The PRC Ministry of Commerce (“MOFCOM”) and the State Environmental Protection Administration of China (“SEPA”) jointly issued a notice on October 8, 2007 on “Strengthening the Environmental Monitoring over Export Enterprises” (the “Notice”).

The stated goals of the Notice are to save energy, reduce emissions, build an environmentally-friendly society, protect state environmental interests and promote the

transformation of trade growth.

The Notice reflects a new approach to regulating pollution in China. Existing anti-pollution rules, which generally impose fines on polluters, have been considered largely ineffective because many businesses find it less expensive to pay the fines than to restructure their operations to reduce pollution. The new rules embodied in the Notice target exporters of goods, and require businesses

to demonstrate environmental compliance as a condition to obtaining an export license or quota.[1] It is believed that these rules will be more effective in effecting environmental compliance because they impact a critical aspect of exporters’ businesses.

The Notice represents a collaboration between MOFCOM, which is responsible for regulating exporters, and SEPA; which is responsible for enforcing China’s environmental laws. The general concept is that SEPA and local environmental agencies under its administration will monitor

environmental compliance by exporters, and will relay information regarding non-compliant businesses to MOFCOM and local commerce departments so that they can consider such noncompliance in passing upon applications for export licenses and quotas.