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					CHINA INDUSTRIAL DIGEST




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  BONDED AREA INTRODUCTION
  China has various types of bonded areas that offer favourable incentives
  on import business at the state, province, city and district level.

  In the attached article, you will realise the unique functions of different
  kinds of bonded areas.
CHINA INDUSTRIAL DIGEST




    BONDED AREA INTRODUCTION




                          TIANJIN    Tianjin Dongjiang Free Trade Port
                          DALIAN     Dalian Dayaowan Free Trade Port
                          SHANGHAI   Shanghai Yangshan Deep Water Port
                          NINGBO     Ningbo Meishan Free Trade Port
                          XIAMEN     Xiamen Haicang Free Trade Port
                          QINGZHOU   Qingzhou Free Trade Port
                          HAINAN     Hainan Yangpu Free Trade Port
CHINA INDUSTRIAL DIGEST




      INTRODUCTION
                                                           Free Trade Zone (FTZ)
                                                           Free-trade zones (FTZs) are specialized areas
                                                           for international trade, foreign investment,
                                                           bonded warehouses, and export processing.
                                                           They are the new junctures welding China's
                                                           economy with the world's economy.


                                                           Bonded Logistics Park (BLP)
      China has several types of bonded areas which        After the entrance of the logistics market, the
      offer more favourable import conditions at the       advantages in bonded function and import &
      state, provincial, city, and district levels. Both   export business of FTZs are reducing. To
      foreign and Chinese companies may set up in all      enhance and integrate the advantage of FTZ
      types of zones shown as follows:                     functions and port location, the Central
        Free-trade zones (FTZs);                           Government approved a new functional
                                                           area—bonded logistic parks - which suggests
        Export-processing zones (EPZs);                    that the FTZ is turning into the free trade port
        Bonded logistics parks (BLPs);                     area.

        Free trade port areas (FTPAs);                     Free Trade Port Area (FTPA)
                                                           The Free Trade Port Areas (FTPAs), which are
      Export Processing Zone (EPZ)                         subject to Customs regulations, enjoy current
      The establishment of EPZs was one of the major       policy preference for free trade zones, export
      steps taken by China to expand its involvement in    processing zones and bonded logistics parks as
      the international market and further open its        a whole and mainly deal with international
      market to the outside world. It is most helpful in   trade, distribution and purchase, transit trade,
      the promotion of export, improvement in the          and export processing businesses, as well as
      management of processing trade, utilization of       expanded related functions. Currently, there
      foreign capital in a more active, practical, and     are six FTPAs in China. They are Shanghai
      effective way, and development of the local          Yangshan Port, Dalian Dayaowan Port,
      economy. Export-processing zones (EPZs) are          Tianjing Dongjiang Port, Hainan Yangpu Port,
      special enclosed areas supervised by the General     Ningbo Meishan Port and Guangxi Qinzhou
      Administration of Customs.                           Port, among which, only Yangshan FTPA is in
                                                           operation n
CHINA INDUSTRIAL DIGEST




      MAJOR POLICIES
                                                        No Need of Verification of Collection and
                                                        Payment of Foreign Exchange


                                                        Foreign exchange revenue and expenditure
                                                        under the account of inbound and outbound
                                                        trade between the enterprises in the area and
                                                        their counterparts overseas can be delivered via
                                                        banks upon relevant documents without having
                                                        to file with the foreign exchange administration
      Bonded Area                                       for verification of collection and payment of
      Upon entry of imported goods into this area,      foreign exchange; the enterprises outside of the
      they can be classified as bonded goods which      area need to file with the foreign exchange
      can be stored in the area indefinitely.           administration for verification of collection and
                                                        payment of foreign exchange generated by the
      Tariff & VAT Free                                 flow of goods in and out of the area.
      Imports of equipment used in the area are free    Enterprises in the area shall go through the
      of tariffs & VAT                                  procedures of declaration of international
                                                        revenue and expenditure statistics when they
      Tax free transactions by enterprises              engage in any foreign transaction.
      Product transactions between enterprises in
      the area are exempted from value-added tax        Easing Purchase of Foreign Exchange
      and consumption tax                               The enterprises in the area that are registered
                                                        with capital in RMB are allowed to purchase
      Tax Refund                                        foreign exchange equivalent to less than actual
      Flow of domestic goods into the area are          contributed capital in RMB; the goods
      treated equally as exports and may enjoy tax      distribution enterprises in the area are allowed
      rebates as per relevant regulations on export     to purchase foreign exchange equivalent to less
      rebates as well as the construction materials     than the amount of import of goods in the
      tax.                                              current year; the processing enterprises in the
                                                        area are allowed to purchase foreign exchange
      Domestic goods                                    equivalent to less than the amount of approved
      Domestic goods into the area are treated          domestic sale of their products. Enterprises out
      equally as exports and can enjoy tax rebates as   of the area are allowed to purchase foreign
      per relevant regulations on export rebates.       exchange to pay overseas enterprises upon
                                                        related documents in terms of inconsistency
      Tariff and import linkage tax are levied on       between goods flow and cash flow.
      domestically-sold products produced by
      processing enterprises in the area in
      proportion of foreign-produced materials to
      all materials used in a unit product.
CHINA INDUSTRIAL DIGEST




