Laws of the People's Republic of China

    For the purpose of encouraging the Chinese-foreign cooperative
exploitation of offshore oil, the Customs duties and consolidated industrial
and commercial taxes on the imports and exports for oil operations are
stipulated as follows:

    1. The following imports shall be exempt from duties or taxs:

    (1) the machinery, equipment, spare parts and materials, the direct use of
which in prospecting operations has been verified and approved;

    (2) the machinery, equipment, spare parts and materials, the requirement
for the import of which has been verified and approved for direct use in
exploiting operation in accordance with Articles 19 to 21 of the Regulations
of the People's Republic of china on the Exploitation of Offshore Petroleum
Resources in Cooperation with Foreign Enterprises;

    (3) the parts, components and materials, the requirement for the import
of which has been verified and approved for use in the manufacture in China
of the machinery and equipment to be used in offshore oil exploitation
operations (includings prospecting, well drilling, well cementation, well
survey, well logging, oil recovery, well repair, etc.);

    (4) machinery and other engineering equipment, which are temporarily
imported by foreign contractors for the exploitation of offshore oil, and of
which the re-export is guaranteed, shall be exempt from duties at the time
of import or re-export.

    2. The crude oil due to foreign contractors as stipulated in the contracts
shall be exempt from export duties when it is shipped abroad.

    3. Customs duties and consolidated industrial and commercial taxes shall,
in accordance with the Import and Export Duty Tariff of the Customs of the
People's Republic of China and the Draft Regulations of the People's Republic
of China on Consolidated Industrial and Commercial Taxes, be levied on the
imports or exports beyond the ranges stipulated in Article 1 and Article 2.