MEASURES OF CUSTOMS FOR SUPERVISION AND CONTROL OF THE BONDED AREAS

The General Administration of Customs

Decree of the General Administration of Customs of the People’s Republic of China

No.65

Measures of Customs for Supervision and Control of the Bonded Areas adopted by the State Council on June 10, 1997, are hereby promulgated
and shall come into force as of the date of promulgation. The Administration Measures of the Customs of the People’s Republic of
China on Importing and Exporting Goods, Vehicles and Articles Carried by an Individual of Shanghai Waigaoqiao Bonded Area promulgated
by the General Administration of Customs and its relative specific rules formulated according with the Measures, shall be annulled
therefrom.

Director General of the General Administration of Customs, Qian Guanlin

August 1, 1997

Measures of Customs for Supervision and Control of the Bonded Areas

Chapter I General Provisions

Article 1

These Measures are formulated in accordance with the provisions of the Customs Law and other relevant laws with a view to strengthening
and perfecting customs supervision and control of the bonded areas and promoting sound development of the bonded areas.

Article 2

Establishment of the bonded areas within the territory of the People’s Republic of China must be subjected to the approval of the
State Council.

Article 3

The bonded areas are specially designated areas under customs supervision and control. The customs exercise supervision and control
over goods, transportation vehicles and articles carried by individuals entering or leaving the bonded areas pursuant to these Measures.
Isolation facilities meeting the requirements for customs supervision and control should be installed between the bonded areas and
other areas within the territory of the People’s Republic of China(hereinafter referred to as un-bonded areas).

Article 4

Only administrative organs for the bonded areas and enterprises are established in the bonded areas. No persons other than the security
guards shall reside in the bonded areas.

Article 5

Enterprises established in the bonded areas(hereinafter referred to as in-area enterprises) should complete the formalities of registration
at the customs. In-area enterprises should, pursuant to the provisions of the relevant laws and regulations of the State, keep ledgers,
compile statements and tables, do bookkeeping and carry out accounting and settlement on legal and effective vouchers and record
such information as the stocks, transfers, transshipment, sales, processing, utilization and damages and consumption of goods and
articles entering or leaving the bonded areas.

Article 6

The bonded areas practice the customs auditing system. In-area enterprises should hook up with the electronic computer network of
the customs and carry out electronic data exchange.

Article 7

The customs are empowered to conduct inspections and examinations of the goods, articles, transportation vehicles and personnel entering
or leaving the bonded areas as well as related sites in the areas pursuant to the provisions of the Customs Law.

Article 8

Goods and articles the import and export of which are prohibited by the State must not enter or leave the bonded areas.

Chapter II Supervision and Control of Entry and Exit Goods between the Bonded Areas and Beyond-the-boundary Areas

Article 9

The customs exercise simple, convenient and effective supervision and control over entry and exit goods between the bonded areas and
the beyond-the-boundary areas.

Article 10

Consignees, consignors or their agents shall report to the customs for the record on entry and exit goods between the bonded areas
and the beyond-the-boundary areas.

Article 11

No import-export quota and license control shall be exercised other than passive export quota control in respect of entry and exit
goods between the bonded areas and the beyond-the-boundary areas.

Article 12

Import duty and import link taxes of goods entering the bonded areas from places beyond the boundaries, unless otherwise provided
for in laws and regulations, shall be handled in accordance with the following provisions:

(1)

Machinery, equipment and other capital goods needed for in-area construction projects of infrastructure for production shall be exempted
from taxation;

(2)

Production and management equipment and rational quantity of office items for their own use by in-area enterprises as well as their
required parts and components for maintenance, fuels for production, materials and equipment required for the construction of workshops
for production and warehouse facilities shall be exempted from taxation;

(3)

Rational quantity of management equipment and office items as well as the required parts and components for maintenance for their
own use by the administrative organs of the bonded areas shall be exempted from taxation; and

(4)

Raw materials, parts, components and packaging materials required for the processing of export products by in-area enterprises shall
be bonded.

Goods or articles other than those prescribed in subparagraphs(1) to(4) in the preceding paragraph entering the bonded areas shall
be taxed in accordance with law.

Goods for transshipment and goods stored in the bonded areas shall be put under control as bonded goods.

Chapter III Supervision and Control of Entry and Exit Goods between the Bonded Areas and the Un-bonded Areas

Article 13

Formalities for import goods shall be completed for goods from the bonded areas entering un-bonded areas; formalities for export goods
shall be completed for goods from un-bonded areas entering the bonded areas and export tax refund shall be processed in accordance
with the relevant provisions of the State. The customs exercise supervision and control over entry and exit goods between the bonded
areas and the un-bonded areas pursuant to the provisions of the State related to import-export control.

Article 14

For machinery, equipment, capital goods and articles entering the bonded areas from the un-bonded areas for in-area use, user units
should submit lists of the above-mentioned goods or articles which will be cleared upon customs inspection. Goods or articles of
the preceding paragraph, which have already paid import duty and import linked tax, shall not be refunded.

