancellation;

4.

Do not apply for the verification to the customs within the time limit;

5.

Do not establish an account book according to the customs’ request, account management is in chaos or accounts are not in order.

Article 17

Whoever violates these measures and commits a crime of smuggling or violates the customs’ rules on supervision and administration
shall be handled by the customs according to relative provisions of the Customs Law of the People’s Republic of China and the Implementation
Regulations of the General Administration of Customs of the People’s Republic of China for Administrative Punishment. Whoever commits
a crime shall be ascertained criminal liabilities.

Article 18

For the purpose of these measures:

“Electronic account” refers to the electronic data base established by the customs for a networked-enterprise according to its application
for noting down the information of processing trade record, import and export, verification and cancellation and etc.

“Special check” refers to the verification carried out by the customs to a networked-enterprise on one or more contents in light of
the needs of verification and administration.

“Stock-taking check” refers to a mode of verification and administration that the customs carries out material objects verification
and data check to part of bonded commodities within a certain period while a networked-enterprise is conducting stock-taking.

Article 19

The interpretation of the said measures shall be vested in the General Administration of Customs.

Article 20

These measures shall be implemented on August 1, 2006. The Measures of the General Administration of Customs for Networked Supervision
and Administration of Processing Trade Enterprises promulgated by the General Administration of Customs in its No. 100 Decree on
March 19, 2003 shall be abolished simultaneously.