1. TP & CV China Customs 2014 WCO REVENUE CONFERENCE

2. MNEs in China China has become the world second largest country to absorb foreign investment China has become the world second largest country to absorb foreign investment 2013, Shanghai Customs has 15 large MNEs affiliated associations among its top 20 tax- payers. With total tax revenue accounting for 23% of total amount of Shanghai Customs. 2013, Shanghai Customs has 15 large MNEs affiliated associations among its top 20 tax- payers. With total tax revenue accounting for 23% of total amount of Shanghai Customs.

3. Transfer Pricing Challenges for Customs Valuation TCCV and customs authorities focus on TP TCCV and customs authorities focus on TP China Customs has not only accumulated rich experience, but also facing challenges in respect of Customs control on transfer pricing China Customs has not only accumulated rich experience, but also facing challenges in respect of Customs control on transfer pricing

4. N o practical guidance as to transfer pricing for Customs purposes Difficult to formulate a unified practical guidance Difficult to formulate a unified practical guidance Circumstances surrounding the sale & Commentary 23.1 can not meet the need of Customs authorities Circumstances surrounding the sale & Commentary 23.1 can not meet the need of Customs authorities

5. Significant divergences between transfer pricing and Customs valuation A lot in common, but significant divergence in their application. A lot in common, but significant divergence in their application. TNMM doesn ’ t focus on the reasonableness of expenses TNMM doesn ’ t focus on the reasonableness of expenses A low imported price with a high expense A low imported price with a high expense

6. Inappropriate transfer pricing policies are used to evade customs duty Transfer pricing policy with lower tax burden Transfer pricing policy with lower tax burden Difference between TP practice and TP policy Difference between TP practice and TP policy Failure to declare subsequent transfer pricing adjustments Failure to declare subsequent transfer pricing adjustments Manipulation of the arm’s length range Manipulation of the arm’s length range

7. Great Progress of TP study WCO-OECD joint hands WCO-OECD joint hands Commentary 23.1 Commentary 23.1 Case Study on TNMM by USA Case Study on TNMM by USA Case Study on RPM by China Case Study on RPM by China

8. Further the studies on TP Change the research findings into tools and instruments as guidance Change the research findings into tools and instruments as guidance Promote the amendment and updating of WTO Valuation Agreement when appropriate Promote the amendment and updating of WTO Valuation Agreement when appropriate Improve mechanism of transfer pricing audit Improve mechanism of transfer pricing audit - registration regime of transfer pricing - registration regime of transfer pricing -declaration of subsequent TP adjustments -declaration of subsequent TP adjustments

9. Enhance coordination between tax and Customs authorities A unified management of transfer pricing and joint audits are expected. A unified management of transfer pricing and joint audits are expected. China Customs plans to carry out a audit of transfer pricing on selected industries and enterprises later this year. Sharing information with China tax authorities China Customs plans to carry out a audit of transfer pricing on selected industries and enterprises later this year. Sharing information with China tax authorities

10. Encourage stronger links and cooperation with MNEs Cooperation between Customs and business community is a useful basis for creating a win-win situation in respect of company compliance and trade facilitation. Cooperation between Customs and business community is a useful basis for creating a win-win situation in respect of company compliance and trade facilitation. Improve clearance efficiency and enhance compliance. Improve clearance efficiency and enhance compliance.

11. THANK YOU