      FUNCTIONS
                                                       Bonded Export Processing
                                                       Purchase of materials both domestically and
                                                       overseas, provision of value-added processing,
                                                       and import or export from the free port.


                                                       Import Distribution Centre
                                                       Packing & repacking of domestically imported
                                                       goods, simple value-added processing, then
                                                       import to domestic.


      Asia Distribution Centre                         International Repairing Centre
      Storage for overseas goods for future            Equipment, both domestic and overseas, will
      distribution to countries outside China.         be repaired in the Free Port, then sent back to
                                                       the original countries.
      International Transit
      Operations include container loading and         Domestic Goods Re-Import
      unloading, piling, international transit, and    Exported goods are re-imported domestically
      deconsolidation and consolidation, import and    with little or no value add.
      export goods transit, and container multimodal
      transportation


      Multi-Countries Purchase Centre
      Storage and management of domestic and
      exported goods for future integration and
      value-adding, before exporting.


      Bonded Area
      Operations such as cargo transit, commodity
      transaction, bonded commodity exhibition and
      corresponding technical services.
  CHINA INDUSTRIAL DIGEST




              COMPARISON

                          Free Trade Zone               Bonded Logistics Park           Export Processing            Free Trade Port Area
                                                                                        Zone
                          • International Trade,        • International                 • Only Export Processing     • All
                          • Bonded Warehouse,             Trans-shipping,
                          • Export Processing by        • International distributing,
Function
                           order                        • International purchasing,
                                                        • International Entrepot
                                                          trade

                          • No Port                     • BLP direct connection         • No Port                    • Within Port
Port Accessibility
                                                          with Port

Bonded Warehouse          • Yes                         • Yes                           • Public warehouse only      • Yes

Workshop                  • Yes                         • No                            • Yes                        • Yes

                          • Imports of equipment        • Not applicable                • Imports of equipment       • Imports of equipment used in
Tariff                     used in the area are free                                     used in the area are free     the area are free of tariff
                           of tariff                                                     of tariff

                          • Through an intermediate     • No                            • No more than 30% of        • No
Sell Products to           vendor with trading rights                                    total finishing products
domestic market                                                                          can be sold to the
                                                                                         domestic market.

                          • Exempted from               • Not allow                     • Exempted from              • Exempted from value-added
Transaction inside area    value-added tax and                                           value-added tax and           tax and consumption tax
                           consumption tax                                               consumption tax

Tax                       • No                          • No                            • No                         • No

VAT Refund                • Refund after export         • Refund upon entering          • Refund regularly           • Refund every 2 weeks

                          • Total enclosure, 8          • Total enclosure, 24           • Total enclosure, 24        • Total enclosure, 24 working
Administrative Issues
                           working hours                  working hours                  working hours                 hours

Custom Inspection         •2                            •2                              •2                           •1

                          • Customs clearance after     • Priority to Customs           • Priority to Customs        • Priority to Customs clearance
Customs clearance
                                                          clearance                      clearance

                          • C/C to Customs              • C/C to Customs                • C/C to Customs             • Free Move after C/C to
Transfer
                                                                                                                       Customs
CHINA INDUSTRIAL DIGEST



     BUSINESS MODEL
     VMI (Vendor Managed Inventory)                         decision on criteria of inventory and strategy for
     The vendor delivers materials to designated location   continuing goods supplemented by negotiated
     for management by a third party logistics company      delivery of payment after the use of the goods.
     (3PL). However, ownership of the materials still
     belongs to the vendor. The manufacturer, together      The core idea is JIT (Just in Time), that is, delivery of
     with the vendor, makes                                 goods upon demand and no inventory without
                                                            demand.




