General Administration of Customs

Order of the General Administration of Customs

No.148

The Measures of the Customs of the People’s Republic of China for the Assessment and Determination of Duty-paid Value of Import and
Export Goods deliberated and adopted at the executive meeting of the General Administration of Customs on March 8, 2006, are hereby
promulgated and shall come into force as of May 1, 2006. The Measures of the Customs of the People’s Republic of China for the Assessment
and Determination of Duty-paid Value of Import and Export Goods as promulgated by Order No. 95 of the General Administration of Customs
on December 31, 2001 and the Measures of the Customs of the People’s Republic of China for the Evaluation of Royalties of Imported
Goods as promulgated by Order No. 102 of the General Administration of Customs on May 30, 2003 shall be repealed simultaneously.

General Director of General Administration of Customs, Mou Xinsheng

March 28, 2006

Measures of the Customs of the People’s Republic of China for the Assessment and Determination of Duty-paid Value of Import and Export
Goods

Chapter I General Provisions

Article 1

For the purpose of correctly measuring and determining the duty-paid value of import and export goods, these Measures are formulated
in pursuant to the Customs Law of the People’s Republic of China and the Regulation of the People’s Republic of China on the Import
and Export Duties.

Article 2

The customs shall observe the principles of objectiveness, fairness and unification when checking and determining the duty-paid value
of import and export goods.

Article 3

These Measures shall apply when the customs checks and determines the duty-paid value of import and export goods.

These Measures shall not be applicable to the checking and determination of the duty-paid value of such articles for personal use
that are permitted to be imported as the luggage of passengers entering China, personal postal items and etc., or the assessable
value of the import and export goods and articles that are suspected of being involved in smuggle.

Article 4

The customs shall properly keep the materials involving business secrets provided by taxpayers, and shall not provide them to any
other people or entity unless it is otherwise prescribed by the laws or administrative regulations according to the relevant provisions
of the State.

A taxpayer may request the customs to keep business secrets in the form of written application and specifically mention the contents
that need to be kept confidential, but shall not refuse to provide relevant materials for the customs on the pretext of business
secrets.

Chapter II Duty-paid Value of Imported Goods

Section 1 Method for Determining the Duty-paid Value of Imported Goods

Article 5

The duty-paid value of imported goods shall be checked and determined by the customs on the basis of the transaction value of those
goods, which shall include the freight and relevant expenses and the insurance premiums of the goods before they are transported
to and unloaded at the entry spot within the territory of the People’s Republic of China.

Article 6

Where the transaction value of imported goods does not comply with the provisions in Section 2 of this Chapter or cannot be determined,
the transaction value of those goods shall be determined in sequence by the following methods after the customs gains knowledge of
the relevant situations and carries out consultation on pricing with the taxpayer:

(1)

The appraisal method for the transaction value of identical goods;

(2)

The appraisal method for the transaction value of similar goods;

(3)

The subtractive method;

(4)

The computing method; and

(5)

Other reasonable methods.

The taxpayer may file an application for reversing the applying order for Item (3) and Item (4) of the preceding Paragraph after providing
relevant materials.

Section 2 Appraisal Method for the Transaction Value

Article 7

The transaction value of imported goods shall refer to the total amount of the paid-in or payable value that the buyer shall pay to
the seller for the imported goods when the goods are sold within the territory of the People’s Republic of China after adjustment
according to the provisions in Section 3 of this Chapter, which shall include the price that is directly and indirectly paid.

Article 8

The transaction value of imported goods shall comply with the following conditions:

(1)

The buyer shall not be restricted with regard to the disposal or use of imported goods, except for the restrictions prescribed and
implemented by laws or administrative regulations, the restrictions on areas where the goods are to be sold, and the restrictions
that have no substantial impact on the value of the goods;

(2)

The value of imported goods shall not be affected by the conditions or factors that may make the determination of the transaction
value of those goods impossible;

(3)

The seller shall not directly or indirectly acquire any proceeds from the buyer’s selling, disposal or use of imported goods, unless
the adjustment can be made according to Item (4) of Paragraph 1 of Article 11 of these Measures; and

(4)

There shall be no special relation between the buyer and the seller, unless the special relation will not affect the transaction value
according to Article 17 of these Measures.

