PRC Sino-foreign Cooperation in Running Schools Regulations

(Promulgated by the State Council on March 1 2003 and effective as of September 1 2003.)

PART ONE: GENERAL PROVISIONS

Article 1: These Regulations are formulated in accordance with the PRC Education Law, PRC Vocational Education Law and PRC Promotion of Non-government-run Education Law in order to standardize Sino-foreign cooperation in running schools, to strengthen educational exchanges and cooperation with abroad, and to promote the development of education.

Article 2: These Regulations shall apply to institutes of education run jointly within China by foreign educational institutions and Chinese educational institutions (hereafter, Chinese and foreign joint operators of schools) that mainly enrol Chinese citizens (the jointly run institutes being hereafter referred to as Sino-foreign jointly run schools).

Article 3: Sino-foreign jointly run schools shall be institutes for the public good and shall be part of the Chinese educational system. Sino-foreign jointly run schools shall be open to a broad sector of society, be run in a standardized manner, be administered in accordance with the law, and shall promote development.

The State shall encourage Sino-foreign jointly run schools that import high quality educational resources from foreign countries. The State shall encourage Sino-foreign jointly run schools within the higher education and vocational education sectors, and institutes of higher education run jointly by Chinese institutes of higher education and famous foreign institutes of higher education.

Article 4: The lawful rights and interests of Chinese and foreign joint operators of schools and of Sino-foreign jointly run schools shall be protected by Chinese law.

Sino-foreign jointly run schools shall in accordance with the law enjoy preferential policies as stipulated by the State and shall in accordance with the law develop education and teaching activities themselves.

Article 5: Sino-foreign jointly run schools must abide by Chinese law, implement China's policy on education and be in accord with Chinese public morals. They shall not harm China's national sovereignty, national security or the interests of society.

Sino-foreign jointly run schools shall be in accord with China's requirements on developing education, shall ensure the quality of their education and teaching, and shall endeavour to train all types of talented personnel for the establishment of Chinese socialism.

Article 6: Chinese and foreign joint operators of schools may jointly run all levels and types of educational institution. However they shall not carry out compulsory education nor run schools providing special types of education such as military, religious and political education.

Article 7: Foreign religious organizations, institutions, schools and religious teachers shall not jointly run schools within China.

Sino-foreign jointly run schools shall not engage in religious education or launch religious activities.

Article 8: The State Council education administrative departments shall be responsible for the overall planning, coordination and oversight of Sino-foreign jointly run schools. The State Council education and labour administrative departments, and other relevant administrative departments, shall be responsible within the scope of their functions as stipulated by the State Council for the relevant Sino-foreign jointly run schools.

The education administrative departments of the people's governments of provinces, autonomous regions and municipalities directly under the central government shall be responsible for the overall planning, coordination and oversight of Sino-foreign jointly run schools within their administrative areas. The education and labour administrative departments, and other relevant administrative departments, of the people's governments of provinces, autonomous regions and municipalities directly under the central government shall be responsible within the scope of their functions for the relevant Sino-foreign jointly run schools within their administrative areas.

PART TWO: ESTABLISHMENT

Article 9: Educational institutions applying to establish Sino-foreign jointly run schools shall have the status of legal persons.

Article 10: Chinese and foreign joint operators of schools may invest in the school using funds, material objects, leaseholds, intellectual property rights or other assets.

Investment of intellectual property rights by a Chinese or foreign joint runner of schools shall not exceed one third of their investment. However investment of intellectual property rights by foreign institutes of education that have been invited to China to cooperate in the running of schools by the State Council education and labour administrative departments or by the people's governments of provinces, autonomous regions and municipalities directly under the central government may exceed one third of their investment.

Article 11: Sino-foreign jointly run schools shall fulfil the basic conditions stipulated in the PRC Education Law, PRC Vocational Education Law, PRC Higher Education Law and the relevant administrative regulations, and shall have the status of legal persons. However Sino-foreign jointly run schools carrying out higher education that are established by foreign institutes of education and Chinese institutes of higher education that award academic certificates need not have the status of legal persons.

The establishment of Sino-foreign jointly run schools shall follow the same standards as those for State-run schools of the same level and type.