                                                                                    Customs       Other Bonded
                                  Bonded Warehouse                                 Monitoring         Aera
       Overseas
                                                                                    Truckers
        Supplier


                                                                                      Customs
                                                                                                       Other
                                                                                     Monitoring
                                                                                      Truckers     Bonded Aera


                                            Warehouse
         Local
                                                                                  Nomal Truck
        Supplier                                                                                      Nomal
                                                                                                  Industrial PARK


    Import and Distribution Pattern
     Customers purchase goods to be entered into the        First delivery upon guarantee (guarantee funds and
     area in a centred basis, and then distribute them      letter of guarantee) before centralized customs
     when necessary.                                        declaration.




     Local Assembling
                                       Bonded Warehouse                                            Overseas
                                                                              Airfreight           Warehouse
       Manufactory                                                                                  No. 1
           No. 1                                                                                      :::
         :::                                                                                          :::
         :::


                                                                              Shippingg
                                                 Warehouse                                         Overseas
     Local Assembling                                                                              Warehouse
       Manufactory                                                                                  No. 34
          No. 15
CHINA INDUSTRIAL DIGEST




     Global Purchasing Centre
     Enterprises purchase the products from both           The ownership of the products belongs to the
     overseas and local vendors and deliver the products   enterprises that purchased the products when
     to a 3PL’s warehouses in FTPA. The 3PL will deliver   the products are delivered to the 3PL’s
     the products to different overseas or local           warehouses in FTPA. The ownership of the
     manufactories according to the production plan.       products transfers to the manufactory when the
     (Please refer to the picture below for details)       products leave the FTPA.




                                    Bonded Warehouse
        Overseas                                                               Truck
                                                                                          Local Assembling
                                                                                            Manufactory
        Vendors



                                                                             Airfreight


                                               Warehouse                                     Overseas
                                                                                            Assembling
          Local                                                                             Manufactory
        Vendors
                                                                             Shipping
CHINA INDUSTRIAL DIGEST




      APPENDIX
      Regulations affecting development zones and cities



      Provisional Rules on Customs Bonded Port Areas in China
      Promulgated by the General Administration of Customs on September 3rd 2007 and effective from October 3rd
      2007.
      Translation: China Economic News


      CHAPTER I          General Provisions

      Article 1                                                  Article 6
      This set of rules is formulated in accordance with the     Administration departments of bonded port areas shall
      Customs Law of the People’s Republic of China              establish an information-sharing public computer
      (hereinafter referred to as the “Customs Law”) and         information platform, and realize exchange of electronic
      other laws and administration regulations.                 statistics between enterprises and the customs inside
                                                                 the areas through e-customs.
      Article 2
      Bonded port area mentioned in this set of rules refers     Article 7
      to special areas under customs supervision and             Infrastructure facilities, monitoring and supervision
      monitoring with functions such as port, logistics and      facilities and the grounds of a bonded port area shall be
      processing set up in the state open port areas and         built in keeping with the Inspection Standards on
      specific areas linking with the port areas with approval   Infrastructure and Supervision and Monitoring facilities
      from the State Council.                                    in Areas under Special Customs Supervision. After
                                                                 passing the inspection jointly conducted by GAC and
      Article 3                                                  relevant departments of the State Council, the bonded
      The customs conduct supervision over means of              port area is allowed to start business.
      transport, cargo, goods entering and leaving the bonded
      port area, and enterprises and grounds inside the area.    Article 8
                                                                 A bonded port area is allowed to conduct the following
      Article 4
                                                                 business:
      A bonded port area implements closed management.
      Customs pass, fences, video monitoring and control
                                                                 1. Storage of import and export goods, and cargos
      system and other facilities needed by customs shall be
                                                                 which have not gone through customs procedures;
      set up between the bonded port area and other areas
      of the People’s Republic of China (hereinafter referred
                                                                 2. Foreign trade, including entrepot trade;
      as “other areas”) in accordance with the requirements
      of the customs supervision stations.
                                                                 3. International procurement, sales and distribution;
      Article 5
                                                                 4. International transshipment;
      No residence is permitted inside the bonded port area.
      Apart from non-profit-making facilities for guaranteeing
                                                                 5. Inspection, testing, after-sales service, and
      the normal work and life of people in the bonded port
                                                                 maintenance and repair;
      area, the area is not allowed to construct commercial
      facilities for people’s living and consumption nor
                                                                 6. Commodity show;
      conduct commercial retail business.
                                                                 7. Research and development, processing and
      Office places of customs and other administrative
                                                                 manufacturing;
      organs shall be built in designated areas of bonded port
      areas, and comprehensive office areas outside.
                                                                 8. Port operation;

