(All information in this document is authentic in Chinese. English is provided for reference only. In case of any discrepancy, the Chinese version shall prevail.)

Circular on Hainan Free Trade Port’s "Zero-tariff" Policy for Raw and Auxiliary Materials

Department of Finance of Hainan Province,

Haikou Customs,

Hainan Provincial Tax Service of State Taxation Administration:

In order to implement the Overall Plan for the Construction of Hainan Free Trade Port, with the approval of the State Council, the "zero-tariff" policy for raw and auxiliary materials imported by Hainan Free Trade Port is hereby notified as follows :

I. Before the whole island of Hainan enters into independent customs operation, raw and auxiliary materials imported by enterprises registered in Hainan Free Trade Port as independent legal person entities to be processed on the island for manufacturing or service trade which need raw materials from abroad and target the overseas market will be exempted from import tariffs, import value-added tax and consumption tax.

II. Raw and auxiliary materials exempt from tarrifs are listed in the appendix. The contents of the list are subject to adjustments by the Ministry of Finance (the "MOF") and relevant departments based on Hainan's actual needs and regulatory conditions.

III. The parts and components listed in the appendix are subject to the "zero-tariff" policy and shall be used for repairs of aircrafts and vessels (including repairs of relevant parts and components), and will be exempted from import tariffs, import value-added tax and consumption tax when any of the following conditions is met:

1. they are used to repair aircrafts and vessels (including relevant parts and components) that enter into China and will be moved out of the country;

2. they are used for the repairs of aircrafts (including relevant parts and components) operated by aviation enterprises whose main operating base is located in Hainan; or

3. they are used for the repairs of vessels (including relevant parts and components) that are registered in Hainan and operated by shipping companies registered in Hainan as independent legal person entities.

IV. Zero-tariff raw and auxiliary materials should only be used for the production of enterprises in Hainan Free Trade Port and should be subject to customs supervision. They should not be transferred on or outside of the island. If the said transfer is necessary due to corporate bankruptcy and other reasons, approval shall be obtained and relevant payment of taxes shall be completed. For goods processed and manufactured with raw and auxiliary materials subject to "zero-tariff", if they are sold on the island or in the mainland, payment of the import tariffs, import value-added tax and consumption tax imposed on the corresponding raw and auxiliary materials shall be made, and domestic value-added tax and consumption tax will be levied in accordance with regulations. Export of goods processed and manufactured with raw and auxiliary materials subject to "zero-tariff" shall be governed by existing tax policies.

V. Enterprises that volunteer to pay import value-added tax and consumption tax when importing zero-tariff raw and auxiliary materials may apply at customs declaration.

VI. Relevant departments shall strengthen supervision through information-based methods and other means to prevent and control possible risks, promptly investigate and deal with violations, and ensure the steady implementation of the "zero-tariff" policy for raw and auxiliary materials. Relevant departments of Hainan shall improve information sharing in aircrafts and vessels supervision.

VII. The Circular shall come into force as of December 1, 2020.

Appendix: Hainan Free Trade Port List of Zero-tariff Raw and Auxiliary Materials

Ministry of Finance

General Administration of Customs

State Taxation Administration

November 11, 2020