Article 12: Applications to establish Sino-foreign jointly run institutes of higher education that award degrees at undergraduate level and above shall be examined and approved by the State Council education administrative department. Applications to establish Sino-foreign jointly run schools of higher education providing specialized training that do not award degrees shall be examined and approved by the education administrative department of the people's government of the province, autonomous region or municipality directly under the central government where the proposed school is to be located.

Applications to establish middle-level Sino-foreign jointly run schools that award academic certificates and that provide examination preparation study, tutorial study, or preschool education shall be examined and approved by the education administrative department of the people's government of the province, autonomous region or municipality directly under the central government where the proposed school is to be located.

Applications to establish Sino-foreign jointly run schools providing vocational and technical training shall be examined and approved by the labour administrative department of the people's government of the province, autonomous region or municipality directly under the central government where the proposed school is to be located.

Article 13: The establishment of Sino-foreign jointly run schools shall be divided into two stages: preparatory and formal establishment. However, those fulfilling the conditions for running schools and reaching the standards for establishment may apply directly for formal establishment.

Article 14: Sino-foreign jointly run schools applying for preparatory establishment shall submit the following documents: (1) application, which shall principally include the Chinese and foreign joint operators of the school, the name of the Sino-foreign jointly run school, the aims of the training to be given, the size of the school, the level of the school, the type of school, the school conditions, the internal administrative system, the raising of funds and their administration and use, etc.; (2) the cooperation agreement, which shall principally include the period of cooperation and the method of resolving disputes, etc.; (3) the sources and amount of funds and valid documents of proof, and clarification of property rights; (4) in the case of school property that is of the type of donation, agreement on donations of property to the school showing clearly the donor's name, the size of the donation, the use to which it will be put and the method of administering the donated assets, and related valid documents of proof; and (5) proof that not less than 15% of the start-up funds to be invested by the Chinese and foreign joint operators of the school are paid in.

Article 15: When an application is made for preparatory establishment of a Sino-foreign jointly run school, the examination and approval authority shall decide whether or not to approve it within 45 working days of the date of accepting the application. When an application is approved a letter of approval for preparatory establishment shall be issued; when an application is not approved an explanation for the reasons therefor shall be given in writing.

Article 16: Sino-foreign jointly run schools whose preparatory establishment has been approved shall apply for formal establishment within three years of the date of approval. The Chinese and foreign joint operators of the school shall re-apply if the period exceeds three years.

Students shall not be accepted during the period of preparatory establishment.

Article 17: When an application for formal establishment is made after completion of preparatory establishment, the following documents shall be submitted: (1) the application for formal establishment; (2) the approval letter for preparatory establishment; (3) the report on the preparatory establishment; (4) the articles of association of the Sino-foreign jointly run school and the names of the members of the first board of directors, board of trustees or joint management committee; (5) valid proof of the assets of the Sino-foreign jointly run school; and (6) proof of qualification of the head of the school and the principal administrators, teachers, and finance and accounts personnel.

When a direct application for formal establishment of a Sino-foreign jointly run school is made, the documents listed in Items (1), (4), (5) and (6) of the preceding paragraph and in Items (2), (3) and (4) of Article 14 shall be submitted.

Article 18: When an application is made for formal establishment of a Sino-foreign jointly run school that will not award academic certificates, the examination and approval authority shall make a decision whether or not to approve it within three months of the date of receiving the application. When an application is made for formal establishment of a Sino-foreign jointly run school that will award academic certificates, the examination and approval authority shall decide whether or not to approve it within six months of the date of receiving the application. When an application is approved, a Sino-foreign jointly run school permit in a uniform format and under a uniform numbering shall be issued; when an application is not approved an explanation of the reasons therefor shall be given in writing.

The form of the Sino-foreign jointly run school permit shall be formulated by the State Council education administrative department and the printing of the permits shall be organized variously by the State Council education and labour administrative departments in accordance with the division of their responsibilities. The State Council education administrative department shall apply a unified numbering system to Sino-foreign jointly run school permits. The precise method to be used shall be jointly decided by the State Council education and labour administrative departments.

Article 19: When an application is made for formal establishment of a Sino-foreign jointly run school that will award academic certificates, the examination and approval authority shall, once they have accepted the application, organize a committee of experts to comment on the application.

Article 20: Once a Sino-foreign jointly run school has obtained a Sino-foreign jointly run school permit it shall register in accordance with the relevant laws and administrative regulations. The registration authority shall process the registration in a timely manner in accordance with the relevant provisions.

