Laws of the People's Republic of China

the Ministry of Commerce, the Ministry of Public Security, the State Administration for Industry and Commerce and the State Administration of Taxation

Measures for the Administration of the Circulation of Second-hand Automobiles

Order No. 2 [2005] of the Ministry of Commerce, the Ministry of Public Security, the State Administration for Industry and Commerce and the State Administration of Taxation

August 29, 2005

Chapter I General Provisions

Article 1

In order to intensify the administration of the circulation of second-hand automobiles, regulate the business operations of second-hand automobiles, guarantee the legitimate interests and rights of both parties to transactions of second-hand automobiles and facilitate the sound development of the circulation of second-hand automobiles, the present Measures are formulated in accordance with the relevant laws and administrative regulations of the state.

Article 2

The present Measures shall be applicable to the business operations of second-hand automobiles and the activities involving second-hand automobiles within the territory of China.

The term "second-hand automobiles" as mentioned in the present Measures refers to the automobiles that are traded and whose ownership is transferred in the duration from the completion of the registration formalities to the date when the state compulsory discarding standards are satisfied, including three-wheeled automobiles, low-speed motor trucks (former agricultural transport vehicles, hereinafter the same), trailers and motorcycles.

Article 3

The term "second-hand automobile market" refers to a business place that is established under the law and where centralized transactions of second-hand automobiles are conducted and the relevant services are provided for both parties to a transaction.

Article 4

The term "business operator of second-hand automobiles" refers to an enterprise that has gone through the registration formalities with the administrative department of industry and commerce under the law and undertakes the retail, auction, brokerage, appraisal and evaluation of second-hand automobiles.

Article 5

The term "business operations of second-hand automobiles" refers to such activities as retail, auction, brokerage, appraisal and evaluation of second-hand automobiles.

(1)

The term "retail of second-hand automobiles" refers to the business activities whereby a retail enterprise of second-hand automobiles purchases and sells second-hand automobiles;

(2)

The term "auction of second-hand automobiles" refers to the business activities whereby an auction enterprise of second-hand automobiles transfers a second-hand automobile to a bidder that offers the highest price through public bidding;

(3)

The term "brokerage of second-hand automobiles" refers to the business activities whereby a brokerage entity of second-hand automobiles, for the purpose of collecting commissions, engages in such business activities as intermediary, agency, and brokerage to promote other person's transaction of second-hand automobiles; and

(4)

The term "appraisal and evaluation of second-hand automobiles" refers to the business activities whereby an appraisal and evaluation organization of second-hand automobiles appraises and evaluates the technical qualities of a second-hand automobile and the value thereof.

Article 6

The term "direct transaction of second-hand automobiles" refers to a transaction whereby the owner of a second-hand automobile sells his automobile directly to a buyer without the assistance of any retail enterprise, auction enterprise or brokerage entity. Any direct transaction of second-hand automobiles shall be conducted in the second-hand automobile market.

Article 7

The administrative department of commerce, the administrative department of industry and commerce and the taxation department of the State Council shall, pursuant to their respective duties, take charge of the relevant supervision and administration work concerning the circulation of second-hand automobiles.

The provincial-level administrative department of commerce (hereinafter referred to as the administrative department of commerce at the provincial level), the administrative department of industry and commerce and the taxation department of the provinces, autonomous regions and municipalities directly under the Central Government and the city under separate state planning shall, pursuant to their respective duties, take charge of the relevant supervision and administration work concerning the circulation of second-hand automobiles within their jurisdiction.

Chapter II Requirements of and Procedures for Establishment

Article 8

A business operator of a second-hand automobile market, a retail enterprise and brokerage entity of second-hand automobiles shall possess the qualification of an enterprise legal-person and shall go through the registration formalities with the administrative department of industry and commerce according to law.

Article 9

An appraisal and evaluation entity of second-hand automobiles shall satisfy the following requirements:

(1)

Being an independent intermediary organization;

(2)

Having a fixed business place and the necessary facilities to undertake its business operations;

(3)

Having 3 or more professionals engaged in the appraisal and evaluation of second-hand automobiles (including the appraisers of old motor vehicles who have acquired a professional qualification certificate of the state prior to the implementation of the present Measures); and

(4)

Having sound rules and regulations.