                                                                 9. Others approved by the customs.
CHINA INDUSTRIAL DIGEST




      Article 9                                                   financial management in accordance with the
      Enterprises inside the bonded port area shall have          Accounting Law of China, other laws and administrative
      qualified legal person status with the capability to pay    regulations, open account books and sheets and put on
      taxes to the customs and other legal obligations. Under     record the enterprise financial performance, cargos into
      special circumstances, corporate enterprises outside the    and out of the bonded port area, storage, transfer, shift,
      area can set up branches inside the bonded port area as     sales, processing and use of goods in keeping with the
      approved by the competent customs department of the         customs supervision requirements. The enterprises shall
      bonded port area, and they shall report to the customs      truthfully fill in relevant documents, and account books,
      for putting on record.                                      and make accounts and accounting with legal and
                                                                  effective documents.
      Article 10
      The customs adopt an on-line control system and             Article 12
      customs examination system for enterprises inside the       Operation and other activities of port and shipping
      bonded port area.                                           enterprises inside a bonded port area shall be in
                                                                  keeping with relevant laws, administrative regulations
      Enterprises inside the bonded port area shall use a         and customs supervision regulations.
      computer management system which conforms to the
      customs requirements, and provide terminal equipment
                                                                  Article 13
      and applied computer software access to the customs
                                                                  Cargo and articles banned by the state in import and
      for the convenience of data examination. They shall
                                                                  export shall not enter the bonded port area.
      connect their computer system with that of the
      customs according to the accepted way and statistics
      standards provided by the customs, and ensure               Article 14
      truthfulness and actuality and effectiveness of the data.   Production and operation activities of enterprises inside
                                                                  a bonded port area shall meet the requirements of
      The customs conduct examination over enterprises            industrial development of China, and are not permitted
      inside the bonded port area, and enterprises inside the     to conduct processing trade business of high energy
      area shall standardise their management, abide by laws      consumption and pollution making products and
      and regulations, and be self disciplined.                   resource-based products, and commodities listed in the
                                                                  Catalogue of Commodities Banned for Processing
      Article 11                                                  Trade.
      Enterprises inside a bonded port area shall standardise

      CHAPTER II         Supervision over cargo between bonded port area and other countries

      Article 15                                                  Article 17
      Cargo going between a bonded port area and another          With the exception of those covered by other laws and
      area shall go through the customs procedures of the         administrative regulations, the following goods entering
      bonded port area; and cargo not under the jurisdiction      or leaving the bonded port area from other countries
      of the bonded zone customs for import and export            are exempted of import duties and import linkage tax
      shall conduct the customs procedures at the port            collected by the customs as agent.
      customs with approval of the competent department of
      the bonded port area.                                       1. Machinery and equipment needed by
                                                                  production-type infrastructure facilities construction
      Article 16                                                  projects inside the bonded port area, and capital
      Cargo going between a bonded port area and another          construction materials needed for the construction of
      area shall be put under the management for putting on       workshops and storage facilities;
      record, giving bonded treatment to goods entering the
      bonded port area from outside the country with the          2. Machinery, equipment moulds and parts for
      exception to circumstances mentioned in Article 17, 18      maintenance and repair needed for production of
      and 39.                                                     enterprises inside the bonded port area;

      In accordance with the putting on record system             3. Office articles of a reasonable quantity for self-use of
      management mentioned in the previous articles, cargo        enterprises and administrative organs inside the bonded
      receivers and suppliers or agents shall fill in list        port area.
      documents truthfully on entry and exit goods for
      putting on record in the customs.
CHINA INDUSTRIAL DIGEST