PART THREE: ORGANIZATION AND ADMINISTRATION

Article 21: Sino-foreign jointly run schools with legal person status shall set up a board of directors or a board of trustees. Sino-foreign jointly run schools without legal person status shall set up a joint management committee. Not less than half the members of the board of directors, the board of trustees or the joint management committee shall come from the Chinese party involved.

Boards of directors, boards of trustees and joint management committees shall be composed of at least five members and shall establish a chairman and deputy chairman in each case. If one of the Chinese or foreign joint operators of a school holds the post of chairman then the other party shall hold the post of deputy chairman.

The statutory representatives of Sino-foreign jointly run schools with legal person status shall be negotiated by the Chinese and foreign joint operators of the school and decided on by the chairman of the board of directors or trustees or the head of the school.

Article 22: The board of directors, board of trustees or joint management committee of a Sino-foreign jointly run school shall be composed of representatives of the Chinese and foreign joint operators of the school, the head of the school or the principal administrators and representatives of the teaching staff, etc. One third or more shall have at least five years teaching or educational experience. The names of the members of the boards of directors, the boards of trustees or the joint management committees of Sino-foreign jointly run schools shall be put on record with the examination and approval authority.

Article 23: The boards of directors, boards of trustees or joint management committees of Sino-foreign jointly run schools shall have the following functions and powers: (1) re-election of or by-elections for members of the board of directors, board of trustees or joint management committee; (2) appointment and removal from office of the head of the school or the principal administrators; (3) amendment of the articles of association and formulation of regulatory systems; (4) formulation of development plans and approval of annual work plans; (5) raising of funds and verification of budgets and final accounts; (6) decisions on the size of the teaching establishment and salary levels; (7) decisions on the division, merger or termination of the Sino-foreign jointly run school; and (8) other responsibilities as stipulated in the articles of association.

Article 24: The boards of directors, boards of trustees or joint management committees of Sino-foreign jointly run schools shall meet at least once a year. An ad hoc meeting may be called if a motion is put forward by at least one third of the members.

Decisions on the following major issues shall only be passed by the boards of directors, boards of trustees or joint management committees of Sino-foreign jointly run schools with the agreement of at least two thirds of the members: (1) employment or dismissal of the head of the school or of principal administrators; (2) amendment of the articles of association; (3) formulation of development plans; (4) decisions to split, merge or close the Sino-foreign jointly run school; and (5) other major issues as stipulated in the articles.

Article 25: The heads or principal administrators of Sino-foreign jointly run schools shall be nationals of the People's Republic of China who reside within China, love the motherland, are of good moral conduct, have experience in education and teaching, and are of the corresponding professional standard.

The heads of schools and principal administrators employed by Sino-foreign jointly run schools shall be permitted by the examination and approval authority.

Article 26: The heads and principal administrators of Sino-foreign jointly run schools shall have the following functions and powers: (1) implementation of the resolutions of the board of directors, the board of trustees or the joint management committee; (2) implementation of development plans and drawing up of annual work plans, financial budgets and regulatory systems; (3) employment and dismissal of staff and implementation of rewards and penalties; (4) organization of educational and scientific research and ensuring the quality of the teaching; (5) responsibility for day-to-day administration; and (6) other responsibilities as stipulated in the articles of association.

Article 27: Sino-foreign jointly run schools shall administer teachers and students in accordance with the law.

Foreign teachers and management staff employed by Sino-foreign jointly run schools shall possess at least a bachelor's degree or corresponding professional certificates and shall have at least two years of experience in education or teaching.

The foreign party in the jointly run school shall send a certain number of teachers from its own institute of education to teach in the Sino-foreign jointly run school.

Article 28: Sino-foreign jointly run schools shall safeguard the lawful rights and interests of teachers and students in accordance with the law. They shall guarantee the salaries and benefits of teaching staff and shall pay social insurance premiums on their behalf.

Teaching staff in Sino-foreign jointly run schools shall set up organizations such as unions in accordance with the law and shall take part in the democratic management of their Sino-foreign jointly run school through staff representative meetings, etc.

Article 29: Foreign nationals in Sino-foreign jointly run schools shall abide by the provisions on employment of foreign nationals in China.

