August 23rd, 2005

Chapter I General Provisions

Article 1 With a view to regulating direct selling acts, strengthening supervision over direct selling activities,
preventing fraud and protecting the legitimate rights and interests of consumers and public interests, the present
Regulations are formulated.

Article 2 The present Regulations shall be subject to the direct selling activities undertaken within the territory of
the People's Republic of China.
The scope of direct selling products shall be determined and promulgated by the competent department of commerce of the
State Council jointly with the administrative department of industry and commerce of the State Council on the basis of the
development of the direct selling industry and the demands of consumers.

Article 3 The term "direct selling" as mentioned in the present Regulations refers to a type of business mode, in
which direct selling companies recruit door-to-door salesmen to sell products directly to ultimate consumers(hereinafter
referred to as consumers)outside the companies' fixed places of business.
The term "direct selling companies" as mentioned in the present Regulations refers to the companies which, upon
approval, sell products by way of direct selling according to the provisions of the present Regulations.
The term "door-to-door salesmen" as mentioned in the present Regulations refers to any personnel who sell products directly
to consumers outside the fixed places of business.

Article 4 Any company that is established within the territory of the People's Republic of China (hereinafter
referred to as the company) may, in accordance with the provisions of the present Regulations, apply for establishing
a direct selling company that sells the products produced by itself or the products produced by its parent company or
holding company by way of direct selling.
A direct selling company may obtain the trade right and distribution right according to law.

Article 5 When undertaking direct selling activities, no direct selling company or its door-to-door salesman may
conduct any fraudulent or misleading acts and other drumbeating and sales promotion acts.

Article 6 The competent commerce department and the administrative department of industry and commerce of the
State Council shall, in line with the division of their responsibilities and the provisions of the present
Regulations, be responsible for conducting supervision and administration on direct selling companies and door-to-door
salesmen as well as their direct selling activities.

Chapter II Establishment and Alteration of Direct Selling Companies and Their Branches

Article 7 Anyone applying for establishing a direct selling company shall satisfy the following requirements:
1. The investor shall have good commercial reputation, and have no records of serious illegal operation during the past
five years before filing the application; in the case of a
foreign investor, it shall, in addition, have undertaken
direct selling business outside China for at least three
years;
2. The paid-in registered capital shall be no less than RMB
80 million Yuan;
3. The deposits shall have been fully paid in the designated
bank in accordance with the provisions of the present
Regulation; and
4. The system of information reporting and disclosure shall
have been established as required.
Article 8 Anyone applying for establishing a direct selling
company shall fill out the application form and provide the
following application documents and materials:
1. the certification documents conforming to the conditions
as provided for in Article 7 of the present Regulation;
2. articles of association of the company; in the case of
establishment of a Sino-foreign joint venture or cooperative
company, the contract of the joint venture or cooperative
company shall be provided as well;
3. the report on market plan, including the scheme for
service networks in the area where direct selling business is
conducted as recognized by the people's governments at or
above the county level, which is drawn up according to the
provisions of Article 10 of the present Regulations;
4. descriptions of products up to the national standards;
5. model sales contract to be signed with the door-to-door
salesman;
6. report on the verification of capital as issued by an
accounting firm; and
7. agreement concluded between the company and the designated
bank on using the deposit according to the present
Regulations.
Article 9 An applicant shall, through the competent commerce
department at the province, autonomous region, and
municipality directly under the Central Government at its
locality, file an application with the competent commerce
department of the State Council. The competent commerce
department at the province, autonomous region, and
municipality directly under the Central Government shall,
within 7 days as of the day of receipt of the application
documents and materials, submit the application documents and
materials to the competent commerce department of the State
Council. The competent commerce department of the State
Council shall, within 90 days as of the day of receipt of all
the application documents and materials, and upon the opinions
solicited from the administrative department of industry and
commerce of the State Council, make a decision on whether or
not to approve it. And if an approval is granted, it shall
issue the direct selling license.
An applicant shall, upon the strength of the direct selling
license issued by the competent commerce department of the
State Council, apply for registration of alteration to the
administrative department of industry and commerce according
to law. The competent commerce department of the State Council
shall, when carrying out examination and issuing the direct
selling license, take into account such factors as national
security, public interests, and the development of the direct
selling sector, etc.
Article 10 When undertaking direct selling business, a direct
selling company shall, in the administrative regions of the
provinces, autonomous regions, and municipalities directly
under the Central Government where it plans to undertake
direct selling business, establish branches(hereinafter
referred to as branches), which shall be responsible for the
direct selling business within their regions respectively .
A direct selling company shall, within the area where it
undertakes direct selling business, establish service networks
which may facilitate and satisfy consumers and door-to-door
salesmen to know about the price of products and returning and
changing of products and for the company to provide other
services. The establishment of such service networks shall
satisfy the requirements of the local people's governments at
or above the county level.
When applying for establishment of branches, a direct selling
company shall provide the certification documents and
materials complying with the provisions of the preceding
paragraph, and shall file an application according to the
procedures as provided for in paragraph one of Article 9 of
the present Regulations. After approval is granted to the
application, the company shall register with the
administrative department of industry and commerce according
to law.
Article 11 In the case of any major alteration in the
contents as listed in Article 8 of the present Regulations, a
direct selling company shall, in light of the procedures as
provided for in paragraph one of Article 9 of the present
Regulations, report it to and seek approval from the competent
commerce department of the State Council.
Article 12 The competent commerce department of the State
Council shall promulgate on the government website the name
list of the direct selling companies and their branches, and
update it in a timely manner.

