REGULATORY OVERVIEW. This section sets forth a summary of the major laws and regulations applicable to the Group s business in Hong Kong.

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1 HONG KONG This section sets forth a summary of the major laws and regulations applicable to the Group s business in Hong Kong. (A) HEALTH AND SAFETY Factories and Industrial Undertakings The Group operates the Processing Centre at the Kowloon Bay Site and the collection stations at the Kowloon Bay Site, the Tsuen Wan Site and the Fanling Site. The Factories and Industrial Undertakings Ordinance (Chapter 59 of the Laws of Hong Kong) provides safety and health protection to workers in an industrial undertaking. Under this Ordinance, every proprietor shall, as far as reasonably practicable, take steps to safeguard occupational safety and health for all persons employed by it at an industrial undertaking by: (i) (ii) (iii) (iv) (v) providing and maintaining plant and work systems that are safe and risk-free to health; making arrangements for ensuring safety and health in using, handling, storing and transportation of articles and substances; providing all necessary information, instructions, training, and supervision for ensuring safety and health; providing and maintaining safe access to and from the workplace; and providing and maintaining a working environment that is safe and risk-free to health. A proprietor which contravenes these obligations commits an offence and is liable to a maximum fine of HK$500,000. A proprietor which contravenes these obligations wilfully and without reasonable excuse commits an offence and is liable to a maximum fine of HK$500,000 and maximum imprisonment for 6 months. Section 9 of the Factories and Industrial Undertakings Ordinance requires the person having management or control of a notifiable workplace (as defined in the Ordinance) to give the Commissioner for Labour a notification of his workplace in the prescribed form before any industrial process is first commenced or any industrial operation is carried on. Notification of change in location or name of the workplace, or nature of the industrial process or industrial operation carried on therein in the prescribed form is also needed before the change takes place. A proprietor which contravenes the abovementioned duty is liable on conviction to a maximum fine of HK$10,000 and a daily fine of HK$5,000 if the offence is knowingly and willfully continued. During the Track Record Period, the Group had hired qualified staff to perform flame cutting and operate excavator grapples at its collection stations. 56

2 The Factories and Industrial Undertakings (Gas Welding and Flame Cutting) Regulation (Chapter 59AI of the Laws of Hong Kong) regulates the carrying out of gas welding and flame cutting work in industrial undertakings by persons who are trained and certified competent for carrying out such work. Regulation 3 of the Factories and Industrial Undertakings (Gas Welding and Flame Cutting) Regulation requires gas welding and flame cutting work is only performed by a person who has attained the age of 18 years and holds a valid certificate or a person who is undergoing training in performing gas welding and flame cutting work and the performance of such work is under the supervision of a person who has attained the age of 18 years and holds a valid certificate. A proprietor which contravenes these obligations commits an offence and is liable to a maximum fine of HK$50,000. The Factories and Industrial Undertakings (Lifting Appliances and Lifting Gear) Regulations (Chapter 59J of the Laws of Hong Kong) regulates lifting gear used for raising or lowering or as a means of suspension in any industrial undertaking. Regulation 5 of the Factories and Industrial Undertakings (Lifting Appliances and Lifting Gear) Regulations requires an owner of lifting appliance, crane, crab or winch to ensure that it is not used unless it has been thoroughly and regularly examined by a competent examiner, and a certificate in the approved form containing a statement made by a competent examiner to the effect that it is in safe working order, has been obtained. Regulation 15A of the Factories and Industrial Undertakings (Lifting Appliances and Lifting Gear) Regulations requires the owner of a crane to ensure that a crane is only operated by a person who has attained the age of 18 years, holds a valid certificate and in the opinion of the owner, is competent to operate the crane by virture of his experience. Any owner which contravenes the Regulations commits an offence and is liable to a maximum fine of HK$200,000 for Regulation 5 and HK$50,000 for Regulation 15A and any workman employed or working on or near any lifting appliance or lifting gear, who wilfully and without reasonable cause does anything which likely endangers himself or others is guilty of an offence and is liable on conviction to a maximum fine of HK$50,000. As at the Latest Practicable Date, the Group had 16 staff and 3 staff who were qualified to conduct flame cutting and operate crawler-mounted mobile crane, respectively. Occupational Safety and Health The Occupational Safety and Health Ordinance (Chapter 509 of the Laws of Hong Kong) sets out provisions governing safety and health of employees in both industrial and non-industrial workplaces. Employers must, as far as reasonably practicable, ensure safety and health in their workplaces by: (i) (ii) (iii) (iv) providing and maintaining plant and work systems that are safe and risk-free to health; making arrangement for ensuring safety and absence of health risk in connection with using, handling, storing or transportation of plant or substances; providing all necessary information, instructions, training, and supervision for ensuring safety and health; providing and maintaining safe access to and from the workplaces; and 57

