(Promulgated by the State Plan Commission on October 31, 1987)

(Promulgated by the State Plan Commission on October 31, 1987) Whole document Measures for the Substitution of Importation by Products Manufactured by Chinese-Foreign Equity Joint Ventures and Chinese-Foreign Cooperative Joint Ventures (Promulgated by the State Plan Commission on October 31, 1987) Article 1 These measures are specially formulated pursuant to the "Provisions of the State Council for the Encouragement of Foreign Investment" in order to encourage foreign businessmen to invest in and establish technologically advanced enterprises, and assist enterprises with foreign investment to achieve a balance of foreign exchange receipts and payments.

Article 2 These measures are applicable to the productive Chinese-foreign equity joint ventures and cooperative joint ventures (hereinafter "joint venture" and "cooperative venture") which are capable of providing the advanced technology needed by the country and involve in developing new products and upgrading the existing products.

Article 3 Applications for import substitution treatment may be made if the following conditions are met: 1. Temporary difficulties in balancing foreign exchange in the initial period of operation are encountered in respect of the product made by a joint venture or cooperative venture which has advanced technology needed by the country and which is in the process of localizing source; 2. The products produced by the above mentioned enterprises are need to be imported at present and will be needed to be imported in the next few years by central and local authorities and relevant departments; and 3. The specification, performance, term of delivery and the conditions of technical service and training of those products applied for import substitution should meet the requirements of domestic customers, and the products must be confirmed to reach the same quality standard as import products of the same kind after being tested by a State-level product quality examination center, and in principle, the prices are not higher than current prices in international market.

Article 4 All enterprises which intending to ask for import substitution shall request import substitution in the project proposal submitted for examination and approval. In the feasibility study report submitted for examination and approval, the proportion of the products for export and domestic-sales, and the degree for increasing the indigenous components and parts of the products shall be clearly specified. The feasibility of import substitution (including the quantity of import products and the amounts of foreign exchange involved on a yearly basis) shall also be fully demonstrated or assessed.

Article 5 In accordance with the principle of administrative separation, the application for import substitution of products of joint ventures and cooperative ventures should be examined and approved either by the central authorities or by local authorities (or departments). As for the project within the examination and approval limits of the central authorities, the application for import substitution shall be examined and approved by the State Planning Commission. As for the project within the examination and approval limits of the local authorities or departments the application for import substitution shall be examined and approved by the local planning commission or departments themselves.

Article 6 Import substitution for the projects within the examination and approval limits of the central authorities shall be examined and approved by the State Planning Commission: 1. In the case of products listed in the Central medium or long-term import plan, except for those products for which foreign long-term trade agreements have already been signed and those products for which imports must be arranged, import substitution may be approved in advance for the period covered by the central import plan at the time the feasibility study report is examined and approved.

2. In principle, advance approval shall not be given for import substitution of products which are not listed in the Central medium or long-term import plan. However, if such products are listed in the Central annual import plan and import substitution is possible, the enterprises may apply to the State Planing Commission for import substitution. After approval is granted the formalities for import substitution shall be handled by the Ministry of Foreign Economic Relations and Trade and shall be valid for that given year only.

3. As for the products not listed in the central medium and long-term or annual import plan, the enterprises may, where importation of the products is to be made locally in the given year, apply to local planning commission. After the approval is granted, the formalities for import substitution shall be handled by the local departments of foreign economic relations and trade.

Article 7 Import substitution for projects within the examination and approval limits of local authorities should be examined and approved by the local authorities and departments: 1. In the case that the products are listed in the medium and long-term or annual import plan of provinces, autonomous regions and municipalities directly under the Central Government and suitable for import substitution, the planning commission of the provinces, autonomous regions and municipalities directly under the Central Government can approve import substitution in advance for the period covered by the local import plan; reference shall be made to central examination and approval measures.

2. In the case that the products are not listed in the medium and long-term or annual import plan of one region, but such products is to be imported into that-region or other regions, import substitution may be conducted transregionally. The enterprises may apply directly to the planning commission of provinces and autonomous regions and municipalities directly under the Central Government which is importing the products.

After approval is granted, the import substitution formalities shall be handled by the local departments of foreign economic relations and trade of such province, autonomous region or municipality directly under the Central Government.

3. In the case that the products imported by the departments using their own foreign exchange, the enterprises may apply directly to such department for import substitution. If such department consents, it shall handle the import substitution formalities.

Article 8 The above mentioned products of import substitution which have been approved by the State or local planning commission (or department) in advance for the period covered by the medium and long-term plan, must be further checked and ratified each year, in accordance with the situation of such import plan in such year.

Under the same conditions, domestic users shall select and use the products approved for import substitution in reference to imports.

All levels of import administration and import examination and approval authorities shall provide guidance to domestic users and encourage them to buy the products produced by joint ventures and cooperative ventures which conform to the conditions of import substitution, in reference to imports.