Chapter III Recruiting and Training of Door-to-door salesmen
Article 13 A direct selling company and its branches may
recruit door-to-door salesmen. Any other entity or individual
is not allowed to recruit any door-to-door salesman.
The lawful selling activities of door-to-door salesmen may
not be investigated and punished on the ground of unlicensed
business.
Article 14 No direct selling company or any of its branches
may promulgate any advertisements drumbeating the
remunerations for its door-to-door salesmen, nor may it have
the payment of fees or purchase of commodities as the
conditions for becoming a door-to-door salesman thereof.
Article 15 No direct selling company or any of its branches
may recruit the following personnel as a door-to-door
salesman:
1. person under the age of 18;
2. person without capacity or with limited capacity for civil
conduct;
3. full-time school students;
4. teachers, medical personnel, public servants and soldiers
in active service;
5. formal employees of the direct selling company;
6. overseas personnel; and
7. personnel as prohibited from taking part-time jobs by laws
or administrative regulations.
Article 16 A direct selling company and its branches shall
conclude a sales contract with any door-to-door salesman it
recruits, and shall ensure that its door-to-door salesmen
carry out direct selling business only in the province,
autonomous region, and municipality directly under the Central
Government where one of its branches has established service
location. Any person who fails to conclude a sales contract
with a direct selling company or any of its branches may not
carry out direct selling business by any way.
Article 17 A door-to-door salesman may, within 60 days as of
the day of conclusion of the contract, rescind a sales
contract at any time; after the 60 days as of the day of
conclusion of the contract, it shall notify the direct selling
company 15 days before rescinding the sales contract.
Article 18 A direct selling company shall be responsible for
organizing the vocational training and examination of the
door-to-door salesmen it recruits, and shall issue the
certificates of door-to-door salesman to the door-to-door
salesmen who have passed the examination. Anyone who fails to
obtain the certificate of door-to-door salesman may not
undertake direct selling activities.
No direct selling company may charge the door-to-door
salesman any fees for the vocational training and examination.
No entity or individual outside a direct selling company is
allowed to organize the vocational training of door-to-door
salesmen in any name.
Article 19 The teaching staff who give vocational training to
door-to-door salesmen shall be the formal employees of the
direct selling company, and shall satisfy the following
requirements:
1. Having worked in the companies for more than one year;
2. Having received graduate or post-graduate education and
having the relevant professional knowledge of law and
marketing;
3. Having no records of being punishment for deliberate
crimes; and
4. Having no records of major illegal operation.
A direct selling company shall issue the certificates of
direct selling trainer to the teaching staff that satisfy the
provisions of the preceding paragraph, and shall report the
name list of the personnel who have obtained the certificate
of direct selling trainer to the competent commerce department
of the State Council for record. The said department shall
promulgate on the government website the name list of the
personnel who have obtained the certificate of direct selling
trainer.
No foreigner may undertake the vocational training of
door-to-door salesmen.
Article 20 The certificate of door-to-door salesman and the
certificate of direct selling trainer issued by a direct
selling company shall be printed in the format as prescribed
by the competent commerce department of the State Council.
Article 21 A direct selling company shall be responsible for
the legitimacy of the vocational training of door-to-door
salesmen, the training order and the safety of the training
places.
A direct selling company and its direct selling trainers
shall be responsible for the legitimacy of the teaching
contents of vocational training of door-to-door salesmen.
The concrete measures for the administration of vocational
training of door-to-door salesmen shall be separately
formulated by the competent commerce department of the State
Council and the administrative department of industry and
commerce of the State Council in conjunction with the relevant
departments.