3 (v) providing and maintaining a working environment that is safe and risk-free to health. Failure to comply with the above provisions constitutes an offence and the employer is liable on conviction to a maximum fine of HK$200,000. An employer which fails to comply with the said provisions intentionally, knowingly or recklessly commits an offence and is liable on conviction to a maximum fine of HK$200,000 and imprisonment for up to 6 months. The Commissioner for Labour may also issue improvement notices in light of non-compliance of the Occupational Safety and Health Ordinance, the Factories and Industrial Undertakings Ordinance, or suspension notices against activity of workplace which may create imminent hazard to employees. Failure to comply with improvement notices without reasonable excuse constitutes an offence punishable by a maximum fine of HK$200,000 and HK$500,000, and imprisonment of up to 12 months. Contravention of suspension notices without reasonable excuse constitute an offence punishably by a maximum fine of HK$500,000 and imprisonment of up to 12 months and a further maximum fine of HK$50,000 for each day or part of a day during which the offender knowingly and intentionally continues the contravention. Occupiers Liability The Occupiers Liability Ordinance (Chapter 314 of the Laws of Hong Kong) provides for obligations of a person occupying or having control of premises relating to injury caused to persons or damage caused to goods or property lawfully on the land. The Occupiers Liability Ordinance imposes a common duty of care on an occupier of premises by requiring him to take such care as is reasonable in all circumstances of the case, to ensure that the visitor will be reasonably safe when using the premises for the purposes of his visit as permitted by the occupier. (B) EMPLOYMENT The employment of the Group s employees are subject to various laws and regulations in Hong Kong. Mandatory Provident Fund Schemes Under the Mandatory Provident Fund Schemes Ordinance (Chapter 485 of the Laws of Hong Kong), employers must participate in a Mandatory Provident Fund Scheme for employees employed under the jurisdiction of the Hong Kong Employment Ordinance. The Mandatory Provident Fund Scheme is a defined contribution retirement plan administered by independent trustees. Under the Mandatory Provident Fund Scheme, the employer and employee is each required to make contributions to the plan at 5% of the employees relevant income, subject to a cap of monthly relevant income of HK$30,

4 Employment Ordinance Pursuant to section 23 of the Employment Ordinance (Chapter 57 of the Laws of Hong Kong), wages shall become due on the expiry of the last day of wage period and shallbe paid as soon as possible, but in any case not later than 7 days thereafter. An employer who wilfully and without reasonable excuse contravenes the said provision commits an offence and is liable to a maximum fine of HK$350,000 and imprisonment of up to 3 years. Employees Compensation The Employees Compensation Ordinance (Chapter 282 of the Laws of Hong Kong) establishes a no-fault and non-contributory employee compensation system for work injuries, and lays down the rights and obligations of employers and employees in respect of injuries or death caused by prescribed occupational diseases or accidents arising out of and in the course of employment. Under the Employees Compensation Ordinance, if an employee sustains an injury or dies as a result of an accident arising out of and in the course of his employment, his employer is in general liable to compensate even if the employee might have committed acts of faults or was negligent when the accident occurred. Similarly, an employee who suffers incapacity or dies of an occupational disease is entitled to receive the same compensation as that payable to employees injured in occupational accidents. According to section 40 of the Employees Compensation Ordinance, all employers are required to take out an insurance policy issued by an insurer for all their employees (including full-time and part-time employees) for an amount not less than that specified under the Employees Compensation Ordinance in respect of the liability of the employers. An employer who fails to secure the said insurance cover is liable on conviction upon indictment in to a maximum fine of HK$100,000 and imprisonment for up to 2 years and on summary conviction of a maximum fine of HK$100,000 and imprisonment for up to 1 year. According to section 48 of the Employees Compensation Ordinance, an employer shall not, without the consent of the Commissioner for Labour, terminate, or give notice to terminate, the contract of service of an employee (who has suffered incapacity or temporary incapacity in circumstances which entitle him to compensation under the Employees Compensation Ordinance) before occurrence of certain events. Any person who commits breach of this provision is liable on conviction to a maximum fine of HK$100,000. Minimum Wage The Minimum Wage Ordinance (Chapter 608 of the Laws of Hong Kong) provides for a prescribed minimum hourly wage rate (HK$32.5 per hour as of the Latest Practicable Date) during the wage period in which employee is engaged under a contract of employment as defined in the Employment Ordinance. Any provision of the employment contract which purports to extinguish or reduce the right, benefit or protection conferred on the employee by the Minimum Wage Ordinance is void. 59