Article 9

It shall be regarded that the buyer is restricted with regard to the disposal or use of imported goods under any of the following
circumstances:

(1)

The imported goods can be used solely for exhibitions or as free gifts;

(2)

The imported goods can be sold solely to the designated third party;

(3)

The imported goods can be sold solely to the seller or the designated third party after they are processed into finished products;
or

(4)

Any other circumstance under which the buyer is regarded as being restricted with regard to the disposal or use of imported goods
upon examination of the customs.

Article 10

It shall be regarded that the value of imported goods has been affected by the conditions or factors that make the determination of
the transaction value of those goods impossible under any of the following circumstances:

(1)

The value of imported goods is determined on condition that the buyer purchases a certain amount of other goods from the seller;

(2)

The value of imported goods is determined on condition that the buyer sells other goods to the seller; or

(3)

Any other circumstance under which the value of imported goods is affected by the conditions or factors that makes the determination
of the transaction value of those goods impossible upon examination of the customs.

Section 3 Adjustment Items for the Transaction Value

Article 11

When the duty-paid value of imported goods is checked and determined on the basis of transaction price, the following expenses or
values that are excluded from the paid-in or payable value of those goods shall be taken into account of the duty-paid value:

(1)

The following expenses as borne by the buyer:

a.

Commissions and brokerages other than the commission for buying goods;

b.

Expenses for the containers which are regarded as integral parts of those goods; and

c.

Expenses for the package materials and packing services.

(2)

The value of the following goods or services that are relevant to the production of imported goods and the selling thereof within
the territory of the People’s Republic of China and are provided for free or sold at a price lower than the cost price by the buyer,
which may be apportioned in appropriate proportion:

a.

Materials, parts, accessories and similar goods contained in imported goods;

b.

Tools, molds and similar goods used in the production of imported goods;

c.

Materials consumed in the production of imported goods;

d.

Relevant services occurring out of China such as engineering design, technological research and development, techniques and drawings,
etc. that are needed for the production of imported goods.

(3)

The royalties that the buyer needs to pay to the seller or the relevant party directly or indirectly, unless it is under either of
the following circumstances:

a.

The royalties are irrelevant to those goods; or

b.

The payment of royalties does not constitute the conditions for those goods to be sold within the territory of the People’s Republic
of China.

(4)

The proceeds directly or indirectly acquired by the seller from the buyer’s selling, disposal or use of those goods after the import
thereof.

The taxpayer shall provide objective and quantitative data and materials about the aforesaid expenses or values to the customs. Where
the taxpayer fails to provide the aforesaid data and materials, the customs shall check and determine the duty-paid value upon consultation
on pricing with the taxpayer according to the methods as mentioned in Article 6 of these Measures.

Article 12

When determining the value of goods that shall be taken into account of the duty-paid value of imported goods according to Item (2)
of Paragraph 1 of Article 11 of these Measures, the relevant expenses shall be calculated according to the following methods:

(1)

The purchasing price shall be taken into account of the value in case that the buyer purchases goods from the third party that has
no special relation therewith;

(2)

The cost of manufacture shall be taken into account of the value in case that the buyer manufactures goods by it or purchases goods
from the third party that has any special relation therewith;

(3)

The cost of lease borne by the buyer shall be taken into account of the value in case that the buyer acquires the goods by leasing;
and

(4)

The value of tools, molds and similar goods used in the production of imported goods shall include the expenses for engineering design,
technological research and development, techniques and drawings, etc.

Where the goods have been used by the buyer before they are provided to the seller, the value to be taken into account shall be the
value upon depreciation according to the domestically recognized accounting principles.

Article 13

The royalties that comply with any of the following conditions shall be regarded as relevant to the imported goods:

(1)

The royalties are paid for the patent or the right to use know-how, and the imported goods are under any of the following circumstances:

a.

The imported goods contain patent or know-how;

b.

The imported goods are produced by using any patented method or know-how; or

c.

The imported goods are specially designed or manufactured for implementing the patent or know-how.

(2)

The royalties are paid for trademark right, and the imported goods are under any of the following circumstances:

a.

The imported goods are attached with the trademark;

b.

The imported goods are attached with the trademark after importing and may be directly sold; or

c.

The imported goods contain the trademark right when imported and may be sold with the trademark attached after minor processing.

(3)

The royalties are paid for copyright, and the imported goods are under either of the following circumstances:

a.

