Measures for the Determination of the Dutiable Value of Imports and Exports

(Promulgated by the General Administration of Customs on March 28 2006 and effective as of May 1 2006.)

Order of the GAC No.148

PART ONE: GENERAL PROVISIONS

Article 1: These Measures have been formulated pursuant to the PRC Customs Law and the PRC Regulations on Import and Export Duties in order to correctly examine and determine the dutiable value of imports and exports.

Article 2: When examining and determining the dutiable value of imports and exports, customs shall abide by the principles of objectivity, fairness and uniformity.

Article 3: These Measures shall govern the examination and determination of the dutiable value of imports and exports by customs.

These Measures shall not apply to the determination of the dutiable value of articles in the luggage of travellers entering China, mailed articles of individuals or other articles for personal use whose import is permitted, or the determination of the taxable value of suspected smuggled imported or export goods or articles.

Article 4: Customs shall duly safeguard in accordance with relevant state provisions information provided by taxpayers that relates to trade secrets, and may not provide the same to third parties unless otherwise specified in laws or administrative regulations.

Taxpayers may submit written requests to customs to maintain the confidentiality of their trade secrets, in which the requests shall state the information that needs to be kept confidential, but may not refuse to provide relevant information to customs on the grounds of its relating to trade secrets.

PART TWO: DUTIABLE VALUE OF IMPORTED GOODS

Section One: Methods of Determining the Dutiable Value of Imported Goods

Article 5: The dutiable value of imported goods shall be examined and determined by customs based on the transaction value of the goods in question and shall include the costs of transport and insurance and associated costs incurred up to the time the goods reach the point of entry into, and before unloading in, the People's Republic of China.

Article 6: If the transaction value does not comply with Section Two of this Part or is undeterminable, customs shall, after gaining an understanding of relevant circumstances and holding consultations on value with the taxpayer, examine and determine the dutiable value of the goods in question by applying the following methods in sequence:

(1) the method of valuation based on the transaction value of identical goods;

(2) the method of valuation based on the transaction value of similar goods;

(3) the reverse deduction valuation method;

(4) the computed value valuation method; or

(5) a reasonable method.

After providing the relevant information to customs, a taxpayer may apply to have the order of application of Items (3) and (4) reversed.

Section Two: Transaction Value Valuation Method

Article 7: The transaction value of imported goods means the total price actually paid or payable by the buyer to the seller for import of the goods in question at the time the seller sells such goods for export to the People's Republic of China and after adjustments made in accordance with Section Three of this Part, including directly and indirectly paid amounts.

Article 8: The transaction value of imported goods shall satisfy the following conditions:

(1) there are no restrictions as to the disposition or use of the goods by the buyer other than restrictions that are imposed or required by laws or administrative regulations, that limit the geographical area in which the goods may be resold or that do not substantially affect the value of the goods;

(2) the price of the imported goods may not be subject to some condition or consideration that makes the transaction value of the goods in question impossible to determine;

(3) no part of the proceeds of the sale, disposal or use of the imported goods by the buyer may accrue directly or indirectly to the seller, unless an adjustment can be made therefor in accordance with Item (4) of the first paragraph of Article 11 hereof; and

(4) there is no special relationship between the buyer and the seller, or, if such relationship does exist, it does not, as specified in Article 17 hereof, affect the transaction value.

Article 9: The buyer's disposal or use of the imported goods shall be deemed restricted if:

(1) the imported goods can only be used for display or given as a free gift;

(2) the imported goods can only be sold to a designated third party;

(3) after processing into finished products, the imported goods can only be sold to the seller or a designated third party; or

(4) there is another circumstance that is determined by customs after examination to constitute a restriction on the disposal or use of the imported goods by the buyer.

Article 10: The price of imported goods shall be deemed to be affected by a condition or consideration that makes the transaction value of the goods in question impossible to determine if:

(1) the price of the imported goods is conditional on the purchase by the buyer from the seller of a set quantity of other goods;

(2) the price of the imported goods is conditional on the sale by the buyer to the seller of other goods; or

(3) there is another circumstance that is determined by customs after examination to constitute a condition or consideration that makes the transaction value of the goods in question impossible to determine.