PART FOUR: EDUCATION AND TEACHING

Article 30: Sino-foreign jointly run schools shall provide courses in accordance with China's requirements on the Constitution, laws, morality and national conditions for that level and that type of school.

The State shall encourage the import by Sino-foreign jointly run schools of internationally advanced courses and teaching materials urgently needed in China.

Sino-foreign jointly run schools shall report the courses they set up and the teaching materials they import to the examination and approval authority for the record.

Article 31: Sino-foreign jointly run schools may, in accordance with their needs, use foreign language teaching. However the basic teaching language shall be putonghua and standard Chinese characters.

Article 32: Recruitment of students by Sino-foreign jointly schools awarding higher education academic certificates shall be brought within the national plan for recruitment of students by institutes of higher education. Recruitment of students by Sino-foreign jointly run schools awarding other academic certificates shall follow the provisions of the education administrative department of the local people's government of the province, autonomous region or municipality directly under the central government.

Article 33: The notices and advertisements used by Sino-foreign jointly run schools to recruit students shall be filed with the examination and approval authority.

Sino-foreign jointly run schools shall make regular public announcements of the type and level of their school, its specialist facilities, the content of its courses and the scale of student intake, etc.

Article 34: Sino-foreign jointly run schools offering academic certificates shall issue academic certificates or other certificates of study in accordance with the relevant State provisions. Those not offering academic certificates shall issue training certificates or certificates of completion of courses in accordance with the relevant State provisions. Students receiving vocational and technical training assessed as being qualified by vocational and technical assessment authorities approved by the government may be awarded the corresponding State vocational certificate of qualification in accordance with the relevant State provisions.

Sino-foreign jointly run schools awarding higher education certificates may award the corresponding Chinese degree in accordance with the relevant State provisions.

Sino-foreign jointly run schools awarding academic certificates or degrees from foreign institutes of education shall award certificates or degrees identical to those the foreign institute issues in its own country, and these shall be recognized in that country.

Recognition of certificates or degrees from foreign institutes of education awarded by Sino-foreign jointly run schools shall be carried out in accordance with the international treaties that the People's Republic of China has concluded or joined, or in accordance with the relevant State provisions.

Article 35: The State Council education administrative department and other administrative departments such as the education and labour administrative departments of the people's governments of provinces, autonomous regions and municipalities directly under the central government shall strengthen day-to-day supervision of Sino-foreign jointly run schools. They shall organize the assessment of or appoint an intermediary to assess the standard of Sino-foreign jointly run schools and the quality of their education, and shall publish the results of the assessment to the public.

PART FIVE: PROPERTY AND FINANCE

Article 36: Sino-foreign jointly run schools shall set up proper financial and accounting systems and systems for managing assets in accordance with the law, and shall set up account books in accordance with the relevant State provisions.

Article 37: While a Sino-foreign jointly run school is in existence it shall enjoy legal person property rights over all its assets in accordance with the law, and no organization or individual shall seize them.

Article 38: The type and level of fees received by Sino-foreign jointly run schools shall be decided and published in accordance with the relevant State provisions. No extra fee shall be added or fee level raised without approval. Sino-foreign jointly run schools shall charge tuition fees and other fees in renminbi. They shall not charge tuition fees or other fees in foreign currency.

Article 39: The fees collected by Sino-foreign jointly run schools shall be used principally for educational activities and for improving the school conditions.

Article 40: The foreign exchange income and expenditure of Sino-foreign jointly run schools and their opening and use of foreign exchange accounts shall abide by State provisions on the administration of foreign exchange.

Article 41: Sino-foreign jointly run schools shall compile a financial accounting report at the end of every accounting year and appoint an auditing firm to audit these. The results of the audit shall be published to the public and filed to the examination and approval authority for the record.

PART SIX: CHANGES AND CLOSURES

Article 42: The division or merger of Sino-foreign jointly run schools shall be reported by the board of directors, the board of trustees or the joint management committee to the examination and approval authority for approval once the school's finances have been liquidated.

When applications to divide or merge Sino-foreign jointly run schools that do not award academic certificates are made, the examination and approval authority shall give a written reply within three months of the date on which the application was accepted. When applications are made to divide or merge Sino-foreign jointly run schools that award academic certificates, the examination and approval authority shall give a written reply within six months of the date on which the application was accepted.