The imported goods contain software, words, music, graphics, images, or other similar contents, including the form of tape, disk,
compact disk, or other similar media; or

b.

The imported goods contain other contents with copyright.

(4)

The royalties are paid for the right to distribute, or sell or other similar rights, and the imported goods are under either of the
following circumstances:

a.

The imported goods may be directly sold after importing; or

b.

The imported goods may be sold after minor processing.

Article 14

Where the buyer cannot purchase the imported goods or the deal cannot be made under the conditions stipulated in the contract because
the buyer fails to pay the royalties, it shall be regarded that the payment of royalties constitutes the conditions for the imported
goods to sell within the territory of the People’s Republic of China.

Article 15

The following taxes and expenses separately listed in the value of imported goods shall not be taken into account of the duty-paid
value of those goods:

(1)

The expenses for the construction, installation, assembly, maintenance or technical aid that occur after the import of workshops,
machines, equipments or other goods, except for the warranty costs;

(2)

The freight and relevant expenses and the insurance premiums of the imported goods that occur after the goods are transported to and
unloaded at the entry spot within the territory of the People’s Republic of China;

(3)

The import duties, the import linkage taxes levied by the customs on behalf of other authorities and other internal taxes;

(4)

The expenses paid for the reproduction of imported goods within China; and

(5)

The expenses for domestic and overseas technical trainings and overseas inspection.

The expenses for interests that comply with the following conditions simultaneously shall not be taken into account of the duty-paid
value:

(1)

The expenses for interests are incurred from the financing for the buyer to purchase imported goods;

(2)

There is a written financing agreement;

(3)

The expenses for interests are separately listed; and

(4)

The taxpayer can prove that the relevant interest rate is not higher than that for local similar transactions at the time and the
value of identical or similar imported goods for which there is no financing arrangement is very close to the paid-in or payable
value of imported goods.

Section 4 Special Relations

Article 16

It shall be regarded that there is a special relation between the buyer and the seller in case of any of the following circumstances:

(1)

Both the seller and the buyer are the members of a same family;

(2)

One of the seller and the buyer is a business senior employee or board director of the other;

(3)

One of the seller and the buyer is directly or indirectly controlled by the other;

(4)

Both the seller and the buyer are directly or indirectly controlled by a third party;

(5)

The seller and the buyer directly or indirectly control a third party together;

(6)

One of the seller and the buyer directly or indirectly possesses, controls or holds 5% or more of the voting stocks or shares publicly
issued by the other;

(7)

One of the seller and the buyer is the employee, senior employee or board director of the other; or

(8)

Both the buyer and the seller are members of a partnership.

Where the buyer and the seller have mutual relations in business, and one party is the exclusive agent, distributor or assignee of
the other, it shall be deemed that there is a special relation between them providing that the provisions of the preceding Paragraph
are met.

Article 17

Where the taxpayer can prove that the transaction value is close to any of the following values occurring at or about the same time
even though there is a special relation between the buyer and the seller, it shall be regarded that such special relation has no
impact on the transaction value of imported goods:

(1)

The transaction value of identical or similar goods sold to a buyer with no special relation within China;

(2)

The duty-paid value of identical or similar goods determined according to Article 22 of these Measures; or

(3)

The duty-paid value of identical or similar goods determined according to Article 24 of these Measures.

When comparing the aforesaid values, the customs shall consider the differences in business level and import quantity, and the expense
differences resulted from the special relation between the buyer and the seller.

Section 5 Checking Methods Other Than the Checking Method for the Transaction Value

Article 18

The checking method for the transaction value of identical goods refers to such an checking method with which the customs checks and
determines the duty-paid value of imported goods on the basis of the transaction value of identical goods sold within the territory
of the People’s Republic of China at or about the same time as the imported goods were imported.

Article 19

The checking method for the transaction value of similar goods refers to such an checking method with which the customs checks and
determines the duty-paid value of imported goods on the basis of the transaction value of similar goods sold within the territory
of the People’s Republic of China at or about the same time as the imported goods are imported.

Article 20

When checking and determining the duty-paid value of imported goods according to the checking method for the transaction value of
identical or similar goods, the customs shall use the transaction value of the identical or similar goods of the same business level
and in basically the same quantity as the imported goods. However, the differences between the imported goods and the identical or
similar goods in costs and other expenses resulted from the differences of transportation distance and modes shall be adjusted in
light of the objective and quantitative data when the aforesaid value is used.