Section Three: Elements for Which the Transaction Value is to be Adjusted

Article 11: When the transaction value is used as the basis for examining and determining the dutiable value of imported goods, the following expenses or values that are not included in the price actually paid or payable for the goods in question shall be added to the dutiable value:

(1) the following charges borne by the buyer:

(a) commissions and brokerage, except buying commissions;

(b) the cost of containers that are treated as being one with the goods in question; and

(c) the cost of packing whether for labour or materials;

(2) the value, apportioned as appropriate, of the following goods and services where supplied by the buyer free of charge or below cost for use in connection with the production of and sale for export of the imported goods to the People's Republic of China:

(a) the materials, components, parts and similar goods incorporated in the imported goods;

(b) the tools, dies and similar goods used in the production of the imported goods;

(c) materials consumed in the production of the imported goods; and

(d) relevant services such as engineering designs, technical research and development, artwork, and plans and sketches undertaken abroad and necessary for the production of the imported goods;

(3) the royalties and licence fees that the buyer is required to pay directly or indirectly to the seller or relevant party, unless such royalties and fees satisfy either of the following conditions:

(a) they are unrelated to the goods in question; or

(b) their payment does not constitute a condition of sale for export of the goods in question to the People's Republic of China;

(4) the value of any part of the proceeds of the sale, disposal or use of the goods in question by the buyer after the import of such goods that accrues directly or indirectly to the seller.

The taxpayer shall provide to customs objective and quantifiable data and information on the expenses or values mentioned in this Article. If the taxpayer is unable to provide such data and information, customs shall examine and determine the dutiable value by the methods specified in Article 6 hereof after holding consultations on value with the taxpayer.

Article 12: When determining the value of the goods that should be added to the dutiable value of the imported goods pursuant to Item (2) of the first paragraph of Article 11 hereof, the relevant charges shall be calculated in accordance with the following methods:

(1) if purchased by the buyer from a third party with whom it has no special relationship, the value to be added shall be the purchase price;

(2) if produced by the buyer itself or obtained from a third party with whom it has a special relationship, the value to be added shall be the production cost;

(3) if obtained by the buyer by way of a lease, the value to be added shall be the lease cost borne by the buyer; or

(4) the value of tools, dies and similar goods used in the production of the imported goods, which shall include the expenses for the engineering designs, technical research and development, artwork, and plans and sketches, etc..

If the goods had been used by the buyer before being provided to the seller, the value to be added shall be the depreciated value determined in accordance with the accounting principles generally accepted in China.

Article 13: Royalties and licence fees that satisfy any of the following conditions shall be deemed as related to the imported goods:

(1) the royalties and licence fees are used to pay for patent rights or rights to use proprietary technology, and the imported goods are characterized by any of the following circumstances:

(a) they incorporate a patent or proprietary technology;

(b) they were produced using a patented method or proprietary technology; or

(c) they were specifically designed or manufactured to work a patent or proprietary technology;

(2) the royalties and licence fees are used to pay for trademark rights, and the imported goods are characterized by any of the following circumstances:

(a) a trademark is attached thereto;

(b) after import, they can be sold directly once the trademark is attached; or

(c) at the time of import they already incorporate trademark rights and, after light processing, they can be sold directly once the trademark is attached;

(3) the royalties and licence fees are used to pay for copyright, and the imported goods are characterized by either of the following circumstances:

(a) they are imported goods that contain software, text, music, photographs, images or other similar content, such as magnetic tapes, magnetic disks, optical disks or other similar form of media; or

(b) they contain other copyrighted content;

(4) the royalties and licence fees are used to pay for distribution rights, sales rights or other similar rights, and the imported goods are characterized by either of the following circumstances:

(a) they can be sold directly after import; or

(b) they can be sold once they have undergone light processing.

Article 14: If the buyer cannot purchase the imported goods without paying a royalty or licence fee or if the transaction of the goods in question cannot be completed under the contractually agreed upon conditions without the buyer paying the royalty or licence fee, the payment of such royalty or licence fee shall be deemed as constituting a condition of the sale for export of such imported goods to the People's Republic of China.

Article 15: The taxes and expenses set forth below included in the price of the imported goods shall not be included in the dutiable value of the goods in question if itemized separately:

(1) the construction, installation, assembly, maintenance and repair or technical assistance expenses incurred after the import of such goods as factory buildings, machinery or equipment, with the exception of warranty expenses;

(2) the costs of transport and insurance and associated costs incurred after the goods reach the point of entry into, and before unloading in, the People's Republic of China;

(3) import duties, import stage taxes collected by customs and other domestic taxes;

(4) the expenses incurred in order to reproduce the imported goods in China; and

(5) expenses for training in China and abroad and those for on-the-spot investigations abroad.

Interest expenses satisfying all of the following conditions shall not be included in the dutiable value:

(1) interest expenses arising from the financing taken out by the buyer in order to purchase the imported goods;

(2) there is a written financing agreement therefor;

(3) the interest expenses are itemized separately; and

(4) the taxpayer is able to demonstrate that the relevant interest rate is not higher than the normal interest rate level for similar transactions in such place at the time of the financing and that the price of identical or similar imported goods for which there was no financing arrangement is very close to the paid or payable price of the imported goods in question.