Chapter IV Direct Selling Activities
Article 22 When selling products to consumers, a door-to-door
salesman shall comply with the following provisions:
1. showing the certificate of door-to-door salesman and the
sales contract;
2. not entering into the abode of any consumer to sell
products compulsively without the consent of the consumer,
stopping promotion activities immediately and leaving the
consumer's abode if the consumer requires him to do so;
3. giving consumers detailed account of the company's system
of returning goods before the bargain is struck; and
4. providing consumers with invoices as well as the sales
voucher containing such contents as the system of returning
goods, the address of the local service location of the direct
selling company and the telephone number, etc. issued by the
direct selling company after the bargain is struck.
Article 23 A direct selling company shall clearly mark the
product price on the direct selling product, and the price
shall be consistent with the price of the product as showed at
the service website. A door-to-door salesman shall sell direct
selling products to consumers at the marked price.
Article 24 A direct selling company shall pay remuneration to
its door-to-door salesmen at least on a monthly basis. The
remunerations paid to any door-to-door salesman by a direct
selling company shall be calculated on the basis of the income
gained from selling products directly to consumers by the
door-to-door salesman himself/herself, and the total
remuneration (including commission, bonus, various awards and
other economic benefits, and etc.) may not exceed 30% of the
income gained from selling products directly to consumers by
the door-to-door salesman himself/herself.
Article 25 A direct selling company shall establish and put
into practice the sound system of changing and returning of
goods.
Any consumer may, within 30 days as of the day of purchasing
any direct selling product, upon the strength of the invoice
or the sales voucher issued by the direct selling company ,
change or return the product to the direct selling company or
its branches, or the service website at his locality or the
door-to-door salesman who sells the product, on the condition
that the product remains unopened. The direct selling company
and its branches, the service website at his locality or the
door-to-door salesman shall, within 7 days as of the day when
the consumer requests for changing or returning the product,
handle the change or return of the product according to the
price as made out in the invoice or the sales voucher.
A door-to-door salesman shall, within 30 days as of the day
of purchasing the direct selling product, upon the strength of
the invoice or the sales voucher issued by the direct selling
company, change or return the product to the direct selling
company or its branches, or the service website at his
locality, on the condition that the product remains unopened.
The direct selling company and its branches, or the service
website at his locality shall, within 7 days as of the day
when the door-to-door salesman requests for changing or
returning the product, handle the changing or returning of the
product according to the price as made out in the invoice or
the sales voucher.
Except for the circumstances as prescribed in the two
preceding paragraphs, where a consumer or door-to-door
salesman requests changing or returning any product, the
direct selling company or its branches or the service website
at his locality and the door-to-door salesman shall, according
to the provisions of the relevant laws and regulations or the
stipulations of the contract, change or return the product.
Article 26 If any dispute arises from changing or returning
goods between any direct selling company and any of its
door-to-door salesman or between any direct selling company or
its door-to-door salesmen and any consumer, the former shall
bear the burden of proof.
Article 27 A direct selling company shall bear the joint
responsibility for the direct selling acts of any of its
door-to-door salesmen, unless it can prove that the direct
selling act of the door-to-door salesman has nothing to do
with the company.
Article 28 A direct selling company shall, in accordance with
the provisions of the competent commerce department of the
State Council and the administrative department of industry
and commerce of the State Council, establish and put into
practice a sound information reporting and disclosure system.
The provisions on the contents and ways of the information
reporting and disclosure of any direct selling company and the
relevant requirements shall be separately prescribed by the
competent commerce department of the State Council and the
administrative department of industry and commerce of the
State Council.