Article 10

The establishment of an appraisal and evaluation entity of second-hand automobiles shall conform to the following procedures:

(1)

The applicant shall file a written application with the administrative department of commerce at the provincial level where the appraisal and evaluation entity of second-hand automobiles is to be located and submit the relevant materials as prescribed in Article 9 of the present Measures as well;

(2)

The administrative department of commerce at the provincial level shall, within 20 workdays from the date of receipt of all the application materials, decide whether or not to grant an approval and shall, in the case of approval, issue the Approval Certificate of Appraisal and Evaluation Entity of Second-hand Automobiles; in the case of disapproval, give an explanation; and

(3)

The relevant applicant shall go through the registration formalities with the administrative department of industry and commerce upon the strength of the Approval Certificate of Appraisal and Evaluation Entity of Second-hand Automobiles.

Article 11

An applicant who applies for establishing a foreign-funded second-hand automobile market, retail enterprise, brokerage entity, or appraisal and evaluation entity shall submit to the administrative department of commerce at the provincial level the relevant materials that comply with the provisions of Articles 8 and 9 of the present Measures, the Measures for the Administration of Foreign Investment in the Commercial Field, and other relevant laws on foreign investment. The administrative department of commerce at the provincial level shall, after the preliminary examination, report them to the administrative department of commerce of the State Council within 1 month from the date of receipt of all the application materials. Where a Chinese party to the joint venture is an enterprise group specifically designated in the state plan, the application materials may be directly reported to the administrative department of commerce of the State Council. The administrative department of commerce of the State Council shall, within 3 months from the date of receipt of all the application materials, decide whether or not to grant an approval jointly with the administrative department for industry and commerce of the State Council, and shall, in the case of approval, issue an Approval Certificate of Foreign-funded Enterprises or a new one; in the case of disapproval, give an explanation.

The relevant applicant shall go through the registration formalities with the administrative department for industry and commerce upon the strength of the Approval Certificate of Foreign-funded Enterprises.

Article 12

The establishment of an auction enterprise of second-hand automobiles (including a foreign-funded auction enterprise of second-hand automobiles) shall comply with the relevant provisions of the Auction Law of the People's Republic of China and the Measures for the Administration of Auction, and shall be handled according to the procedures as prescribed by the Measures for the Administration of Auction.

Article 13

The merger and acquisition of any second-hand automobile market or operational subject by any foreign investor or the expansion of business scope of an existing foreign-funded enterprise to engage in second-hand automobiles shall be handled according to the procedures as prescribed by Articles 11 and 12.

Chapter III Behavioral Standards

Article 14

The operator of second-hand automobile market and operational subject of second-hand automobiles shall conduct its business operations and pay taxes according to law, observe the commercial ethics and shall be subject to the supervision and examination as carried out according to law.

Article 15

A seller of second-hand automobiles shall have the ownership or right to dispose of the automobile. An operator of second-hand automobile market and an operational subject of second-hand automobiles shall affirm the identity certificate of the relevant seller, number plate of the vehicle, the Registration Certificate of Motor Vehicles, the Driving License of Motor Vehicles, the effective mark of passing the security technical examination, the policy of insurance of the vehicle, and the payment certificate of relevant taxes and fees.

A state organ or state-owned enterprise or public institution shall, when selling or entrusting an auction of a vehicle thereof, hold the certification regarding asset treatment as produced by this entity or its superior entity.

Article 16

Anyone who sells or auctions a vehicle of which he has no ownership or right to disposal shall be subject to relevant legal liabilities.

Article 17

A seller of second-hand automobiles shall provide the authentic information about the use, repair, accident, and examination, whether the registration of mortgage has been handled, whether the taxes and fees have been paid as well as the time to be discarded. Where a buyer fails to go through the formalities for the registration of transfer due to any concealing or fraud as committed by a seller, the seller concerned shall accept the unconditional return of the vehicle and shall refund the vehicle purchase price, etc.