Section Four: Special Relationships

Article 16: A special relationship shall be deemed to exist between the buyer and seller if:

(1) they are members of the same family;

(2) they are senior officers or directors of another's business;

(3) one party directly or indirectly controls the other party;

(4) they are both directly or indirectly controlled by a third party;

(5) together they directly or indirectly control a third party;

(6) one party directly or indirectly owns, controls or holds 5% or more of the outstanding voting stock or shares of the other party;

(7) one party is an employee, senior officer or director of the other party; or

(8) they are both members of the same partnership.

If the buyer and the seller are associated in business with one another in that one party is sole agent, sole distributor or sole assignee of the other, a special relationship shall also be deemed to exist between them if they fall within the criteria of the preceding paragraph.

Article 17: Where a special relationship exists between the buyer and seller, it shall not be deemed to have had an effect on the transaction value of the imported goods in question if the taxpayer is able to demonstrate that the transaction value closely approximates to any of the following prices occurring at or about the same time:

(1) the transaction value of identical or similar imported goods sold to unrelated buyers in China;

(2) the dutiable value of identical or similar imported goods as determined in accordance with Article 22 hereof; or

(3) the dutiable value of identical or similar imported goods as determined in accordance with Article 24 hereof.

When using the aforementioned values to make the comparison, customs shall take into account differences in commercial levels, import quantities and the difference in charges arising from the existence or non-existence of a special relationship between the buyer and seller.

Section Five: Valuation Methods Other Than the Transaction Value Valuation Method

Article 18: The method of valuation based on the transaction value of identical goods is a valuation method wherein customs examines and determines the dutiable value of imported goods based on the transaction value of identical goods sold for export to the People's Republic of China at or about the same time as the imported goods.

Article 19: The method of valuation based on the transaction value of similar goods is a valuation method wherein customs examines and determines the dutiable value of imported goods based on the transaction value of similar goods sold for export to the People's Republic of China at or about the same time as the imported goods.

Article 20: When examining and determining the dutiable value of imported goods in accordance with the provisions on the method of valuation based on the transaction value of identical or similar goods, the transaction value of identical or similar goods at the same commercial level and in substantially the same import quantity as the goods in question shall be used. When using the aforementioned value, adjustments shall be made based on objective and quantifiable data and information to take account of differences in costs and other charges between the goods in question and the identical or similar goods arising from differences in transport distances and modes of transport.

Where the transaction value of identical or similar goods as specified in the preceding paragraph is not available, the transaction value of identical or similar goods at a different commercial level or in different import quantities may be used. When using the aforementioned value, adjustments shall be made based on objective and quantifiable data and information to take account of differences in the prices, costs and other charges attributable to differences in commercial levels, import quantities, transport distances and methods of transport.

Article 21: When examining and determining the dutiable value of imported goods using the method of valuation based on the transaction value of identical or similar goods, the transaction value of identical or similar goods produced by the same producer shall be considered first.

If the transaction value of identical or similar goods produced by the same producer is not available, the transaction value of identical or similar goods produced by other producers in the same country or region may be used.

If more than one transaction value of identical or similar goods is found, the lowest such value shall be used as the basis for examining and determining the dutiable value of the imported goods.

Article 22: The reverse deduction valuation method is a valuation method wherein customs examines and determines the dutiable value of imported goods based on the sales price of the imported goods or of identical or similar imported goods in China and deducting relevant charges incurred in China. Such sales price shall satisfy all of the following conditions:

(1) it was the price at which the goods in question or the identical or similar imported goods were sold in China at or about the same time the goods in question were imported;

(2) it was the price at which the goods were sold in the condition as imported;

(3) it was the price at the first stage of sales in China;

(4) it was the price of sales in China to parties without any special relationship; and

(5) the greatest quantity of goods was sold, in aggregate, at the price in question.

Article 23: When examining and determining the dutiable value of imported goods using the reverse deduction valuation method, the following items shall be deducted:

(1) the additions usually made for profit and general expenses (including direct expenses and indirect expenses) and the commissions usually paid in connection with first stage sales in China of goods of the same class or kind;

(2) the costs of transport and insurance and associated costs incurred from the time the goods are unloaded at the point of entry into China; and

(3) import duties, import stage taxes collected by customs and other domestic taxes.

If neither the goods in question nor identical nor similar imported goods are sold in China in the condition as imported, then, if the taxpayer so requests, the dutiable value may, subject to the conditions specified in Article 22 hereof, be examined and determined based on the sales price of the goods, after further processing, with due allowance being made for the value added by such processing.

The "valued added by such processing" specified in the preceding paragraph shall be calculated based on objective and quantifiable data and information related to the costs of such processing, and the generally accepted standards, calculation method and other practices of the relevant industry.