5 (C) ENVIRONMENTAL PROTECTION The Group s operations are subject to various environmental laws and regulations in Hong Kong. Air Pollution The Air Pollution Control Ordinance (Chapter 311 of the Laws of Hong Kong) is the principal legislation in Hong Kong for controlling emission of air pollutants and noxious odour from construction, industrial and commercial activities, and other sources. Subsidiary regulations of the Air Pollution Control Ordinance impose control on air pollutant emissions for certain operations through the issue of licences and permits. Under the Air Pollution Control Ordinance, a set of Air Quality Objectives (AQOs) was established for seven air pollutants, i.e. sulphur dioxide, nitrogen dioxide, carbon monoxide, ozone, lead, fine suspended particulates and respirable suspended particulates. If any emission of air pollutants from a polluting process or activity is causing air pollution, the Environmental Protection Department may serve an air pollution abatement notice under section 10 of the Air Pollution Control Ordinance, which requires the owner concerned to take remedial action to cut down or even eliminate the emission. A person who fails to comply with an air pollution abatement notice given to him under section 10 commits an offence and is liable: (a) (b) if he fails to cease the operation of a polluting process as specified in the air pollution abatement notice, to a maximum fine of HK$500,000 and to imprisonment for up to 12 months and a further maximum fine of HK$100,000 for each day that the court is satisfied that the failure to cease the operation has continued; and in any other case, to a maximum fine of HK$100,000 on first conviction and to a maximum fine of HK$200,000 and to imprisonment for up to 6 months on a second or subsequent conviction and, on a first or subsequent conviction, to a further maximum fine of HK$20,000 for each day that the court is satisfied that the failure to comply with the air pollution abatement notice has continued. For air pollution due to the improper design, operation or maintenance of any equipment, section 30 of the Air Pollution Control Ordinance empowers Environmental Protection Department to require the owner of the premises concerned by the air pollution abatement notice to take specified steps to rectify the deficiencies. Any owner who fails, without reasonable excuse, to comply with any of the requirements of an air pollution abatement notice duly served upon him under section 30 of the Air Pollution Control Ordinance commits an offence and is liable to a maximum fine of HK$100,000 on conviction for a first offence and HK$200,000 and imprisonment for up to 6 months for a second or subsequent offence and in addition, if the offence is a continuing offence, to a maximum fine of HK$20,000 for each day during which it is proved to the satisfaction of the court that the offence has continued. 60

6 Noise Pollution The Noise Control Ordinance (Chapter 400 of the Laws of Hong Kong) controls noise emitted from construction, industrial and commercial activities. It empowers the Secretary for the Environment to issue technical memoranda setting out principles, procedures and guidelines in respect of measurement and assessment of noise emanating from any place other than domestic premises, public places or construction sites. Section 13 of the Noise Control Ordinance provides that the noise abatement notice may require the owner or occupier to bring his noise emissions into a state of compliance by a certain date and non-compliance with such a notice will be an offence. The Director of Environmental Protection may serve a noise abatement notice in the prescribed form on any or all of the following: (i) the person making the noise or causing or permitting the noise to be made; or (ii) the owner, tenant, occupier or person in charge of the place from which the noise emanates. Any person who fails to comply with the requirements in the noise abatement notice is liable on first conviction to a fine of HK$100,000 and on a second or subsequent convictions to a fine of HK$200,000, and in any case to a fine of HK$20,000 for each day during which the offence continues. Waste Disposal The Waste Disposal Ordinance (Chapter 354 of the Laws of Hong Kong) controls the production, storage, collection, treatment, reprocessing, recycling and disposal of wastes. At present, livestock waste, clinical waste and chemical waste are subject to specific controls, whilst unlawful deposition of waste is prohibited. Import and export of certain kinds of waste specified in the Waste Disposal Ordinance is controlled through a permit system. The import and export into Hong Kong of uncontaminated ferrous waste and scrap of iron or steel specified in the Waste Disposal Ordinance for the purpose of a reprocessing, recycling or recovery operation or the reuse of the waste do not require a permit issued by the Environmental Protection Department. Under the Waste Disposal Ordinance, a person shall not use, or permit to be used, any land or premises for the disposal of waste unless he has a licence from the Director of Environmental Protection. A person who except under and in accordance with a permit or authorisation, does, causes or allows another person to do anything for which such a permit or authorisation is required commits an offence and is liable to a fine of HK$200,000 and to imprisonment for six months for the first offence, and to a fine of HK$500,000 and to imprisonment for two years for a second or subsequent offence, and in addition, if the offence is a continuing offence, to a fine of HK$10,000 for each day during which it is proved to the satisfaction of the court that the offence has continued. 61

