1. One Scenario

2. Second Scenario

3. Manufacturing and Export Zones

4. Characteristics of SCZs Goods into SCZs bonded, free from the Import Taxes and exempted from the import license Bonded goods stored in SCZs can be further processed (except in BLPs) and sold into the Chinese domestic market Import Taxes paid by Chinese customer; Goods from non-SCZs China enter SCZs (except FTZs), the local suppliers in China may claim export VAT refund! Goods sourced from non-SCZs may be put into and stored in the SCZs for export sale purposes; The goods transported between SCZs keeps bonded status.

5. General or Processing Trade ? Cross-border trade with China classifications: General Trade or Processing Trade; General Trade -import duties and Value Added Tax (VAT 17%) are levied upon importation; Processing Trade- model whereby materials to be used in export production are imported into China under bonded status (i.e. free from import duties and VAT).

6. Manufacturing and Export Zones

7. Processing Trade Characteristics of Special Customs Zones (“SCZs”): Bonded System Goods can be imported from overseas into SCZs in China free from import duties and VAT (“Import Taxes”) and exempted from normal import/export licenses. Bonded goods monitored by China customs, Goods Classified as processing trade or bonded logistics. From overseas to SCZs: Goods enter SCZs in bond upon the entry filing customs clearance. From SCZs to non-SCZs: Sale of goods into non-SCZs from SCZs is regarded as importation- Import Taxes apply.

8. Manufacturing and Export Zones Raw Materials(e.g. steel) may be imported into these zones free from import duties and VAT; Customs is also encouraging more high-value added activities to be performed inside SCZ;

9. Customs Valuation Dutiable value of imported goods should be assessed based on the transaction value (defined as the complete actual price of the goods, including both direct and indirect payments made by the buyer to the seller). Final price actually paid or payable is the value that must be declared to Customs;

10. Customs Duties Non-dutiable cost elements include after-sales or post-implementation services (training, assembly, maintenance and warranty services); Other cost elements such as finance charges, inspection fees, sales and marketing costs, and certain types of commissions can also be deducted based on a review of the supplier agreements and payment structure.

11. Tariff Classification Harmonised System (HS) Code for tariff classification -applicable customs duty rates and import licences/certificates for specific imported goods are determined according to their HS Code; HS Codes for China eight to 10 digits.

12. Features of SCZ From non-SCZs to SCZs: In general, the sale of goods from non-SCZs to SCZs is exportation, all customs export clearance procedures applicable; No customs duty unless goods sourced from non- SCZs fall into the export customs duty dutiable category; Goods to SCZs under processing trade may be not treated as exported, i.e. NO VAT refund!

13. Manufacturing and Export Zones Questions please Contact us at +371 2678 1636 Or thucto@icloud.comthucto@icloud.com Or visit us at www.ceuba.net www.ceuba.net

14. Manufacturing and Export Zones