When determining the items to be deducted in accordance with this Article, principles and methods consistent with the accounting principles generally accepted in China shall be used.

Article 24: The computed value valuation method is a valuation method wherein customs examines and determines the dutiable value of imported goods based on the sum of the following items:

(1) the costs of materials, components and processing employed in producing the goods in question;

(2) an amount for profit and general expenses (including direct and indirect expenses) equal to that usually reflected in sales of goods of the same class or kind; and

(3) the costs of transport and insurance and associated costs incurred up to the time the goods reach the point of entry into, and before unloading in, the People's Republic of China.

When examining and determining the dutiable value of imported goods pursuant to the preceding paragraph, customs may verify abroad information supplied by the foreign producer subject to the agreement of the producer and provided that advance notice is given to the government of the country or region in question.

When determining the relevant values or costs in accordance with the first paragraph of this Article, principles and methods consistent with the accounting principles generally accepted in the producing country or region shall be used.

Article 25: A reasonable method is a valuation method used by customs whenever it is unable to determine the dutiable value based on the transaction value valuation method, the method of valuation based on the transaction value of identical goods, the method of valuation based on the transaction value of similar goods, the reverse deduction valuation method or the computed value valuation method, wherein it examines and determines the dutiable value of imported goods pursuant to the principles set forth in Article 2 hereof and based on objective and quantifiable data and information.

Article 26: When using a reasonable method to determine the dutiable value of imported goods, customs may not use the following prices or values:

(1) the sales price in China of goods produced in China;

(2) the higher of the two available values;

(3) the price of goods on the market of the place of exportation;

(4) the value of identical or similar goods computed using values or costs other than those specified in Article 24 hereof;

(5) the price of goods for export to a third country or region; or

(6) minimum, arbitrary or fictitious values.

PART THREE: DUTIABLE VALUE OF SPECIAL IMPORTED GOODS

Article 27: If imported processing trade materials and components or the finished products derived therefrom are dutiable, customs shall examine and determine the dutiable value in accordance with the following provisions:

(1) for materials and components imported under a processing of purchased materials arrangement that are subject to duties at the time of import, the dutiable value shall be examined and determined based on the transaction value of the materials and components in question as declared at the time of import;

(2) when materials and components imported under a processing of purchased materials arrangement or the finished products (including rejects) derived therefrom are sold domestically, customs shall examine and determine the dutiable value thereof based on the original import transaction value of the materials and components; if the original import transaction value of the materials and components is undeterminable, customs shall examine and determine the dutiable value thereof based on the import transaction value of goods identical or similar to the materials and components that were imported at or about the same time it accepted the declaration for domestic sale of the materials and components or the finished products;

(3) when materials and components imported under a processing of supplied materials arrangement or the finished products (including rejects) derived therefrom are sold domestically, customs shall examine and determine the dutiable value thereof based on the import transaction value of goods identical or similar to the materials and components that were imported at or about the same time it accepted the declaration for domestic sale of the materials and components or the finished products; and

(4) for the scraps or by-products generated during the processing process and sold domestically by the processor, the dutiable value thereof shall be the domestic sales price as examined and determined by customs.

If the dutiable value of processing trade goods sold domestically remains undeterminable after the application of the provisions of the preceding paragraph, customs shall examine and determine the same using a reasonable method.

Article 28: For the finished products (including rejects) sold domestically by a processor located in an export processing zone, customs shall examine and determine the dutiable value thereof based on the import transaction value of identical or similar goods imported at or about the same time it accepted the declaration for domestic sale of the finished products.

For the scraps or by-products generated during the processing process and sold domestically by a processor located in an export processing zone, the dutiable value thereof shall be the domestic sales price as examined and determined by customs.

If the dutiable value of finished products (including rejects), scraps or by-products sold domestically by a processor located in an export processing zone remains undeterminable after the application of the provisions of the preceding two paragraphs, customs shall examine and determine the same using a reasonable method.

Article 29: For the imported materials and components or the finished products (including rejects) derived therefrom sold domestically by a processor located in a bonded zone, customs shall examine and determine the dutiable value thereof based on the import transaction value of identical or similar goods imported at or about the same time it accepted the declaration for domestic sale of the imported materials and components or finished products.

If the finished products from a processing of purchased materials arrangement sold domestically by a processor located in a bonded zone incorporate materials and components procured in China, customs shall determine the dutiable value thereof based on the original import transaction value of the materials and components purchased abroad and incorporated in such products. If the original import transaction value of the materials and components is undeterminable, customs shall examine and determine the dutiable value thereof based on the import transaction value of goods identical or similar to the materials and components and imported at or about the same time it accepted the declaration for domestic sale of the finished products.

