Administration of Foreign-invested International Freight Forwarding Agencies Measures

(Promulgated by the Ministry of Foreign Trade and Economic Cooperation on December 11 2002 and effective 30 days from the date of promulgation.)

Article 1: These Measures are formulated in accordance with the State laws and regulations concerning foreign-invested enterprises and the PRC Administration of the International Freight Forwarding Agency Business Provisions in order to promote the healthy development of the international freight forwarding agency business in China, and to regulate the establishment and operational conduct of foreign-invested international freight forwarding agencies.

Article 2: "Foreign-invested international freight forwarding agencies" mentioned in these Measures refers to foreign-invested enterprises established by foreign investors in the form of Sino-foreign equity joint ventures, Sino-foreign cooperative joint ventures, as well as wholly foreign-owned enterprises that are able to accept commissions from consignees and consignors for imported and exported goods, to handle for the entrusting party any international freight forwarding and related business in the name of the entrusting party or itself and to charge service fees (hereafter, Foreign-invested International Forwarding Agencies).

Article 3: The Ministry of Foreign Trade and Economic Cooperation of the People's Republic of China (hereafter, MOFTEC) and its authorized authorities are responsible for the examination, approval and administration of Foreign-invested International Forwarding Agencies.

Article 4: Foreign investors may establish Foreign-invested International Forwarding Agencies in the form of equity joint ventures, cooperative joint ventures or wholly foreign-owned enterprises.

Where a foreign investor establishes a Sino-foreign equity or cooperative international forwarding joint venture enterprise, the Chinese party's capital contribution must not be less than 25%; applications for wholly foreign-owned international forwarding agencies will be accepted at a time made public by MOFTEC.

Foreign investors may take over already established international forwarding agencies by means of acquisition of equity interests, however the shareholder ratio and investor qualifications shall be in accordance with the requirements hereof. Where State-owned assets are involved, they must be dealt with in accordance with relevant laws and regulations.

Article 5: Both the Chinese and foreign parties applying for the establishment of a Foreign-invested International Forwarding Agency shall meet the following conditions:

1. At least one of the Chinese parties must be an international forwarding agency that has engaged in international forwarding agency business, or an enterprise that has engaged in export and import operation, or an enterprise that has engaged in related transport or storage business. The Chinese party meeting the above-mentioned condition shall be the largest shareholder among the Chinese parties.

2. At least one of the foreign parties must have engaged in international forwarding agency business for at least three years. The foreign party meeting the above-mentioned condition shall be the largest shareholder among the foreign parties.

3. None of the Chinese and foreign parties has violated any provisions of the trade in the three years preceding the date of application.

Article 6: Where a foreign party has been operating for less than two years since the establishment of its international forwarding agency inside China, that same foreign party must not invest in the establishment of a second international forwarding agency.

Article 7: The establishment of a Foreign-invested International Forwarding Agency shall meet the following requirements:

1. a minimum registered capital of US$1 million;

2. at least five personnel who have been engaged in international forwarding agency business for at least three years or with appropriate qualification certificates;

3. permanent business premises; and

4. necessary business facilities such as communication, transportation, loading and unloading, and packing, etc.

Article 8: With approval, a Foreign-invested International Forwarding Agency may engage in part or all of the following businesses:

1. booking (leasing of ships, and chartering of airplanes and shipping space), consignment, warehouse storage and packing;

2. supervising loading and unloading, container grouping and unpacking, allocating goods, providing transit as well as related short-distance transport services;

3. arranging customs declarations, customs examination and inspection, and insurance;

4. filling out of relevant documents, payment of transportation fees, settlement of accounts and miscellaneous freight charges;

5. agency business of international exhibits, personal items and transportation of transit cargoes;

6. arranging international multimodal transportation, container transport (including the packing of containers);

7. international express delivery (excluding personal mail and postal services for official documents of provincial or higher branches of the party, government or military); and

8. consultancy and other international forwarding agency business.