Article 9 Domestic users shall pay the foreign exchange to joint ventures and cooperative ventures totally or partially when they buy products approved for import substitution according to the conditions agreed by both parties upon permission by the foreign exchange central authorities.

Article 10 The State Economic Commission shall draw up and promulgate a list of mechanical and electric products of import substitution and relevant administrative measures, and provide the guidance to the domestic users to buy the products on the list, in reference to imports.

Joint ventures and cooperative ventures that produce the products on such list, may enter bids in tenders organized by the China Machine and Electrical Equipment Tendering Center (or other tendering companies approved by the State Economic Commission). If an enterprise wins the render, it may carry out the import substitution on the basis of the certificate issued by the Center.

Article 11 The import procedures of the materials and parts which must be imported by the joint ventures and cooperative ventures to produce the import substitution products shall be handled according to the Article 4 of "Implementation Measures of the Ministry of Foreign Economic Relations and Trade Concerning the Application for Import and Export Licenses by Enterprises with Foreign Investment". When the products mentioned above are supplied to domestic users, it shall be handled according to the Article 5 of the" Measures of the Customs Authority of the People's Republic of China for the Control of Materials and Parts Required to be Imported for the Performance of Product Export Contracts by Enterprises with Foreign Investment".

Article 12 The joint ventures and cooperative ventures whose products have been approved for import substitution shall: 1. strictly carry out the contract requirements regarding the proportion of export sales and the process of raising the indigenous components and parts of the products, 2. strive maintain the technical performance and quality of the products at the world advanced levels; and 3. deliver the products according to the quantity and the time required in the contract. The enterprises which cause economic losses to users because of problems in the amount or quality of products or the delivery time, etc., shall bear corresponding economic responsibility.

4. provide the best service to users.

Article 13 Once the products of joint ventures and cooperative ventures being approved for import substitution, such products shall not be included in the allocation plan of the materials produced in domestic.

Article 14 The State Planning Commission shall be responsible for interpreting these Measures.

Article 15 These Measures shall enter into force on the date of promulgation.

der the Central Government which is importing the products.

After approval is granted, the import substitution formalities shall be handled by the local departments of foreign economic relations and trade of such province, autonomous region or municipality directly under the Central Government.

3. In the case that the products imported by the departments using their own foreign exchange, the enterprises may apply directly to such department for import substitution. If such department consents, it shall handle the import substitution formalities.

Article 8 The above mentioned products of import substitution which have been approved by the State or local planning commission (or department) in advance for the period covered by the medium and long-term plan, must be further checked and ratified each year, in accordance with the situation of such import plan in such year.

Under the same conditions, domestic users shall select and use the products approved for import substitution in reference to imports.

All levels of import administration and import examination and approval authorities shall provide guidance to domestic users and encourage them to buy the products produced by joint ventures and cooperative ventures which conform to the conditions of import substitution, in reference to imports.

Article 9 Domestic users shall pay the foreign exchange to joint ventures and cooperative ventures totally or partially when they buy products approved for import substitution according to the conditions agreed by both parties upon permission by the foreign exchange central authorities.

Article 10 The State Economic Commission shall draw up and promulgate a list of mechanical and electric products of import substitution and relevant administrative measures, and provide the guidance to the domestic users to buy the products on the list, in reference to imports.

Joint ventures and cooperative ventures that produce the products on such list, may enter bids in tenders organized by the China Machine and Electrical Equipment Tendering Center (or other tendering companies approved by the State Economic Commission). If an enterprise wins the render, it may carry out the import substitution on the basis of the certificate issued by the Center.

Article 11 The import procedures of the materials and parts which must be imported by the joint ventures and cooperative ventures to produce the import substitution products shall be handled according to the Article 4 of "Implementation Measures of the Ministry of Foreign Economic Relations and Trade Concerning the Application for Import and Export Licenses by Enterprises with Foreign Investment". When the products mentioned above are supplied to domestic users, it shall be handled according to the Article 5 of the" Measures of the Customs Authority of the People's Republic of China for the Control of Materials and Parts Required to be Imported for the Performance of Product Export Contracts by Enterprises with Foreign Investment".

Article 12 The joint ventures and cooperative ventures whose products have been approved for import substitution shall: 1. strictly carry out the contract requirements regarding the proportion of export sales and the process of raising the indigenous components and parts of the products, 2. strive maintain the technical performance and quality of the products at the world advanced levels; and 3. deliver the products according to the quantity and the time required in the contract. The enterprises which cause economic losses to users because of problems in the amount or quality of products or the delivery time, etc., shall bear corresponding economic responsibility.

4. provide the best service to users.

Article 13 Once the products of joint ventures and cooperative ventures being approved for import substitution, such products shall not be included in the allocation plan of the materials produced in domestic.

Article 14 The State Planning Commission shall be responsible for interpreting these Measures.

Article 15 These Measures shall enter into force on the date of promulgation.