Article 15

For goods of the bonded areas to be imported and exported from the ports of un-bonded areas or goods of one bonded area to be shipped
to another bonded area, written applications should be submitted to customs in advance and these goods will be handled in accordance
with customs transfer shipment and relevant provisions upon the approval of customs.

Chapter IV Supervision and Control over Goods in the Bonded Areas

Article 16

Goods in the bonded areas can be transferred and diverted among in-area enterprises; the interested parties should report to the customs
on matters relating to transfers and diversions for the record.

Article 17

Such simple processing as classification, sorting, painting and pasting of marks and change in packaging forms of transit goods in
the bonded areas can be carried out in in-area warehouses or other in-area sites.

Article 18

When in-area enterprises hold exhibitions and displays of foreign commodities and commodities of the un-bonded areas in the bonded
areas, the displayed commodities should be subjected to customs supervision and control.

Chapter V Control of Goods of Processing Trade in the Bonded Areas

Article 19

In-area processors should complete the formalities at the customs for their required raw materials and components entering or leaving
the bonded areas for the record.

Article 20

Production of export products under passive quota control by in-area processors should be subjected to the approval of the competent
department under the State Council in advance.

Article 21

Formalities should be completed at the customs in accordance with the relevant provisions of the State for the shipment out of the
country of the finished products and the leftover bits and pieces of industrial materials produced in the process of processing by
in-area processors; they shall be exempted from export duty unless otherwise provided for in laws and regulations.

Shipment by in-area processors of in-area processed finished products, substandard products or the leftover bits and pieces of industrial
materials produced in the process of processing to un-bonded areas should go through formalities of import customs declaration at
the customs in accordance with the relevant provisions of the State and pay taxes according to law.

Article 22

For finished products processed entirely with materials and components shipped in from abroad by in-area processors to be sold in
un-bonded areas, the customs shall levy tax as import finished products. For processed finished products containing materials and
components shipped in from abroad to be sold in un-bonded areas, the customs shall levy tax in accordance with their contained shipped-in
materials and components; for untruthful declarations with regard to item names, quantity and value of the shipped-in materials and
components from abroad, the customs shall levy taxes as import finished products.

Article 23

In-area processors entrusting enterprises in un-bonded areas or accepting the entrustment of the enterprises in un-bonded areas for
processing business should gain the approval of the customs in advance and meet the following conditions:

(1)

They have in-area production sites, which have already formally conducted processing business;

(2)

Main working procedure of the processing business entrusted to enterprises in un-bonded areas should be carried out in the bonded
areas;

(3)

The duration of entrusting enterprises in un-bonded areas with processing business shall be six months; when extension becomes necessary
under extraordinary circumstances, application for extension should be submitted to the customs and the duration of extension shall
be six months. Products should be shipped back to the bonded areas upon completion of processing in un-bonded areas; when it becomes
necessary to export the products direct from the un-bonded areas, formalities for verification and deduction should be completed
at the customs; and

(4)

In-area processors taking orders of entrusted processing from enterprises in un-bonded areas should complete the formalities for the
materials and components for entrusted processing at the customs for the record, separate ledgers of the materials, components and
products of entrusted processing and those of the in-area enterprises should be kept and they should be used separately. Products
upon completion of processing should be shipped back to the enterprises in the un-bonded areas, and the in-area processors shall
apply to the customs for writing off the case.

Article 24

The customs do not practice the system of bank guarantee machine account for processing trade for the processing businesses with imported
materials and with customers’ materials conducted by in-area processors.

When the processing business is entrusted to enterprises in un-bonded areas, the enterprises in the un-bonded areas shall go through
the formalities of contract registration for the record and follow the bank guarantee machine account system.

Chapter VI Supervision and Control over Transportation Vehicles and Articles Carried by Individuals Entering and Leaving the Bonded
Areas

Article 25

Transpotation vehicles and personnel entering and leaving the bonded areas should go through the special-purpose passages designated
by the customs and be subjected to customs inspection.

Article 26

The persons-in-charge of the transportation vehicles entering and leaving the bonded areas should complete the formalities for registration
at the customs for the record on the presentation of the certificates of approval by the competent departments of the bonded areas
along with lists of the names, quantity, license plate numbers and drivers’ names.

Article 27

Without the approval of the customs, transportation vehicles and personnel from the bonded areas to the un-bonded areas must not ship
or carry duty-free goods and articles, bonded goods as well as products made with bonded materials and components.

Chapter VII Supplementary Provisions

Article 28

Whoever in violation of the provisions of these Measures shall be dealt with pursuant to the provisions of the Customs Law of the
People’s Republic of China and the Rules for the Implementation of Administrative Penalty of the Customs Law of the People’s Republic
of China; when the offence is of a serious nature, the customs can revoke the qualification of customs registration of the in-area
enterprises.

Article 29

Specific measures relating to putting on record provided for in these Measures shall be worked out by the General Administration of
Customs.

Article 30

These Measures enter into force as of the date of promulgation. The Measures of the Customs of the People’s Republic of China on Administration
of Goods, Transportation Vehicles and Articles Carried by Individuals Entering and Leaving the Shanghai Waigaoqiao Bonded Area is
simultaneously nullified.