Where there is no transaction value of identical or similar goods mentioned in the preceding Paragraph, the transaction value of identical
or similar goods of different business level or in different import quantity may be adopted, however, the differences between the
imported goods and the identical or similar goods in value, costs and other expenses resulted from the differences in business level,
import quantity, transportation distance and modes shall be adjusted in light of the objective and quantitative data and materials
when the aforesaid value is used.

Article 21

When checking and determining the duty-paid value of imported goods according to the checking method for the transaction value of
identical or similar goods, the customs shall first use the transaction value of the identical or similar goods manufactured by the
same manufacturer.

Where there is no transaction value of the identical or similar goods manufactured by the same manufacturer, the customs may use the
transaction value of the identical or similar goods manufactured by other manufacturers in the same manufacturing country or region.

Where there are several transaction values of the identical or similar goods, the duty-paid value shall be checked and determined
in light of the lowest transaction value.

Article 22

The subtractive method refers to such an checking method with which the customs checks and determines the duty-paid value of imported
goods in light of the sales price of the imported goods, the identical or similar goods that are sold within China by deducting the
relevant expenses incurred within China. And the sales price shall meet the following conditions at the same time:

(1)

It is the price for selling the imported goods, the identical or similar goods at or about the same time of the import of those goods;

(2)

It ii the price for selling the goods in the status as they are imported;

(3)

It is the price for selling the goods at the first link within China;

(4)

It is the price for selling the goods to the parties without special relations within China; and

(5)

The accumulated sales quantity of the goods is the largest when the goods are sold at the aforesaid price.

Article 23

When the duty-paid value of imported goods is checked and determined according to the subtractive method, all the following items
shall be subtracted:

(1)

Usual profits and general expenses (including direct and indirect expenses) as well as the generally paid commission of the goods
of the same grade or same kind as those goods when they are sold at the first sales link within China;

(2)

Freight and relevant expenses and insurance premiums incurring after the goods are transported to and unloaded at the entry spot within
China; and

(3)

Import duties, import linkage taxes levied by the customs on behalf of other authorities and other internal taxes.

Where the imported goods, the identical or similar imported goods are not sold within China in the state as they are imported, the
sales price of the further processed goods may be used to check and determine the duty-paid value at the request of the taxpayer
providing that other conditions prescribed in Article 22 are met, but the added value from processing shall be deducted at the same
time.

The “added value from processing” mentioned in the preceding Paragraph shall be calculated in light of the objective and quantitative
data and materials relevant to the costs of processing and according to the standards, calculation methods and other industrial practices
generally recognized by the industry.

When determining the items of subtraction according to this Article, the customs shall use the principles and methods in accordance
with the accounting principles generally acknowledged within China.

Article 24

The computing method refers to such an checking method with which the customs check and determine the duty-paid value of imported
goods in light of the sum of all the following items:

(1)

The costs of materials and parts used for the manufacture of those goods and the expenses of processing;

(2)

The usual profits and general expenses (including direct and indirect expenses) for the sales of the goods of the same grade or same
kind within China; and

(3)

The freight and relevant expenses and the insurance premiums incurring before the goods are transported to and unloaded at the entry
spot within China.

When checking and determining the duty-paid value of imported goods according to the preceding Paragraph, the customs may verify the
relevant materials provided by that enterprise out of China after obtaining the consent of the overseas manufacturer and notifying
the government of the relevant country or region in advance.

When determining the relevant value or expenses according to Paragraph 1 of this Article, the customs shall use the principles and
methods in accordance with the accounting principles generally acknowledged in the manufacturing country or region.

Article 25

The method of rational checking refers to such an checking method with which the customs check and determine the duty-paid value of
imported goods according to the principles prescribed in Article 2 of these Measures and in light of the objective and quantitative
data and materials when the checking method for the transaction value, the checking method for the transaction value of identical
or similar goods, the subtractive method and the computed method cannot be used to determine the duty-paid value.

Article 26

When using the method of rational checking to determine the duty-paid value of imported goods, the customs shall not use the following
prices:

(1)

The domestic sales price of the goods manufactured within China;

(2)

The higher prices among the available prices;

(3)

The sales price of the goods on the market of the export place;

(4)

The price of identical or similar goods calculated in light of the values or expenses other than those specified in Article 24 of
these Measures;

(5)

The sales price of the goods exported to a third country or region; and

(6)

The lowest fixed price, or other arbitrary or fictive prices.