If the finished products from a processing of supplied materials arrangement sold domestically by a processor located in a bonded zone incorporate materials and components procured in China, customs shall determine the dutiable value thereof based on the import transaction value of goods identical or similar to the materials and components incorporated in the finished goods and imported at or about the same time it accepted the declaration for domestic sale of the finished products.

For the scraps or by-products generated during the processing process and sold domestically by a processor located in a bonded zone, the dutiable value thereof shall be the domestic sales price as examined and determined by customs.

If the dutiable value of finished products (including rejects), scraps or by-products sold domestically by a processor located in a bonded zone remains undeterminable after the application of the provisions of the preceding four paragraphs, customs shall examine and determine the same using a reasonable method.

Article 30: For dutiable goods, other than materials and components imported for processing trade and the finished products derived therefrom, entering China proper from such an area or premises as a bonded zone, export processing zone, bonded logistics park, bonded logistics centre, etc., customs shall, with reference to the relevant provisions of Part Two hereof, examine and determine the dutiable value thereof based on the sales price of such goods when they enter China proper from one of the aforementioned areas or premises.

If the sales price mentioned in the preceding paragraph does not include the warehousing, transport and other associated costs incurred in the aforementioned area or premises, the same shall be added based on objective and quantifiable data and information.

Article 31: For machinery, apparatus, means of transport or other goods shipped abroad for repair, for which the same is reported to customs at the time of exit and which are shipped back to China by the deadline set by customs, the dutiable value thereof shall be examined and determined based on the cost of the repairs abroad and the cost of the materials and components.

If goods shipped abroad for repair are shipped back into China after the deadline set by customs, customs shall examine and determine the dutiable value thereof in accordance with Part Two hereof.

Article 32: For goods shipped abroad for processing, for which the same is reported to customs at the time of exit and which are shipped back into China by the deadline set by customs, the dutiable value thereof shall be examined and determined based on the overseas processing charge, cost of materials and components and the costs of transport and insurance and associated costs to ship the same back to China.

If goods shipped for processing abroad are shipped back into China after the deadline set by customs, customs shall examine and determine the dutiable value thereof in accordance with Part Two hereof.

Article 33: For dutiable goods entering China on a temporary basis as approved by customs, customs shall examine and determine the dutiable value thereof in accordance with Part Two hereof. For goods that entered China on a temporary basis and that are purchased and retained in China upon approval by customs, the dutiable value thereof shall be the purchase price as examined and determined by customs.

Article 34: The dutiable value of goods imported on a lease basis shall be examined and determined in accordance with the following methods:

(1) for leased goods for which rent is paid to a party abroad, the dutiable value thereof shall be the rent during the lease term examined and determined by customs, plus the interest thereon;

(2) for leased goods purchased and retained in China, the dutiable value thereof shall be the purchase price as examined and determined by customs; and

(3) if the taxpayer applies to pay the duties in one lump sum, he/she may apply to have the dutiable value thereof determined based on a method specified in Article 6 hereof or on the total amount of rent as examined and determined by customs.

Article 35: When duties are to be paid retroactively on goods imported on a reduced duty or duty free basis, the dutiable value shall be the original value of the goods at the time of import as examined and determined by customs less the depreciated value. The formula therefor is set forth below:

The "actual amount of time since import at the time of retroactive payment of duties" in the above formula is counted by month. Any time less than 1 month but more than 15 days shall be counted as 1 month and any time not exceeding 15 days shall be ignored.

Article 36: For goods imported under a barter trade arrangement or consignment sale arrangement, or as a donation, or by way of a gift, etc. for which there is no transaction value, the dutiable value thereof shall be examined and determined in accordance with the methods specified in Article 6 hereof after customs and the taxpayer have held consultations on value.

Article 37: If an imported medium containing software for data processing equipment is characterized by either of the circumstances set forth below, the dutiable value thereof shall be examined and determined based on the value or cost of the medium itself:

(1) the value or cost of the medium is itemized separately from the value of the software contained thereon; or

(2) although the value or cost of the medium is not itemized separately from the value of the software contained thereon, the taxpayer is able to provide documentation evidencing the value or cost of the medium itself or the value of the software contained thereon.

The provisions of the preceding paragraph shall not apply to media containing fine art, photographs, sound, images, videos, games or electronic publications.

PART FOUR: CALCULATION OF THE COSTS OF TRANSPORT AND INSURANCE AND ASSOCIATED COSTS IN THE DUTIABLE VALUE OF IMPORTED GOODS

Article 38: The cost of transport of imported goods shall be calculated based on the actual charges paid. If the cost of transport of imported goods are undeterminable, customs shall calculate such cost based on the actual transport cost of the goods in question or the freight rate (amounts) published by the transport industry at the time such goods were imported.