Chapter V Deposit
Article 29 A direct selling company shall open a special
account in the bank designated by the competent commerce
department of the State Council together with the
administrative department of industry and commerce of the
State Council, and put a deposit into it.
The deposit shall be RMB 20 million Yuan at the time when a
direct selling company is established. After the direct
selling company starts operation, the deposit shall be
adjusted on a monthly basis, and the amount shall remain at
15% of its sales income from direct selling products of the
previous month, but may not exceed RMB 0.1 billion Yuan at the
maximum and not less than RMB 20 million Yuan at the minimum.
The interest of the deposit shall be owned by the direct
selling company.
Article 30 In the case of any of the following circumstances,
the deposit may be used upon the decision jointly made by the
competent commerce department of the State Council and the
administrative department of industry and commerce of the
State Council:
1. A direct selling company fails to pay remuneration to its
door-to-door salesmen without justifiable reasons, or fails to
pay the money for returned goods to door-to-door salesmen and
consumers;
2. A direct selling company involves itself in such
circumstances as suspension of business, merger, dissolution,
transfer and bankruptcy and etc., and lacks the ability to pay
remuneration to its door-to-door salesmen or to pay the
refunds to door-to-door salesmen or consumers; or
3. A direct selling company shall make compensation for any
damage to consumers due to the quality of its direct selling
products under the law, but it refuses to do so without
justifiable reasons or lack the ability to make compensation.
Article 31 Where any deposit is used according to the
provisions of Article 30 of the present Regulations, the
direct selling company shall, within one month, replenish the
deposit to the level as prescribed in paragraph two of Article
29 of the present Regulations.
Article 32 No direct selling company is allowed to offer the
deposit as a guarantee or use it to discharge debts in
violation of the present Regulations.
Article 33 Where a direct selling company no longer
undertakes any direct selling business, it may withdraw the
deposit from the aforesaid bank upon the strength of the
credence issued by the competent commerce department of the
State Council and the administrative department of industry
and commerce of the State Council.
Article 34 The competent commerce department of the State
Council and the administrative department of industry and
commerce of the State Council shall be jointly responsible for
the routine supervision on the aforesaid deposit.
The specific measures for payment and use of the deposit
shall be separately formulated by the competent commerce
department of the State Council and the administrative
department of industry and commerce of the State Council in
conjunction with the relevant departments.

Chapter VI Supervision and Administration
Article 35 The administrative department of industry and
commerce shall be responsible for the routine supervision and
administration on direct selling companies and door-to-door
salesmen and their direct selling activities. The
administrative department of industry and commerce may conduct
on-site inspection by taking the following measures:
1. conducting inspection by entering into the relevant
companies;
2. requiring the relevant enterprises to provide the relevant
documents, materials and certification documents;
3. inquiring of the parties concerned, the interested parties
and other relevant personnel about the relevant issues, and
requiring them to provide the relevant materials;
4. consulting, copying, seizing and detaining the relevant
materials and illegal property of the relevant enterprises
that are related to direct selling activities; and
5. checking up the certificates of direct selling trainers
and the certificates of door-to-door salesmen and other
certificates of the relevant personnel.
When the administrative department of industry and commerce
carries out on-site inspection pursuant to the preceding
provisions, there shall be no less than two inspectors who
shall show lawful certificates. The implementation of seizure
or detention shall be subject to the approval of the
person-in-charge of the administrative department of industry
and commerce at or above the county level.
Article 36 When conducting routine supervision and
administration, in case the administrative department of
industry and commerce discovers that the relevant enterprises
commit any act suspected of violating the present Regulations,
it may, upon the approval of the person-in-charge of the
administrative department of industry and commerce at or above
the county level, order them to suspend their business
operations.
Article 37 The administrative department of industry and
commerce shall set up and publicize the informants' hot-line,
and accept the report and complaints on acts that violate the
present Regulations, and make investigation on and handle them
in a timely manner.
The administrative department of industry and commerce shall
keep secret of the informants, and shall, according to the
relevant provisions of the State, grant awards to those
meritorious informants.