Chapter III Duty-paid Value of Special Imported goods

Article 27

Where the duties shall be levied on the imported materials and parts for processing trade or the finished products thereof, the customs
shall check and determine the duty-paid value according to the following provisions:

(1)

With regard to the imported materials and parts for the processing with the imported materials for which the duties shall be collected
at importation, the transaction value declared for the import of those materials and parts shall be taken as the basis for the checking
and determination of duty-paid value;

(2)

With regard to the imported materials and parts for the processing with imported materials or the finished products thereof (including
inferior products) that are sold in the domestic market, the customs shall check and determine the duty-paid value in light of the
original import transaction value of those materials and parts. If the original import transaction value of those materials and parts
cannot be determined, the customs shall check and determine the duty-paid value in light of the import transaction price of the identical
or similar goods imported at or about the same time when accepting the declaration for domestic sales;

(3)

With regard to the imported materials and parts for the processing with customers’ materials or the finished products thereof (including
inferior products) that are sold in the domestic market, the customs shall check and determine the duty-paid value in light of the
import transaction price of the identical or similar goods imported at or about the same time when accepting the declaration for
domestic sales; and

(4)

With regard to the leftover materials produced in the processing of the processing enterprises to be sold in the domestic market,
the domestic sales price as checked and determined by the customs shall be taken as the duty-paid value.

Where the duty-paid value of the goods of processing trade that will be sold in the domestic market still cannot be determined after
referring to the preceding Paragraph, the customs shall check and determine the duty-paid value in light of the method of rational
checking.

Article 28

With regard to the finished products (including inferior products) sold in the domestic market by the processing enterprises within
export processing zones, the customs shall check and determine the duty-paid value in light of the import transaction value of the
identical or similar goods imported at or about the same time when accepting the declaration for domestic sales.

With regard to the leftover materials or by-products produced in the processing of the processing enterprises within export processing
zones, the domestic sales price as checked and determined by the customs shall be taken as the duty-paid value.

If the duty-paid value of the finished products (including inferior products), leftover materials or by-products of the processing
enterprises within export processing zones that will be sold in the domestic market still cannot be determined according to the preceding
two paragraphs, the customs shall check and determine the duty-paid value in light of the method of rational checking.

Article 29

With regard to the import materials and parts or the finished products thereof (including inferior products) of the processing enterprises
within export processing zones that will be sold in the domestic market, the customs shall check and determine the duty-paid value
in light of the import transaction value of the identical or similar goods imported at or about the same time when accepting the
declaration for domestic sales.

Where there are materials and parts purchased within China in the finished products from the imported materials of the processing
enterprises within export processing zones that will be sold in the domestic market, the customs shall check and determine the duty-paid
value in light of the original import transaction value of the materials and parts purchased from abroad and contained in the finished
products. Where the original import transaction value of the materials and parts cannot be determined, the customs shall check and
determine the duty-paid value in light of the import transaction value of the identical or similar goods imported at or about the
same time when accepting the declaration for domestic sales.

Where there are materials and parts purchased within China in the finished products from the customers’ materials of the processing
enterprises within export processing zones that will be sold in the domestic market, the customs shall r the duty-paid value in light
of the import transaction value of the identical or similar goods, as the materials and parts purchased abroad and contained in the
finished products, imported at or about the same time when accepting the declaration for domestic sales.

With regard to the leftover materials or by-products of the processing enterprises within export processing zones that are produced
during the course of the processing for domestic sales, the domestic sales price as checked and determined by the customs shall be
taken as the duty-paid value.

Where the duty-paid value of the finished products (including inferior products), leftover materials or by-products of the processing
enterprises within export processing zones that will be sold in the domestic market still cannot be determined after referring to
the preceding 4 Paragraphs of this Article, the customs shall check and determine the duty-paid value in light of the method of rational
checking.

Article 30

With regard to the goods (excluding the imported materials for processing trade and the finished products thereof) that are imported
from such areas or places as bonded zones, export processing zones, bonded logistics parks, or bonded logistics centers into China
and that should be taxed, the customs shall, by referring to the relevant provisions in Chapter II of these Measures, check and determine
the duty-paid value in light of the sales price of the goods that are imported from the aforesaid areas or places.

Wher