If an imported good is a means of transport and entered China under its own power, customs shall not include the cost of transport when examining and determining the dutiable value.

Article 39: The cost of insurance of imported goods shall be calculated based on the actual charges paid. If the cost of insurance of imported goods is undeterminable or was not actually incurred, customs shall calculate the cost of insurance at the rate of 0.3% of the sum of the "price of the goods plus cost of transport". The formula therefor is set forth below:

The cost of insurance = (price of the goods + cost of transport) x 0.3%

Article 40: For goods imported by mail, the postage shall be deemed the costs of transport and insurance and associated costs.

Article 41: For imported goods transported by rail or road and transacted franco border, customs shall calculate the costs of transport and insurance and associated costs at 1% of the franco border value.

PART FIVE: DUTIABLE VALUE OF EXPORT GOODS

Article 42: The dutiable value of export goods shall be examined and determined by customs based on the transaction value of such goods and shall include the costs of transport and insurance and associated costs to the point of departure in China before loading.

Article 43: The transaction value of export goods means the total price charged directly and indirectly by the seller to the buyer for the export of the goods at the time the goods are exported for sale.

Article 44: The following taxes and fees shall not be included in the dutiable value of export goods:

(1) export duties;

(2) the costs of transport and insurance and associated costs after the delivery to the point of departure in China and loading which are separately itemized in the price of the goods; and

(3) the commissions borne by the seller and separately itemized in the price of the goods.

Article 45: If the transaction value of export goods is undeterminable, customs shall, after gaining an understanding of relevant circumstances and holding consultations on value with the taxpayer, examine and determine the dutiable value of the goods by applying the following values in sequence:

(1) the transaction value of identical goods exported to the same country or region at or about the same time;

(2) the transaction value of similar goods exported to the same country or region at or about the same time;

(3) the value calculated and derived based on the costs of, and additions made for profit and general expenses (including direct expenses and indirect expenses) in connection with the production of identical or similar goods in China, and the costs of transport and insurance and associated costs incurred in China;

(4) the value valuated in accordance with a reasonable method.

PART SIX: EXAMINATION AND DETERMINATION OF DUTIABLE VALUE

Article 46: When making a declaration to customs, the taxpayer shall provide such documents as true invoices, contracts, bills of lading, packing lists, etc. to customs in accordance with the relevant provisions of these Measures.

As requested by customs, the taxpayer shall additionally provide true payment receipts relating to the purchase and sale of the goods and other true commercial documents, written information and electronic data evidencing the truthfulness and accuracy of the declared value.

When an element for which adjustment of the value is required as specified in Section Three of Part Two hereof arises in the purchase and sale of goods, the taxpayer shall truthfully declare the same to customs.

If the elements for which adjustment of the value is required, as mentioned in the preceding paragraph, need to be apportioned, the taxpayer shall apportion them based on objective and quantifiable criteria and provide to customs the basis for such apportionment.

Article 47: Customs may, for the purpose of ascertaining the truthfulness and accuracy of the declared value, exercise the following functions and powers in verifying such value:

(1) reviewing and taking copies of contracts, invoices, accounts, foreign exchange settlement and payment vouchers, receipts, business correspondence and audio and video products relating to the imported goods or export goods and other commercial documents, written information and electronic data that reflect the relationship between the buyer and seller and the business activities between them;

(2) investigating the taxpayer that imported or exported the goods and the citizens, legal persons and other organizations with whom the taxpayer has money or other business transactions with respect to issues relating to the value of the imports or exports;

(3) examining the imports or exports or taking samples thereof to inspect or test the same;

(4) entering the taxpayer's production and business premises or goods storage premises to inspect the goods, and the production and operation activities, connected with the import or export activities;

(5) as approved by the customs chief of the directly superior customs or by the customs chief of a subordinate customs authorized by him/her and on the strength of a Notice of Customs of the People's Republic of China for Account Inquiries (see Appendix 1) and the credentials of the relevant customs personnel, making inquiries concerning the money transactions in the work unit accounts opened by the taxpayer with banks or other financial institutions and reporting relevant results to the banking regulatory authority; and

(6) making inquiries to the tax departments to gain an understanding on the payment of domestic taxes relating to the imports or exports.

When customs exercises the functions and powers specified in the preceding paragraph, the taxpayer and relevant citizens, legal persons and/or other organizations shall truthfully report matters and provide the relevant written information and electronic data. They may not refuse or delay in doing so, or hold back such information.