      Article 18                                                   Article 20
      Imported transport tools and daily-use consumer goods        Cargo into and out of a bonded port area to and from
      entering the bonded port area for self use by                other countries are not covered by import and export
      enterprises and administrative organs shall go through       quota and license management, except those covered
      customs procedures as imported goods in accordance           by other laws and administrative regulations.
      with relevant regulations, and the customs levy import
      duties and import linkage tax in accordance with             For cargo under the same quota and license item, the
      relevant regulations.                                        customs shall not require enterprises to present original
                                                                   copies of quota and license documents in cases where
      Article 19                                                   the customs have already examined and verified the
      Products shipped from the bonded port area to other          quota and license when the cargo entered the area.
      countries are exempted of export duties, except those
      covered by other laws and administrative regulations.


      CHAPTER III         Supervision over goods shipping between bonded port areas and outside
      the areas

      Article 21                                                   outside the areas with their written application
      For goods shipping between a bonded port area and            approved by the customs, and the customs shall collect
      outside the area, enterprises inside the bonded port         taxes according to their actual status. Commodities
      area and receivers and suppliers outside the area shall      under import quota and license management do not
      apply for customs procedures to the customs of the           need to get an import quota and license; and
      bonded port area in accordance with relevant                 commodities belonging to waste materials and other
      regulations on the import and export goods. For goods        dangerous wastes listed in the Catalogue of Banned
      required to pay duties, enterprises inside the bonded        Waste Materials for Import need to be disposed of
      port area and receivers and suppliers outside the area       outside the bonded area. Enterprises concerned shall go
      shall pay the tax according to actual status of the goods;   through customs procedures for shipping out of the
      for goods under the quota and license management,            bonded area with approved documents provided by
      enterprises inside the bonded port area and receivers        administrative organ of the bonded port area and the
      and suppliers outside the area shall present quota and       local city-level environmental protection department.
      license documents to the customs. For cargo under the
      same quota and license item, the customs shall not           In cases where defective products and sideline products
      require enterprises to present original copies of quota      which emerged in the process of processing and
      and license documents if the customs have already            production of enterprises inside the bonded port area
      examined and verified the quota and license when the         are to be shipped out of the areas for domestic sales,
      cargo entered the area.                                      the customs shall levy taxes on the products according
                                                                   to their actual status. For products under import quota
      Enterprises inside the bonded port area which conduct        and license management, enterprises shall present
      foreign trade and in cases where the goods are actually      import quota and license documents to the customs.
      not going into or out of the area can go through the
      customs procedures at the place of the goods receiver        Article 24
      and supplier or the actual entry and exit port of the        Goods included in a favourable trade agreement which
      goods.                                                       are to be shipped outside bonded port areas and are in
                                                                   keeping with the administration regulations on place of
      Article 22                                                   origin can apply for enjoying conventional tax rate or
      For cargo under supervision of the customs being             preferential tax rate.
      shipped into and out the bonded port area, the
      competent customs of the bonded port area shall              Article 25
      require them to provide relevant guarantee.                  Approved by the customs, enterprises inside the
                                                                   bonded port area can conduct concentrated application
                                                                   procedures. Enterprises inside the area conducting
      Article 23                                                   concentrated application shall make an aggregate total
      For leftover bits and pieces, waste materials made in the    of applied materials and figures in one natural month, fill
      process of processing and production of enterprises          in customs declaration forms on import and export
      inside the bonded port area, and packaging materials         goods, and then conduct the concentrated application
      made in the process of processing, production, storage       to the customs by the end of the next month.
      and transport, enterprises inside the area can ship them
CHINA INDUSTRIAL DIGEST