Article 18

A retail enterprise of second-hand automobiles shall, when selling a second-hand automobile, provide the quality guaranty as well as the after service, which shall be clearly indicated in its business place.

Article 19

A contract shall be concluded for a second-hand automobile transaction. The model contract shall be prepared by the administrative department for industry and commerce of the State Council.

Article 20

Where an owner of a second-hand automobile entrusts any other person to handle the sale of his vehicle, the owner shall conclude a power of attorney with the entrusted person.

Article 21

Where a brokerage entity of second-hand automobiles is entrusted to purchase any second-hand automobile, both parties concerned shall satisfy the following requirements:

(1)

The entrusting party shall provide a legal identity certification to the brokerage entity of second-hand automobiles;

(2)

The brokerage entity of second-hand automobiles shall choose the vehicle in light of the requirements of the entrusting party and shall inform him of the market information;

(3)

Where a brokerage entity of second-hand automobiles accepts the entrustment for purchase, both parties shall conclude a contract; and

(4)

The entrusting party shall bear the relevant expenses as incurred from the appraisal and evaluation of a vehicle that is conducted by a brokerage entity of second-hand automobiles on behalf of and according to the requirements of the entrusting party.

Article 22

Where a transaction of second-hand automobile is concluded, the seller shall deliver to the buyer the vehicle, and the number plate, legal certification and warrant of the vehicle in a timely manner. The legal certification and warrant of a vehicle shall mainly include:

(1)

A Registration Certificate of Motor Vehicles;

(2)

A Driving Certificate of Motor Vehicles;

(3)

The valid mark of passing the security technical examination;

(4)

The proof of payment of vehicle purchase tax;

(5)

The payment certificate of expenses for highway maintenance;

(6)

The payment certificate of vehicle and vessel usage taxes; and

(7)

The policy of insurance of the vehicle.

Article 23

The following vehicles are prohibited from any retail, sale and purchase, auction or brokerage:

(1)

A vehicle that has been discarded as useless or has reached the state standard of compulsory discarding;

(2)

A vehicle under the supervision of the customs that is being mortgaged or for which the seller fails to obtain the approval of the customs for transaction;

(3)

A vehicle that is under seizure or being mortgaged by the people's court, the people's procuratorate or the administrative department of law enforcement;

(4)

A vehicle that is obtained by such illegal criminal means as theft, robbery and fraud;

(5)

A vehicle whose engine number, vehicle identification number or frame number fails to comply with the numbers registered, or has any trace of alteration;

(6)

A vehicle that comes from any smuggle or is illegally assembled;

(7)

A vehicle without the certificate or warrant as prescribed in Article 22 ;

(8)

A vehicle that is not registered with the administrative department of public security within the jurisdiction; or

(9)

A vehicle that is prohibited from operation by any law or administrative regulation of the state.

Where an operator of second-hand automobile market or a business operator of second-hand automobiles finds a vehicle under any of the circumstances as prescribe in item (4), (5) or (6), he shall report it to the administrative departments of law enforcement, such as the public security organ and the administrative department for industry and commerce.

An operator of second-hand automobile market or an operational subject of second-hand automobiles shall bear joint compensatory liabilities and any other legal liabilities for any vehicle that is unlawfully traded.

Article 24

Where a brokerage enterprise of second-hand automobiles or an auction enterprise of second-hand automobiles sells or auctions a second-hand automobile, it shall produce to the buyer an invoice as uniformly printed under the supervision of the taxation authority.

As for a direct transaction of second-hand automobile or a transaction of second-hand automobile made through a brokerage of second-hand automobiles, the operator concerned of second-hand automobile market shall produce to the buyer an invoice as uniformly printed under the supervision of the taxation authority according to the provisions.

Article 25

Where a transaction of second-hand automobile is concluded, the present owner of the vehicle shall, in accordance with the relevant laws and regulations, go through the formalities for the registration of transfer upon the strength of the invoice as uniformly printed under the supervision of the tax authority.

