Tianjin authorities meeting held with Officer Guo, a smart and tidy young man in his mid thirties who had a big file of research which they had assembled on our Morgan cars. We encountered a couple of issues: - Customs officers were of the impression that our HK company is a subsidiary of MMC. In Tianjin last Thursday I had to present my documents and shareholder certificates to them to demonstrate our independence. They were still skeptical and asked at length about our transfer pricing agreement with MMC. They are questioning the margins on the cars as they potentially mean tax loss for the Gov. - Warranty as a component of our invoices. As a result of the second point Customs have charged us at the full invoice price, removing the dealer discount from the invoice value. This added between 10-13.5% on our tax bill taking it past GBP300,000 
Mr Guo proposed withholding the dealer discount from the invoice and in effect we had to pay tax on the gross invoice value. This added some GBP30,000 to our tax bill. As we can't process our next tranche of funds without proof that we have paid RMB in the form of Fapiao, this has caused some cash flow challenges. We are in the position of having to pay funds to clear our cars but with limited funds to do so as we haven't used up all of our Capital in the verification process. Customers want their cars, Customs wants the money. We have to fund clearance to get the cars to Customs. Two more cars arrived 7 days ago, but the Bill of Lading was incorrectly completed stating '6' instead of '2' cars - a clerical error to which no one is admitting, but which leaves us paying daily storage fees. Just a trifle frustrating.
Mr Guo proposed withholding the dealer discount from the invoice and in effect we had to pay tax on the gross invoice value. This added some GBP30,000 to our tax bill. As we can't process our next tranche of funds without proof that we have paid RMB in the form of Fapiao, this has caused some cash flow challenges. We are in the position of having to pay funds to clear our cars but with limited funds to do so as we haven't used up all of our Capital in the verification process. Customers want their cars, Customs wants the money. We have to fund clearance to get the cars to Customs. Two more cars arrived 7 days ago, but the Bill of Lading was incorrectly completed stating '6' instead of '2' cars - a clerical error to which no one is admitting, but which leaves us paying daily storage fees. Just a trifle frustrating.