7 (D) TRADES AND OPERATIONS Trade Descriptions The Trade Description Ordinance (Chapter 362 of the Laws of Hong Kong) prohibits false trade description, false, misleading or incomplete information, false marks and misstatements in respect of goods provided in the course of trade or supply of such goods, and certain unfair trade practices. It confers power upon the Commissioner of Customs and Excise to require information or provide instruction relating to goods to be marked, description to accompany the goods or to be included in advertisements. It also provides regulations relating to forgery of trade marks. Furthermore, it prohibits false trade descriptions in respect of services supplied by traders and confer power upon the Commissioner of Customs and Excise to require any services to be accompanied by information or instruction on services or advertisement of any services to contain or refer to information relating to such services. Any person, who in the course of any trade or business, applies a false trade description to any goods commits an offence. A trader who omits information thereby misleads consumers in a commercial practice commits an offence. A person who forges any trade mark or falsely applies it to any goods or any mark of close resemblance to a trade mark calculated to deceive consumers also commits an offence. The person who commits any of the offences stated above is liable, on conviction on indictment, to a maximum fine of HK$500,000 and imprisonment for up to 5 years, and on summary conviction, to a maximum fine of HK$100,000 and to imprisonment for up to 2 years. The trader may be treated to have committed an offence with respect to a commercial practice even if the practice is directed to consumers who are outside Hong Kong if, at the time of engaging in the practice, the trader is in Hong Kong or Hong Kong is the trader s usual place of business. Weights and Measures The operations of the Group involve the use of weighing equipment to measure the weight of ferrous scraps. The Weights and Measures Ordinance (Chapter 68 of the Laws of Hong Kong) provides for regulations with respect to units and standards of measurement, weighing or measuring equipment used for trade and transactions involving goods supplied by weight or measure, and pre-packed goods. A person who commits any fraud in the using for trade of any weighing or measuring equipment commits an offence and is liable to a maximum fine of HK$20,000 and imprisonment for up to 6 months. A person who uses for trade or has in his possession for use for trade any weighing or measuring equipment which is constructed or adapted to indicate any unit of measurement other than an authorized unit or any weighing or measuring equipment which is false or defective, commits an offence and is liable to a maximum fine of HK$20,000. Any person who, in the course of trade, supplies any goods by weight or measure otherwise than by net weight or measure commits an offence and is liable to a maximum fine of HK$5,000. Any person who supplies goods in the course of trade makes any statement, whether orally or in writing or otherwise, which he knows is false or misleading as to a material particular regarding the quantity of the goods supplied is liable to a maximum fine of HK$20,

8 (E) IMPORT AND EXPORT The daily operation of the Group involves import of ferrous scraps from suppliers in Macau and export of processed ferrous scraps to overseas customers in Asia. Import and Export Ordinance The Import and Export Ordinance (Chapter 60 of the Laws of Hong Kong) provides for the regulation and control of, among other things, the import and export of articles into or out of Hong Kong. Under the Import and Export Ordinance, import and export of prohibited articles (as defined under the Import and Export Ordinance) require permission licences issued by the Trade and Industry Department of Hong Kong. Ferrous scraps are currently not prohibited articles under the provisions of the Import and Export Ordinance or its subsidiary legislation. Accordingly, import and export of ferrous scraps generally do not require a permission licence to be issued by the Trade and Industry Department of Hong Kong under the Import and Export Ordinance. Under the Import and Export (Registration) Regulations, an importer of ferrous scraps is under an obligation to lodge with the Customs and Excise Department of Hong Kong an accurate and complete import declaration through a specified provider of Government Electronic Trading Services within 14 days from the date of import, unless there is a reasonable excuse. A similar obligation is imposed on an exporter of ferrous scraps under the Import and Export (Registration) Regulations. In such connection, the Group is obliged to lodge import and export declarations with the Customs and Excise Department of Hong Kong under the Import and Export (Registration) Regulations in connection with the import and export of ferrous scraps. Failure to lodge such declaration within the prescribed 14-day period, with or without reasonable excuse, will result in the imposition of an administrative penalty (which ranges from HK$20 to HK$200 per incident depending on the time of lodging the declaration and the total value of the articles specified in the declaration) under Regulation 7 of the Import and Export (Registration) Regulations. In addition, lodgment of declaration beyond the prescribed 14-day period without reasonable excuse (or where there is a reasonable excuse, but lodgment is not made as soon as is practicable after the cessation of such excuse) is, if prosecuted and convicted, a criminal offence and, in addition to the said administrative penalty, a fine of HK$1,000 (plus daily fines of HK$100) will be imposed under Regulation 4 or 5 of the Import and Export (Registration) Regulations. Further, under Regulation 4 or 5 of the Import and Export (Registration) Regulations, any person who knowingly or recklessly lodges any declaration that is inaccurate in any material particular shall, if prosecuted and convicted, be guilty of a criminal offence and shall be liable to a fine of HK$10,