Article 26

An operator of second-hand automobile market shall provide a fixed place and facilities for the operational subjects of second-hand automobiles, and shall provide its clients with the conditions for handling such formalities as appraisal and evaluation, registration of transfer, insurance and tax payment. A retail enterprise or a brokerage institution of second-hand automobiles shall, according to the requirements of its clients, handle such formalities as appraisal and evaluation, registration of transfer, insurance and tax payment on their behalf.

Article 27

The principles of free will of both parties to a transaction shall be adhered to in the appraisal and evaluation of a second-hand automobile, which may not be conducted in a compulsory manner. Any second-hand automobile in the form of state-owned assets shall be subject to appraisal and evaluation according to the relevant provisions of the state.

Article 28

An appraisal and evaluation entity of second-hand automobiles shall, pursuant to the principles of "being objective, authentic, impartial and open", carry out the business operations of appraisal and evaluation of second-hand automobiles in accordance with the laws and regulations of the state, and produce the relevant reports on the appraisal and evaluation of vehicles; and shall bear the legal liabilities for such contents as the appraisal on technical qualities of vehicles in the said report, including whether or not the vehicle is involved in a case or a traffic accident.

Article 29

An appraisal and evaluation entity of second-hand automobiles and the staff thereof may, in accordance with the provisions of the state, engage in such appraisal operations as the appraisal of a vehicle that is involved in an legal case or accident.

Article 30

The operator of second-hand automobile market and operational subjects of second-hand automobiles shall put on record the purchase and sale, auction, brokerage and the appraisal and evaluation of second-hand automobile.

Article 31

The establishment of a second-hand automobile market or a store of a retail enterprise of second-hand automobiles shall comply with the relevant provisions on the development of the city where it is located as well as on the urban commercial development.

Chapter IV Supervision and Administration

Article 32

The principles of breaking monopoly, encouraging competition, promoting development and being fair, impartial and open shall be adhered to in the supervision and administration of second-hand automobiles.

Article 33

An archival filing system of the operators of second-hand automobile markets and operational subjects of second-hand automobiles shall be established. The operators of second-hand automobile markets and operational subjects of second-hand automobiles that have registered with the administrative department for industry and commerce according to law and obtained the business license shall, within 2 months as of obtaining their business license, file for record with the administrative department of commerce at the provincial level, The administrative department of commerce at the provincial level shall report the filing of the operators of second-hand automobile markets and operational subjects of second-hand automobiles to the administrative department of commerce of the State Council on a periodical base.

Article 34

A reporting and publicity system of information on the circulation of second-hand automobiles shall be established and brought into perfection. An operator of second-hand automobile market and an operational subject of second-hand automobiles shall, through the local administrative department of commerce, periodically report such information as the volume and value of trade to the administrative department of commerce at the provincial level, which shall gather the aforesaid information and report it to the administrative department of commerce of the State Council. The administrative department of commerce of the State Council shall publicize the information on the circulation of second-hand automobiles to the society.

Article 35

The administrative department of commerce and the administrative department for industry and commerce shall, pursuant to their respective duties, take effective measures to intensify the administration and supervision of the operators of second-hand automobile market and the operational subjects of second-hand automobiles, investigate into and punish irregularities, maintain the market order, and safeguard the legitimate rights and interests of consumers.

Article 36

The administrative department for industry and commerce of the State Council shall, in conjunction with the administrative department of commerce, establish credit archives of the operators of second-hand automobile markets and operational subjects of second-hand automobiles and periodically publicize the name list of regulation-breaking enterprises.

Chapter V Supplementary Provisions

Article 37

The present Measures shall go into effect as of October 1, 2005. The former Notice of the General Office of the Ministry of Commerce on Regulating the Administration of the Appraisal and Evaluation of Used Motor Vehicles (Shang Jian Zi [2004] No. 70), Notice on Strengthening the Administration of the Used Motor Vehicle Market (Guo Jing Mao Mao Yi [2001] No. 1281) and Measures for the Administration of Used Motor Vehicle Transactions (Nei Mao Ji Zi [1998] No. 33) as well as all kinds of documents as promulgated on the basis thereof shall be simultaneously repealed.