Article 48: When customs has doubts as to the veracity or the accuracy of the declared value or is of the opinion that the special relationship between the buyer and seller has affected the transaction value, it shall issue a Notice of Customs of the People's Republic of China Questioning a Declared Value (the "Questioning Notice", see Appendix 2) informing the taxpayer or his/her agent as to the reason why it has doubts concerning the declared value. The taxpayer or his/her agent shall provide relevant information or other evidence in writing within five working days of receipt of the Questioning Notice in order to demonstrate the veracity and accuracy of the declared value or that the special relationship between the buyer and seller did not affect the transaction value.

If the taxpayer or his/her agent genuinely has a valid reason why he/she cannot provide the information specified in the preceding paragraph by the specified time, he/she may apply to customs in writing for an extension before the expiration of the specified period of time.

In the absence of special circumstances, the extension shall not exceed 10 working days.

Article 49: If any of the circumstances set forth below arises after customs issues a Questioning Notice, customs shall, after holding consultations on value with the taxpayer, examine and determine the dutiable value of the imported goods or export goods in accordance with the methods specified in Article 6 or 45 hereof:

(1) the taxpayer or his/her agent fails to provide a further explanation within the period of time set by customs;

(2) customs still has reason to doubt the veracity and accuracy of the value declared by the taxpayer or his/her agent after reviewing the relevant information and evidence provided by the taxpayer or his/her agent; or

(3) customs still has reason to believe that the special relationship between the buyer and seller affected the transaction value after reviewing the relevant information and evidence provided by the taxpayer or his/her agent.

Article 50: If customs is of the opinion, after a review, that there is no transaction value available for imported goods, it may bypass the process of questioning the value, and, after holding consultations on value with the taxpayer, examine and determine the dutiable value in accordance with the methods specified in Article 6 hereof.

If customs is of the opinion, after a review, that there is no transaction value available for export goods, it may bypass the process of questioning the value, and, after holding consultations on value with the taxpayer, examine and determine the dutiable value in accordance with the methods specified in Article 45 hereof.

Article 51: If customs notifies a taxpayer concerning consultations on value pursuant to the Measures, the taxpayer shall conduct such consultations with customs within five working days of receipt of the Notice of Customs of the People's Republic of China on Consultations on Value (see Appendix 3). If the taxpayer fails to hold such consultations with customs within the prescribed period of time, he/she shall be deemed to have waived his/her right to hold consultations on value, and customs may directly examine and determine the dutiable value of the imported goods or export goods in accordance with the methods specified in Article 6 or 45 hereof.

When customs holds consultations on value with a taxpayer, it shall prepare a Record of Customs of the People's Republic of China of Consultations on Value (see Appendix 4).

Article 52: If any of the circumstances set forth below is satisfied, subject to the written application of the taxpayer, customs may bypass the process of questioning the value and consultations on value and examine and determine the dutiable value of the imported goods or export goods in accordance with the methods specified in Article 6 or 45 hereof:

(1) goods under one contract are imported or exported in batches and customs has already valued one batch thereof;

(2) the dutiable value of the imported goods or export goods is less than Rmb100,000 or the total amount of duties and import stage taxes collected by customs thereon is less than Rmb20,000; or

(3) the imported goods or export goods are dangerous articles, fresh or live products, perishable goods, goods with a short validity period, waste products, used products, etc.

Article 53: If imported goods are characterized by the circumstances specified in Article 27, 28 or 29 hereof, customs may bypass the process of questioning the value and, after holding consultations on value with the taxpayer, examine and determine the dutiable value in accordance with the methods specified in Article 6 hereof.

If imported goods are characterized by the circumstances specified in Article 27, 28 or 29 hereof, subject to a written application by the taxpayer, customs may bypass the consultations on value and examine and determine the dutiable value thereof in accordance with the methods specified in Article 6 hereof.

Article 54: While customs is examining and determining the dutiable value of imported goods or export goods, the taxpayer may take delivery of the goods provided that he/she provides security to customs in accordance with the law.

Article 55: After customs has examined and determined the dutiable value of imported goods or export goods, the taxpayer may submit a written application requesting that customs provide a written explanation of how it arrived at the dutiable value of his/her imported goods or export goods. customs shall, as requested, issue a Valuation Notification of Customs of the People's Republic of China (see Appendix 5).

PART SEVEN: SUPPLEMENTARY PROVISIONS

Article 56: The following terms used in these Measures have the meanings ascribed to them below:

"In China" or "China proper" means in the People's Republic of China.

"Dutiable value" means the dutiable value used by customs when calculating and levying customs duties.

"Buyer" means a natural person, legal person or other organization that, through the performance of a payment obligation, purchases goods, bears the risks attaching thereto and enjoys the benefits derived therefrom. A buyer of imported goods is a buyer of imported goods sold for export to the People's Republic of China.

"Seller" means a natural person, legal person or other organization that sells goods. A seller of imported goods is a seller of imported goods sold for export to the People's Republic of China.