Article 43: Changes to operators of Sino-foreign jointly run schools shall be proposed by those running the school and shall be agreed by the board of directors, the board of trustees or the joint management committee once finances have been liquidated. They shall be reported to the examination and approval authority for permission and the corresponding procedures shall be undertaken.

Changes to the location, legal representative, head of school or principal administrators of Sino-foreign jointly run schools shall be permitted by the examination and approval authorities and the corresponding procedures shall be undertaken.

Article 44: Changes to the name, level or type of Sino-foreign jointly run schools shall be reported by the board of directors, the board of trustees or the joint management committee to the examination and approval authority for approval.

When a Sino-foreign jointly run school applies to become a school that does not award academic certificates the examination and approval authority shall give a written reply within three months of the date on which the application was accepted. When a Sino-foreign jointly run school applies to become a school that does award academic certificates the examination and approval authority shall give a written reply within six months of the date on which the application was accepted.

Article 45: A Sino-foreign jointly run school shall close in any of the following circumstances: (1) it should close in accordance with the provisions of its articles of association and with the approval of the examination and approval authority; (2) its Sino-foreign jointly run school licence has been revoked; or (3) with the approval of the examination and approval authorities because its liabilities exceed its assets and the school is unable to continue in operation.

When a Sino-foreign jointly run school closes, it shall make appropriate arrangements for its students. When Sino-foreign jointly run schools apply to close, they shall at the same time submit a plan for appropriate arrangements for their students.

Article 46: When a Sino-foreign jointly run school closes, it shall carry out financial liquidation in accordance with the law. When a Sino-foreign jointly run school applies itself to close, it shall itself organize the liquidation; when it is closed by the examination and approval authority in accordance with the law, the examination and approval authority shall organize the liquidation; and when it is closed because its liabilities exceed its assets and it is unable to continue in operation, it shall in accordance with the law request the people's court to organize the liquidation.

Article 47: When going into liquidation, Sino-foreign jointly run schools shall clear debts in accordance with the following: (1) repayment of students' tuition fees and other fees that should be repaid; (2) payment of teachers' salaries and social insurance that should be paid; and (3) other debts that should be repaid.

Assets remaining once the abovementioned debts have been repaid by Sino-foreign jointly run schools shall be dealt with in accordance with the relevant laws and administrative regulations.

Article 48: When Sino-foreign jointly run schools are given approval to close or have their Sino-foreign jointly run school licences revoked, they shall return their Sino-foreign jointly run school licence and stamp to the examination and approval authority and shall cancel their registration in accordance with the law.

PART SEVEN: LEGAL LIABILITY

Article 49: Authorities examining and approving Sino-foreign jointly run schools, and the personnel of those authorities, who take advantage of their position to appropriate property of others or to gain some other profit, or who abuse their powers or neglect their duty, or who issue Sino-foreign jointly run school licences to those not qualified under the provisions hereof, or who fail to investigate illegal acts, so causing serious consequences and violating criminal laws, shall be pursued for criminal liability in accordance with the criminal law on bribery, abuse of power, neglect of duty or other crimes for those in charge who are responsible and other directly responsible personnel. If the offence is not a criminal one, they shall be given administrative penalties.

Article 50: The approval document of those who in violation of these Regulations examine and approve Sino-foreign jointly run schools ultra vires shall be invalid and they shall be ordered to rectify matters by the authorities at the level above. Those in charge who are responsible and other directly responsible personnel shall be given administrative penalties. Criminal liability shall be pursued in accordance with the criminal law on abuse of power or other crimes if major injury has been caused to public assets or to State or public interests.

Article 51: Those who in violation of the provisions hereof establish Sino-foreign jointly run schools without authorization or who fraudulently obtain a Sino-foreign jointly run school licence by improper means shall be banned by the education and labour administrative departments, according to the division of the responsibilities of those departments, or together with the public security authorities, and shall be ordered to return the fees collected from their students and fined not more than Rmb100,000. Where the criminal law is violated, criminal liability shall be pursued in accordance with the criminal law on fraud or other crimes.

Article 52: Those who in violation of the provisions hereof recruit students during the planning stage of establishment of a Sino-foreign jointly run school shall be ordered to stop recruitment by the education and labour administrative departments, in accordance with the division of the responsibilities of those departments, and shall be ordered to return the fees collected from their students and fined not more than Rmb100,000. Where the circumstances are serious and they refuse to stop recruitment, the examination and approval authority shall revoke their approval for the preparatory establishment document.