Chapter VII Legal Liabilities
Article 38 Where the relevant departments and their staff
members that carry out administration and supervision on
direct selling companies and door-to-door salesmen and their
direct selling activities, grant license to any application
that fails to comply with the conditions as prescribed in the
present Regulations, or do not perform the duty of supervision
and administration in line with the provisions of the present
Regulations, the person-in-charge who is directly responsible
and other personnel held directly liable shall be given
administrative sanctions according to law. If a crime is
constituted, they shall be investigated for criminal
liabilities according to law. The license granted to any
application that does not comply with the conditions as
prescribed in the present Regulations shall be revoked by the
relevant department that has made the decision on granting the
license.
Article 39 Where a direct selling company violates the
provisions of Articles 9 and 10 of the present Regulations by
undertaking direct selling activity without approval, it shall
be ordered by the administrative department of industry and
commerce to make corrections, and shall be subject to the
confiscation of its direct selling products and illegal sales
income as well as a fine of not less than 50,000 Yuan but not
more than 300,000 Yuan. If the circumstances are serious, it
shall be imposed upon a fine of not less than 300,000 but not
more than 500,000 Yuan, and shall be banned according to law.
If a crime is constituted, it shall be investigated for
criminal liabilities according to law.
Article 40 Where an applicant has obtained the licenses as
established in Articles 9 and 10 of the present Regulations by
cheating, bribery or any other foul means, the administrative
department of industry and commerce shall confiscate its
direct selling products and illegal sales revenue, and impose
upon the applicant a fine of not less than 50,000 Yuan but not
more than 300,000Yuan. And the competent commerce department
of the State Council shall revoke its corresponding licenses,
and the said applicant shall be prohibited from filing an
application again. If the circumstances are serious, it shall
be imposed a fine of not less than 300,000 Yuan but not more
than 500,000 Yuan, and shall be banned according to law. If a
crime is constituted, it shall be investigated for criminal
liabilities according to law.
Article 41 Where a direct selling company violates the
provisions of Article 11 of the present Regulations, the
administrative department of industry and commerce shall order
it to make corrections, and impose upon it a fine of not less
than 30,000 Yuan but not more than 300,000 Yuan. Where a
direct selling company no longer satisfies the conditions for
licensing of direct selling, its direct selling license shall
be revoked by the competent commerce department of the State
Council.
Article 42 Where a direct selling company violates
regulations by undertaking direct selling business beyond the
scope of direct selling products, the administrative
department of industry and commerce shall order it to make
corrections, confiscate its direct selling products and
illegal sales revenue, and impose upon it a fine of not less
than 50,000 Yuan but not more than 300,000 Yuan. If the
circumstances are serious, it shall be imposed a fine of not
less than 300,000 Yuan but not more than 500,000 Yuan. And the
administrative department of industry and commerce shall
revoke the business license of the branch of any direct
selling company which has illegal operation acts, till the
direct selling license of the direct selling company is
revoked by the competent commerce department of the State
Council.
Article 43 Where a direct selling company or any of its
door-to-door salesmen violates the provisions of the present
Regulations by committing fraudulent, misleading and other
drumbeating and sales promotion acts, the direct selling
company shall be imposed a fine of not less than 30,000 Yuan
but not more than 100,000 Yuan by the administrative
department of industry and commerce; if the circumstances are
serious, it shall be imposed a fine of not less than 100,000
Yuan but not more than 300,000 Yuan. And the administrative
department of industry and commerce shall revoke the business
license of the branch of any direct selling company which has
illegal operation acts, till the direct selling license of the
direct selling company is revoked by the competent commerce
department of the State Council. The door-to-door salesman
shall be imposed a fine of less than 50,000 Yuan by the
administrative department of industry and commerce; if the
circumstances are serious, the direct selling company shall be
ordered to revoke the qualification of the said door-to-door
salesman.
Article 44 Where a direct selling company or any of its
branches recruits door-to-door salesmen in violation of the
present Regulations, it shall be ordered to make corrections
by the administrative department of industry and commerce, and
imposed a fine of not less than 30,000 Yuan but not more than
100,000 Yuan. If the circumstances are serious, it shall be
imposed a fine of not less than 100,000 Yuan but not more than
300,000 Yuan. And the administrative department of industry
and commerce shall revoke the business license of the branch
of the direct selling company that has illegal operation acts,
till the direct selling license of the direct selling company