International express delivery enterprises that engage in the transport of mail and postal articles (excluding personal mail and postal services for official documents of provincial or higher branches of the party, government or military) shall obtain a postal entrustment certificate from the post department after the foreign-invested enterprise has received approval from MOFTEC.

Article 9: For the establishment of a Foreign-invested International Forwarding Agency the Measures provided by the current State laws and regulations concerning foreign-invested enterprises shall be observed. The application shall be submitted to MOFTEC that, together with its authorized departments must examine and approve the establishment of the enterprise and issue a Foreign-invested Enterprise Approval Certificate and an International Forwarding Agency Approval Certificate. To establish a Foreign-invested International Forwarding Agency, an applicant shall submit the following documents:

1. application form;

2. feasibility study report;

3. contract and articles of association;

4. lists and resumes of board members and other chief management personnel;

5. advance examination and approval notice of the name of the proposed enterprise issued by the administration for industry and commerce;

6. certificates of registration and creditworthiness issued by the country or region that the investor belongs to;

7. qualification certificates of the chief investor;

8. proof of possession of business premises of the enterprise; and

9. other documents required by the examination and approval authorities.

Article 10: The term of operation of a Foreign-invested International Forwarding Agency shall not exceed 20 years.

Article 11: After a Foreign-invested International Forwarding Agency has been operating for one year and the capital from all parties has been fully paid up, the agency may apply to establish subsidiaries in other locations inside China. The business scope of a subsidiary is confined to the business scope of its head office. The head office shall assume civil liability of its subsidiaries. For each subsidiary engaging in international freight forwarding agency business that a Foreign-invested International Forwarding Agency establishes, the agency shall increase its registered capital by US$120,000. Where an enterprise gains approval from the examination and approval authorities to establish a subsidiary by means of providing false investment, withdrawing and evading capital or other conduct violating regulations, in addition to imposing penalties in accordance with relevant laws and regulations, the examination and approval authorities shall also revoke the International Forwarding Agency Approval Certificate issued to the subsidiary.

Where an agency applies for the establishment of a subsidiary, it shall submit the application to MOFTEC or its authorized department, which may grant approval upon obtaining consent from the foreign trade and economic cooperation department at the place where the subsidiary is proposed to be established. A Foreign-invested International Forwarding Agency shall provide the following documents with the application for the establishment of a subsidiary:

1. a letter of consent issued by the foreign trade and economic cooperation department at the place where the subsidiary is proposed to be established;

2. a resolution by the board of directors regarding the establishment of a subsidiary, the increase of capital and the amendment of the articles of association;

3. an agreement of alteration to the joint venture contracts and the articles of association regarding capital increase;

4. an agency operation report and the reasons for the establishment of the subsidiary as well as a feasibility study;

5. a capital verification report of the agency;

6. proof of the provision of personnel and of business premises of the subsidiary; and

7. other documents required by the examination and approval authorities.

Article 12: Foreign-invested International Forwarding Agencies shall strictly observe State laws and regulations concerning foreign investment, and the PRC Administration of the International Freight Forwarding Agency Business Provisions and its implementing rules. Penalties shall be imposed for any conduct in violation of laws and regulations by relevant departments in accordance with corresponding laws and regulations.

Article 13: Foreign-invested International Forwarding Agencies are encouraged to join the Chinese Association of International Forwarding Agencies, the Chinese Association of Foreign-invested Enterprises, and other social organizations and trade associations and to voluntarily accept the supervision and guidance of the industry.

Article 14: The establishment of international forwarding agencies in the mainland by companies, enterprises, other economic organizations and individuals from Hong Kong, Macao or Taiwan shall be handled with reference to these Measures.

Article 15: These Measures shall be implemented 30 days from the date of promulgation and the original Examination and Approval of Foreign-invested International Forwarding Agencies Provisions shall be simultaneously repealed.

1. Translation provided by Ince & Co. All rights reservd.