Article 53: Chinese and foreign joint operators of schools who falsify investment or who withdraw their investment once the Sino-foreign jointly run school has been established shall be ordered to rectify this within a certain period by the education and labour administrative departments, in accordance with the division of the responsibilities of those departments. Those who fail to rectify matters within the given time shall be fined by the education and labour administrative departments not more than two times the amount of falsified investment or withdrawn.

Article 54: Those who forge, alter or trade in Sino-foreign jointly run school licences shall be pursued for criminal liability in accordance with the criminal law on forgery, alteration or trafficking in State authorities certificates, or other crimes.

Article 55: Sino-foreign jointly run schools that increase the number of fees or that raise fees without approval shall be ordered by the education and labour administrative departments, in accordance with the division of the responsibilities of those departments, to return the extra fees collected. They shall be fined by the department in charge of prices in accordance with the relevant laws and administrative regulations.

Article 56: Sino-foreign jointly run schools that have chaotic administration and poor quality teaching, giving a poor impression, shall be ordered by education and labour administrative departments, in accordance with the division of the responsibilities of those departments, to rectify and publicize matters within a certain period. Where the circumstances are serious, or there is failure to rectify matters within the stated period, or where they still fail to match requirements after rectification, they shall be ordered to stop recruiting students by the education and labour administrative departments, according to the division of the responsibilities of those departments, and shall have their Sino-foreign jointly run school licence revoked.

Article 57: Those who in violation of the provisions hereof issue false notices on the recruitment of students and fraudulently obtain money shall be ordered to rectify this within a certain period and shall be warned by the education and labour administrative departments, in accordance with the division of the responsibilities of those departments. Those who have made illegal gains shall have these confiscated once the fees they have collected have been returned and may be fined not more than Rmb100,000. Where the circumstances are serious they shall be ordered to stop the recruitment of students and shall have their Sino-foreign jointly run school licence revoked. Where a crime is constituted, criminal liability shall be pursued in accordance with the criminal law on fraud or other crimes. Where a Sino-foreign jointly run school issues false advertisements to recruit students, criminal liability shall be pursued in accordance with the PRC Advertising Law.

Article 58: The chairman of the board of directors or board of trustees and the head of the school or the principal administrator of Sino-foreign jointly run schools that have had their Sino-foreign jointly run school licence revoked shall not become the chairman of the board of directors or of trustees or the head of a school or a principal administrator of any Sino-foreign jointly run school within ten years of the date on which the Sino-foreign jointly run school licence was revoked.

Those who violate the provisions hereof and against whom criminal liability is pursued for violation of the criminal law shall not be involved in Sino-foreign jointly run schools within ten years of the date on which their punishment was completed.

PART EIGHT: SUPPLEMENTARY PROVISIONS

Article 59: Schools run jointly by institutes of education from the Hong Kong Special Administrative Region, the Macao Special Administrative Region or Taiwan with institutes of education on the mainland shall be handled with reference to these Regulations.

Article 60: Administrative procedures for for-profit Sino-foreign jointly run training institutions registered with departments for industry and commerce shall be formulated separately by the State Council.

Article 61: Specific procedures for examining, approving and administering schools run jointly within China by foreign educational institutes and Chinese educational institutes that award academic certificates, or that provide examination preparation study, tutorial study or preschool education, which are aimed principally at Chinese citizens, shall be formulated by the State Council education administrative department.

Specific procedures for examining, approving and administering schools run jointly within China by foreign educational institutes and Chinese educational institutes that are aimed principally at Chinese citizens and that provide vocational and technical training shall be formulated by the State Council labour administrative department.

Article 62: Foreign institutes of education, or other organizations or individuals, shall not independently set up schools or other educational institutions within China that are aimed principally at Chinese citizens.

Article 63: Sino-foreign jointly run schools set up in accordance with the law prior to the implementation of these Regulations shall retrospectively acquire a Sino-foreign jointly run school licence as stipulated in these Regulations. Those that fail to fulfil some of the criteria stipulated in these Regulations shall fulfil these within two years of these Regulations coming into effect. Those that fail to do so shall be banned by the examination and approval authorities.

Article 64: These Regulations shall be effective as of September 1 2003.