Shanghai Municipality, Circular on Launching a Pilot Project for the Parallel Import of Motor Vehicles in the China (Shanghai) Pilot Free Trade Zone

2. In line with the principles of “steady progress, compliance, orderliness and control of risks”, the Shanghai municipal commerce, pilot FTZ management committee, customs, inspection and quarantine, industry and commerce and other relevant departments shall carry out the work within their respective purviews so as to ensure the steady and stable unfolding of the pilot project.

The Shanghai Municipal Commission of Commerce shall, in concert with relevant departments such as the pilot FTZ management committee, coordinate the work of promoting the pilot project for the parallel import of motor vehicles and recognise pilot project enterprises. The pilot FTZ management committee shall boost work such as developing the backtracking system for the product quality of parallel imported motor vehicles and the information management system for parallel imported motor vehicle distributors, and promote the economic development of the platform in the public service sector relating to parallel imported motor vehicles, which platform will integrate the relevant ancillary functions of the government functional departments and effectively concentrate the publicly oriented services such as the repair and maintenance, services, and parts and components supply of motor vehicles. The service functions and models of third party public service platforms established in the Pilot FTZ must be filed with the pilot FTZ management committee for the record. Shanghai Customs is responsible for duly carrying out tasks such as the customs clearance and surveillance of parallel imported motor vehicles, and levy of customs duties and taxes. The Shanghai Entry-exit Inspection and Quarantine Bureau is responsible for duly carrying out the quality and safety oversight work involving determining whether parallel imported motor vehicle products comply with the mandatory requirements of relevant state quality standards and technical specifications as well as mandatory product certification and access requirements, and, together with relevant departments, duly carrying out follow-up oversight work relating to parallel imported motor vehicles, such as the “three guarantees”, recalls and investigation of defects, in conjunction with relevant departments. The Shanghai Municipal Administration for Industry and Commerce is responsible for overseeing motor vehicle dealing, and safeguarding the lawful rights and interests of consumers and a market order characterised by fair competition.

3. An enterprise that satisfies the following conditions may apply to engage in business relating to the pilot project for the parallel import of motor vehicles:

(1) having engaged in the sale of motor vehicles for at least five years, having been continuously profitable during the most recent three years and having a motor vehicle sales turnover during the past financial year exceeding Rmb400 million;

(2) having maintenance and repair, service, and parts and components supply outlets and facilities appropriate for the size of its operations; an enterprise that is unable to satisfy the requirements of this item may rely on a third party public service platform in the Pilot FTZ to provide the relevant services, and may participate in the pilot project only after meeting the requirements;

(3) having a good reputation, procurement channels, and experience in the motor vehicle sales service industry; and

(4) having registered in the Pilot FTZ a wholly-owned subsidiary or controlled company with motor vehicle distribution qualifications to serve as distributor in the pilot project for the parallel import of motor vehicles.

4. An enterprise applying to participate in the pilot project shall submit the following application materials to the Shanghai Municipal Commission of Commerce or the pilot FTZ management committee:

(1) a written application to engage in business relating to the pilot project for the parallel import of motor vehicles, which shall cover an overview of the applying enterprise, its business performance, distribution of its business, and its repair and maintenance network; plan for engaging in business relating to the pilot project for the parallel import of motor vehicles, mainly including the source of the vehicles, its import pattern, after-sales services, parts and components supply, as well as details of the compliance of the imported motor vehicle products with the mandatory requirements of state quality standards and technical specifications and details of mandatory product certification;

(2) a written undertaking of its intent to register a motor vehicle distributor in the Pilot FTZ to engage in business relating to the pilot project for the parallel import of motor vehicles;

(3) a photocopy of the pilot project enterprise's business licence of an enterprise with legal personality;

(4) its financial reports for the most recent three years issued by an accounting firm;

(5) documentation evidencing business registration of its relevant distribution network and after-sales service network; and

(6) other relevant materials.

5. Once an enterprise applying for the pilot project is approved, it shall provide, in accordance with relevant state provisions for the administration of import licensing for mechanical and electrical products and relevant Ministry of Commerce requirements, the appropriate import application materials and apply to the Ministry of Commerce for an automatic motor vehicle import permit.

6. A pilot project enterprise and its motor vehicle distributor registered in the Pilot FTZ are the entities responsible for backtracking concerning the quality of their parallel imported motor vehicle products, shall perform in accordance with the law obligations such as product recall, quality assurance, after-sales service, “three guarantees” of motor vehicles and calculation of average fuel consumption, are not permitted to import used motor vehicles or illegally modified motor vehicles and shall be responsible for using the plan permitted by the original manufacturer to eliminate quality defects. The motor vehicle products imported by the motor vehicle distributor shall comply with the mandatory requirements of relevant state quality standards and technical specifications and state specified access requirements, such a mandatory product certification. Import shall be accomplished mainly through the Shanghai port, and the sales territory shall mainly be the pilot project enterprise's existing sales territory.

7. A pilot project enterprise and its motor vehicle distributor registered in the Pilot FTZ shall comply with relevant requirements of current state laws and regulations and this Circular in carrying out their relevant business and operational activities. If a relevant regulator discovers an act not in compliance with the requirements of the Circular, and there is a law or set of regulations specifying the same, the relevant department shall impose penalties in accordance with the law. If laws and regulations are silent thereon, the author of such act shall be ordered to rectify the matter within a specified period of time or halt the pilot project business.