Transcript No Slide Title

Trading and Distribution in China
The New Regulatory Regime
By Adam W. Schorr
COUDERT BROTHERS LLP
333 South Hope Street, 23rd Floor
Los Angeles, CA 90071
TEL : +1 213 229 2900
FAX : +1 213 229 2999
E-MAIL:
[email protected]
North America: Los Angeles, New York, Palo Alto, San Francisco, Washington
Europe: Antwerp, Berlin, Brussels, Frankfurt, Ghent, London, Milan, Moscow, Paris,
St. Petersburg, Stockholm
Asia/Pacific: Almaty, Bangkok, Beijing, Hong Kong, Shanghai, Singapore, Sydney, Tokyo
Associated Offices: Budapest, Jakarta, Mexico City, Prague, Rome
China’s Trade Commitments under the
WTO
By December 11, 2004:

China shall grant all enterprises the right to trade
in all goods throughout China.

FIEs shall have rights to engage in trade no less
favorable than Non-FIEs.
Current FIE Import/Export Rights
General FIEs


FIEs may import machinery, equipment, raw
materials for manufacturing or operational needs.
FIEs may export products they manufacture.
Current FIE Import/Export Rights
Special FIEs


Only Sino-Foreign Joint Venture Foreign Trade
Companies have substantial trading rights:
• Foreign majority ownership allowed
• $6M minimum capital requirement
• May only engage in trade of approved list of
goods
• May engage in wholesale activity
• No geographical restrictions
Some Trading Rights for FIE holding companies
and R&D centers
New FIE Import/Export Rights

New regulations effective as of July 1, 2004: all
FIEs will be allowed to engage in the import and
export of a wide range of goods.
Current FIE Rights for Distribution of
Goods

Currently retail/wholesale business only open to
JVs
• U.S. party minimum annual turnover of $2B
/$2.5 B
• U.S. party minimum assets $200M/$300M
• Minimum registered capital $3.6M/$9.6M
• Chinese majority interest required in many
instances
• Maximum business term of 30 years
New FIE Rights for Distribution of
Goods

New Regulations, effective December 11, 2004:
• All FIEs may engage in commercial distribution
at the retail and wholesale levels.
• Minimum registered capital of
RMB300,000/RMB 500,000.
• No minimum asset or turnover requirements.
Opportunities



Increase in number of customers of U.S. export
goods.
Exporters may establish an FIE to import U.S.
goods.
FIE may distribute imported goods in China, and
sell imported goods directly to end-users.
Continuing Trade Restrictions
Import Restrictions
4 categories of import goods remain in effect:
• Prohibited
• Restricted (subject to quota or license)
• Subject to tariff
• Automatic Import License


State Trading
• The Chinese government may continue to
trade in certain goods (i.e. vegetable oils) and
restrict trade in such goods by non-state
enterprises through 2006.
Uncertainties


Trade
• The right to foreign trade will be available
upon “registration.” The registration process,
processing period, etc. have not yet been
clarified.
Distribution
• Books, newspapers, periodicals,
pharmaceuticals
• Compliance documents
• Treatment of existing FIEs (expansion of
business scope)
Coudert Brothers llp
COUDERT BROTHERS LLP
333 South Hope Street, 23rd Floor
Los Angeles, CA 90071
TEL : +1 213 229 2900
FAX : +1 213 229 2999
E-MAIL:
[email protected]
North America: Los Angeles, New York, Palo Alto, San Francisco, Washington
Europe: Antwerp, Berlin, Brussels, Frankfurt, Ghent, London, Milan, Moscow, Paris,
St. Petersburg, Stockholm
Asia/Pacific: Almaty, Bangkok, Beijing, Hong Kong, Shanghai, Singapore, Sydney, Tokyo
Associated Offices: Budapest, Jakarta, Mexico City, Prague, Rome