"Sell for export to the People's Republic of China" means the act whereby imported goods are actually shipped into the People's Republic of China, the ownership of, and risks attaching to, such goods pass from the seller to the buyer and the buyer pays a price therefor to the seller.

"Paid or payable price" means the total amount directly or indirectly paid or payable by the buyer to purchase the imported goods, which as the condition of sale imposed by the seller of the imported goods, is the entire amount paid or to be paid by the buyer to the seller or, for the purpose of performing the seller's obligations, to a third party.

"Indirect payment" means a payment method whereby the buyer, at the request of the seller, pays all or part of the price to a third party or uses it to setoff another money transaction between the buyer and seller.

"Buying commission" means the service charge paid by the buyer to his/her procurement agent to buy the imported goods.

"Brokerage" means the service charge paid by the buyer to the broker representing the interests of both the buyer and the seller in order to buy the imported goods.

"Identical goods" means goods produced in the same country or region as the imported goods and that are the same in all respects, including physical characteristics, quality and reputation. Minor differences in appearance are, however, permitted to exist.

"Similar goods" means goods produced in the same country or region as the imported goods and that, although not alike in all respects, have like characteristics and like component materials, perform the same functions and are commercially interchangeable.

"About the same time" means within 45 days before or after customs accepts the declaration for the goods. When applying the reverse deduction valuation method to examine and determine the dutiable value of imported goods, if the imported goods and identical or similar goods were not sold in China within the 45 days before or after customs accepted the declaration for the imported goods, the period of sale in China may be extended to be within 90 days before or after customs accepted the declaration for the imported goods.

"Generally accepted accounting principles" means the standards of principles and accounting treatment methods generally observed in accounting, in the relevant country or region, including the accrual basis principle, matching principle, historical cost principle, the principle of separation of revenue expenditures and capital expenditures, etc. relating to the recognition of the value of goods.

"Royalty or licence fee" means the charge paid by the buyer of imported goods in order to obtain a licence for, or the transfer of, patent rights, trademark rights, proprietary technology, copyright, distribution rights or sales rights from the holder of the intellectual property rights or the validly authorized party of the rights holder.

"Technical training expenses" means the instruction, meal, lodging, transportation, medical insurance and other such charges for training teachers and personnel paid by the buyer of the imported goods on the basis of the technical guidance on the imported goods provided by the technical personnel assigned to the buyer by the seller or a third party related to the seller.

"Software" means the programs and files used in data processing equipment as specified in the Provisions for the Protection of Computer Software.

"Proprietary Technology" means knowledge, expertise, methods, know-how, etc. relating to non-public processes, formulas, product designs, quality control, testing and marketing management, etc. manifested in the form of drawings, dies, technical information and standards, etc.

"Light processing" means dilution, mixing, sorting, simple assembly, re-packaging or other similar processing.

"Goods of the same class or kind" means goods that fall within a group or range of goods produced by a particular industry or industry sector, and includes identical or similar goods.

"Medium" means merchandise under tariff item No. 85.24 of the PRC Customs Import/Export Tariffs.

"Price verification" means the examination of the veracity and accuracy of the declared transaction value of imported goods or export goods or whether the special relationship between the buyer and seller has affected the transaction value conducted by customs through such methods as the review of documents, checking of data, verification of physical goods and related accounts, etc. when lawfully exercising its functions and powers specified in Article 47 hereof in order to determine the dutiable value of imported goods or export goods.

"Consultations on value" means the act carried out on the basis of the confidentiality of trade secrets whereby the taxpayer and customs mutually exchange the information and data useful in determining dutiable value that is in their possessions when customs uses a valuation method other than the transaction value method.

Article 57: If a taxpayer has an objection to the valuation decision made by customs, he/she shall lawfully pay duties in accordance with the relevant administrative decision rendered by customs and may, in accordance with the law, apply for administrative review to customs of the next higher level. If he/she is dissatisfied with the administrative review decision, he/she may institute an administrative action in a people's court in accordance with the law.

Article 58: If these Measures are violated and such violation constitutes smuggling or a violation of customs surveillance provisions, customs shall handle the same in accordance with relevant provisions of the PRC Customs Law and the General Administration of Customs, Implementing Regulations for Administrative Penalties. If a criminal offence is established, criminal liability shall be pursued in accordance with the law.

Article 59: The General Administration of Customs is in charge of interpreting these Measures.

Article 60: These Measures shall be effective as of May 1 2006. The Measures for the Assessment of the Dutiable Value of Imported and Exported Goods issued with Order of the GAC No.95 on December 31 2001 and the Measures for the Valuation of Royalties of Imported Goods issued with Order of the GAC No.102 on May 30 2003 are repealed simultaneously.

* Appendices are omitted