      The concentrated application is applicable to the tax         port areas, enterprises in the areas may organise
      rate and exchange rate on the date of conducting the          commodity display activities at special exhibition places
      concentrated application. Concentrated application is         of the comprehensive office areas in the bonded port
      not allowed to be carried over to the next year.              areas. The exhibits shall be put on record with the
                                                                    Customs in charge, and be under the supervision of the
      Article 26                                                    Customs.
      For shipment of goods into bonded port areas from
      outside and the procedures for paying taxes shall be          When enterprises in the bonded port areas organise
      conducted according to relevant regulations on                commodity show activities in places other than in the
      exportation of goods, and the certification page of the       bonded port areas, they should go through related
      declaration form of exported goods used for export tax        procedures in light of the administrative provisions of
      refund shall be issued according to the following             the Customs on temporary import of goods.
      regulations:
                                                                    Article 28
      1. For domestically manufactured goods and packaging          The machines, equipment, moulds and office supplies
      materials thereof transported into the bonded port            that are under the supervision of the Customs and are
      areas from outside for enterprises in the areas to carry      used in bonded port areas can, in accordance with
      out business, the Customs shall handle it according to        relevant regulations on fixing goods within the territory
      the relevant provisions on exported goods, and issue          of China, be transported out of the areas for testing and
      the certification page of the declaration form of             maintenance. When enterprises in the areas transport
      exported goods. If the goods are exported in transit,         their moulds outside the areas for testing and
      the Customs in the place of consignment shall issue the       maintenance, they should keep the samples or pictures
      certification page of the declaration form of exported        of the products.
      goods after receiving the electronic return receipt of the
      Customs in charge in the bonded port areas so as to           Machines, equipment, moulds and office supplies that
      confirm that the goods in transit have been transported       are transported out of the areas for testing and
      into the areas;                                               maintenance may not be kept in the outside areas for
                                                                    processing, production and use, and shall be
      2. For the domestically manufactured materials for            transported back to the bonded port areas within 60
      capital construction, machines, loading and unloading         days from the day when they are transported out. If
      equipment, management facilities, and office articles, etc.   they cannot be transported back as required due to
      that are transported into the bonded port areas from          special circumstances, enterprises concerned or the
      outside for use by the administrative organs and              administrative organs of the bonded port areas should
      enterprises in the areas, the Customs shall handle them       apply in written form for extension of the time limit
      according to the relevant provisions on exported goods,       with Customs in charge within 7 days before the term
      and issue the certification page of the declaration form      expires, and the term extended may not exceed 30
      for export goods;                                             days.

      3. For the living consumption goods, office supplies, and     Machines, equipment, moulds and office supplies that
      means of transport that are transported into the              are transported back to the bonded port areas after
      bonded port areas from outside for use by                     completion of testing and maintenance should be the
      administrative organs and enterprises in the areas, the       originals. If any parts and components or accessories are
      Customs shall not issue the certification page of the         replaced, the original parts and components or
      declaration form for exported goods;                          accessories should be transported back to the bonded
                                                                    port areas along with them. For domestically
      4. For the originally imported goods, packaging materials,    manufactured parts and components or accessories
      equipment, and capital construction materials that are        replaced outside the areas, if it is necessary to refund
      transported into the bonded port areas from outside,          tax, enterprises in or outside the areas may file an
      enterprises outside the areas are required to present         application in this regard, and the Customs in charge will
      the lists of the foresaid goods or articles to the Customs,   handle it according to relevant provisions on exported
      and go through declaration formalities according to           goods, and issue the certification page of the declaration
      relevant provisions on exported goods, and the                form for exported goods.
      Customs shall not issue the certification page of the
      declaration form for exported goods, and the tariff           Article 29
      duties, and tax on imported goods collected by                Enterprise in the bonded port areas that need to
      Customs in the link of import cannot be refunded.             transport their moulds, raw materials and semi-finished
                                                                    products out for processing should, before starting the
      Article 27                                                    outward processing, go through outward processing
      Upon approval of the Customs in charge in the bonded          procedures at Customs in charge with the processing
CHINA INDUSTRIAL DIGEST




      contracts/agreements, the copies of the business license    The leftover materials, wastrels, defective products and
      of the undertaking enterprise, and materials concerning     byproducts generated in the processing carried out
      the production capacity situation of the undertaking        outside the areas do not need to be transported back
      enterprises confirmed by the seal of the enterprise in      to the bonded port areas, and the Customs shall levy
      the bonded port areas.                                      taxes according to the actual conditions. Enterprises in
                                                                  the bonded port areas are required to go through the
      The term for entrusted processing cannot exceed 6           procedures of clearance and cancellation after
      months, and the processed goods should be                   verification with Customs with their processing
      transported back to the bonded port areas on schedule.      applications and related documents.