is revoked by the competent commerce department of the State
Council.
Article 45 Anyone, who violates the provisions of the present
Regulations and undertakes direct selling activity without
obtaining the certificate of door-to-door salesman, shall be
ordered by the administrative department of industry and
commerce to make corrections, and shall be subject to the
confiscation of its direct selling products and illegal sales
income as well as a fine of less than 20,000 Yuan. If the
circumstances are serious, he shall be imposed a fine of not
less than 20,000 Yuan but not more than 200,000 Yuan.
Article 46 Any direct selling company that carries out the
vocational training of door-to-door salesmen in violation of
the provisions of the present Regulations shall be ordered by
the administrative department of industry and commerce to make
corrections, and shall be subject to the confiscation of its
illegal gains as well as a fine of not less than 30,000 Yuan
but not more than 100,000 Yuan. If the circumstances are
serious, it shall be imposed a fine of not less than 100,000
Yuan but not more than 300,000 Yuan. And the administrative
department of industry and commerce shall revoke the business
license of the branch of the direct selling company that has
illegal business acts till the direct selling license of the
direct selling company is revoked by the competent commerce
department of the State Council. The teaching staff members
shall be imposed a fine of less than 50,000 Yuan, and if they
are the direct selling trainers, the direct selling company
shall be ordered to revoke their qualifications as a direct
selling trainer.
If an entity or individual outside a direct selling company
organizes the vocational training of door-to-door salesmen,
the administrative department of industry and commerce shall
order it/him to make corrections, confiscate its/his illegal
gains, and impose upon it/him a fine of not less than 20,000
Yuan but not more than 200,000 Yuan.
Article 47 Where a door-to-door salesman violates the
provisions of Article 22 of the present Regulations, the
administrative department of industry and commerce shall
confiscate his/her illegal sales income, and impose upon
him/her a fine of less than 50,000 Yuan. If the circumstances
are serious, the direct selling company concerned shall be
ordered to revoke his/her qualification as a door-to-door
salesman, and shall be imposed upon a fine of not less than
10,000 Yuan but not more than 100,000 Yuan.
Article 48 Any direct selling company that violates the
provisions of Article 23 of the present Regulations shall be
punished in accordance with the relevant provisions of the
price law.
Article 49 Where a direct selling company violates the
provisions of Articles 24 and 25 of the present Regulations,
the administrative department of industry and commerce shall
order it to make corrections and impose upon it a fine of not
less than 50,000 Yuan but not more than 300,000 Yuan. If the
circumstances are serious, it shall be imposed a fine of not
less than 300,000 but not more than 500,000 Yuan. And the
administrative department of industry and commerce shall
revoke the business license of the branch of the direct
selling company that has illegal business acts, till the
direct selling license of the direct selling company is
revoked by the competent department of commerce of the State
Council.
Article 50 Where a direct selling company fails to report and
disclose information according to the relevant provisions, the
administrative department of industry and commerce shall order
it to make corrections within a prescribed time limit, and
impose upon it a fine of less than 100,000 Yuan. If the
circumstances are serious, the administrative department of
industry and commerce shall revoke the business license of the
branch of the direct selling company that has illegal business
acts, till the direct selling license of the direct selling
company is revoked by the competent department of commerce of
the State Council.
Article 51 Where a direct selling company violates the
relevant provisions of Chapter V of the present Regulations,
the administrative department of industry and commerce shall
order it to make corrections within a prescribed time limit,
and impose upon it a fine of less than 100,000 Yuan. In case
it refuses to make corrections, it shall be imposed upon a
fine of not less than 100,000 Yuan but not more than 300,000
Yuan, and its direct selling license shall be revoked by the
competent commerce department of the State Council.
Article 52 In case any illegal act violates the Regulations
on Prohibiting Pyramid Selling as well as the present
Regulations, it shall be punished in accordance with the
relevant provisions of the Regulations on Prohibiting Pyramid
Selling.

Chapter VIII Supplementary Provisions

Article 53 If a direct selling company plans to establish a
direct selling company association and other social
organizations, it shall seek approval from the competent
commerce department of the State Council and shall, upon the
strength of the approval document, apply for registration
according to law.

Article 54 The relevant provisions on foreign investors of
the present Regulations shall be complied with, when the
investors of Hong Kong Special Administrative Region, Macao
Special Administrative Region and Taiwan region invest in
establishing direct selling companies within China and
undertakes direct selling activities.

Article 55 The present Regulations shall go into effect as of
December 1st, 2005.