      Chapter IV       Supervision over Goods within the Bonded Port Areas

      Article 30                                                  Article 34
      Goods in the bonded port areas may be circulated            For goods enterprises inside the bonded port areas
      freely. When enterprises transfer the goods or they are     have applied to be discarded, after being examined and
      conveyed within the areas, the two parties concerned        approved by the Customs and competent department,
      should, without delay submit e-data on the name of the      will be sold off by the Customs in charge according to
      goods, quantity, and volume to the Customs.                 law, and the income from the sale will be disposed of by
                                                                  the Customs in light of the related provisions.
      Article 31                                                  Exception is given to goods whose discard is forbidden
      Enterprises in the bonded port areas do not practice a      by laws, administrative rules and Customs General
      bank deposit account and contract cancellation system       Administration.
      for processing trade, and the Customs do not exert unit
      energy consumption standard management over goods           Article 35
      for processing trade in the bonded port areas. From the     In cases where the goods in the bonded port areas are
      day of starting business, enterprises in the bonded port    damaged, destroyed or lost due to force majeure,
      areas should regularly report the situation of the goods    related enterprises in the bonded port areas should
      into and out of the areas and in storage to Customs in      immediately report in written form to the Customs in
      charge.                                                     charge in the bonded port areas, to explain the reasons
                                                                  for it and provide relevant proof provided by the
      Article 32                                                  disaster appraisal departments. After the said proof is
      Enterprise that apply to engage in maintenance business     verified and confirmed by the Customs in charge, the
      in the bonded port areas should have the qualification      goods will be handled according to the following
      of a legal entity, and should be registered for file with   applicable stipulations:
      Customs in charge in the bonded port areas. The
      products under the maintenance of enterprises in the        1. If the goods are destroyed or lost or are not lost or
      park are strictly restricted to be only those seeking       destroyed but have completely lost their usage value ,
      after-sales services and maintenance after being            the Customs will go through verification and
      exported by China; the replaced components and parts,       cancellation and tax exemption procedures for them.
      as well as the materials produced during the process of
      maintenance should be shipped out of China.                 2. If the entry goods are destroyed and have partly lost
                                                                  their usage value, enterprises concerned in the bonded
      Article 33                                                  port areas may go through procedures with the
      When enterprises in the bonded port areas need to           Customs in charge for direct return shipment. If the
      produce, operate and transport dangerous chemicals          goods are not to be returned out of China and are
      and flammables and explosives, they should obtain           required to be transported out of the bonded port
      administrative permits from related departments of          areas, enterprises concerned may file an application, and
      safety supervision, and communication, and report to        after being confirmed by the Customs in charge, taxes
      the Customs in charge in the bonded port area for the       will be collected according to the prices verified by the
      record.                                                     Customs.

      Facilities such as storage tanks, devices, and equipment    3. If the goods that are transported into the bonded
      must meet the supervision requirements of Customs.          port areas from outside are destroyed and have partly
      Goods that are transported into and out of the bonded       lost their value of use, and there is the necessity to
      port areas through pipelines shall be equipped with         replace them or return them to the export enterprises,
      measuring and testing devices, and other facilities and     they may be replaced by identical or similar goods, and
      equipment for the convenience of Customs supervision.       enterprises concerned are required to go through
                                                                  return shipment procedures with Customs in charge.
CHINA INDUSTRIAL DIGEST




      If the goods need to be returned to the outside, and        Article 37
      the export tax refund procedures are not yet gone           No storage term will be imposed on goods stored in
      through, enterprises concerned may go through return        the bonded port areas. When the term exceeds two
      shipment procedures with Customs in charge; if the          years, however, the enterprises concerned are required
      export tax refund procedures have been completed,           to report to the Customs for the record every year.
      stipulations of Item Two of Clause One of this article      When sustained storage will influence the public
      apply.                                                      security, environmental hygiene or human health in the
                                                                  bonded port areas due to the goods’ nature and actual
      Article 36                                                  condition factors, the Customs should order enterprises
      In cases where goods are damaged, destroyed, or lost        concerned to go through related Customs procedures
      due to inappropriate storage and factors other than         and ship the goods out of the bonded port areas.
      force majeure, enterprises concerned in the bonded
      port areas should, without delay, report in written form    Article 38
      to the Customs, and explain the situation. After being      The Customs exerts bonded supervision over goods
      verified and confirmed by the Customs in charge, the        that are shipped between the bonded port area and
      goods will be handled according to the following            other special Customs supervision and the bonded
      applicable provisions:                                      supervision areas, and will not issue them the
                                                                  certification page of the declaration form for export
      1. For goods that are transported into the bonded port      goods for the use of export tax refund. When goods
      areas from foreign countries, the enterprises in the        are shipped from the Customs supervision and the
      areas should, according to the provisions on goods          bonded supervision areas where the export tax refund
      imported under general trade and the duty-paid value        system does not work to the bonded port areas, it will
      assessed by the Customs before the goods are                be regarded as export of goods in reality, and the
      destroyed or lost, pay tariffs and the taxes collected by   Customs in the place of consignment will issue the
      Customs in the link of import at the tariff rate and        certification page of the declaration form for export
      exchange rate applicable on the day when the goods          goods for the use of export tax refund.
      are damaged or lost;                                        Goods flowing between the bonded port areas and the
                                                                  Customs supervision and the bonded supervision areas
      2. For goods that are transported into the bonded port      will be exempted from the taxes in the link of import
      areas from outside, the enterprises in the areas should     and export.
      again pay taxes in the domestic link that have been
      refunded due to export, and the Customs will based on       Means of transportation that are used to transport
      the tax payment certificates handle the verification and    goods between bonded port areas and Customs
      cancellation procedures. Export tax that has already        supervision and the bonded supervision areas should
      been paid cannot be refunded.                               meet the supervision requirement of the Customs.


      CHAPTER V           Supervision over Goods that are Imported and Exported directly and over
      the Means of Transportation and the Goods and Articles Carried by Individuals Entering
      and Exiting the Bonded Port Areas

      Article 39                                                  Article 40
      For the goods that are directly imported and exported       Means of transportation and individuals that enter or
      through bonded port areas, the Customs will conduct         leave the bonded port areas should accept the
      supervision according to relevant regulations on import     supervision and examination of the Customs.
      and export; the consigner or its agent may declare to
      the Customs before the arrival of the goods at the          Article 41
      bonded port areas; after the arrival of the export goods,   For inbound and outbound means of transportation
      the Customs will receive the declaration and give           service personnel and individuals that carry personal use
      customs clearance, and issue the certification page of      articles into and out of the bonded port areas, the
      the declaration form for exported goods according to        Customs will exert supervision according to related
      related regulations.                                        regulations on inbound and outbound luggage and
                                                                  articles carried by passengers.
CHINA INDUSTRIAL DIGEST




      Article 42
      When the following goods are transported into and out                  3. Goods with import tax paid;
      of the bonded port areas, enterprises concerned may
      appoint special persons to carry them or transport                     4. Goods for which enterprises do not require export
      them on their own upon approval of the Customs:                        tax refund; and

      1. Small amount of goods valued below US$10,000;                       5. Other goods as approved by the Customs.

      2. Goods transported back to suppliers out of the
      bonded port areas due to inconformity of the quality;


      CHAPTER VI             Supplementary Provisions

      Article 43                                                             regulations and have constituted smuggling, and other
      Goods that are shipped into the bonded port areas                      activities that violate the Customs Law, in accordance
      from foreign countries and goods that are shipped to                   with provisions of the Customs Law and the
      foreign countries from the bonded port areas will be                   Regulations of the People’s Republic of China on the
      listed on the Customs import and export statistics,                    Implementation of Customs Administrative Punishment;
      except those on which there are other stipulations as                  if a crime is committed, criminal liabilities will be
      prescribed by laws, administrative regulations and                     pursued according to law.
      Customs rules. Goods that are transported into the
      bonded port areas from the outside and goods that are                  Article 45
      transported outside from the bonded port areas will be                 This set of measures applies to the management of
      listed on Customs single-item statistics.                              comprehensive bonded areas that have the functions of
                                                                             bonded port area established in the inland area in China
      Goods that are transferred and conveyed among the                      with the approval of the State Council.
      enterprises in the bonded port areas and the goods that
      are shipped between the bonded port areas and other                    Article 46
      Customs special supervision or bonded supervision                      The interpretation right of this set of measures is with
      areas will not be put on the Customs statistics.                       the General Administration of Customs.

      Article 44                                                             Article 47
      The Customs will handle the activities that run against                The Measures will go into effect as of October 3rd
      this set of measures and Customs supervision                           2007.




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