Parts and Components. For those tailor-made parts and components for the Group manufactured by Sany Group, the basis of determining prices of the parts and components produced by Sany Group and its subsidiaries will be determined on arm’s length negotiation and with reference to the manufacturing costs involved in the relevant parts and components plus a gross margin ranging from approximately 10% to 30%, with reference to the usual gross margin of the Group’s procurement of other similar parts and components from Independent Third Parties, which should be in any event no less favorable to the Group than is available to Independent Third Parties. Due to confidentiality concern of certain technical information, the Group only procures tailor-made parts and components from Sany Group rather than other third-party suppliers. However, the Group is able to operate independently from Sany Group. The Group’s procurement of tailor-made parts and components from Sany Group only accounted for approximately 3% of the Group’s total procurement for each of the two years ended 31 December 2018 and the eleven months ended 30 November 2019 and it is expected that such procurement will remain to the same extent for the three years ending 31 December 2022. Even under the remote possibility that Sany Group ceases to supply tailor-made parts and complements to the Group, the Group can still engage other third-party suppliers to manufacture tailor-made parts and components imposing confidentiality obligations on them. However, under such arrangement, the Group will need to disclose the confidential technical information to third parties, which is not in the best interest of the Company. For those common parts and components which can be easily accessible in the market, the Group will follow the pricing as determined during the Group’s commercial procurement tender process.
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Parts and Components. For those tailor-made parts and components for the Group manufactured by Sany Group, the basis of determining prices of the parts and components produced by Sany Group and its subsidiaries will be determined on arm’s length negotiation and with reference to the manufacturing costs involved in the relevant parts and components plus a gross margin ranging from approximately 10% to 3020%, with reference to the usual gross margin of the Group’s procurement of other similar parts and components from Independent Third Parties, which should be in any event no less favorable to the Group than is available to Independent Third Parties. Due to confidentiality concern of certain technical information, the Group only procures tailor-made parts and components from Sany Group rather than other third-party suppliers. However, the Group is able to operate independently from Sany Group. The Group’s procurement of tailor-made parts and components from Sany Group only accounted for approximately 3% of the Group’s total procurement for each of the two three years ended 31 December 2018 and the eleven months ended 30 November 2019 2016 and it is expected that such procurement will remain to the same extent for the three years ending 31 December 20222019. Even under the remote possibility that Sany Group ceases to supply tailor-made parts and complements to the Group, the Group can still engage other third-party suppliers to manufacture tailor-made parts and components imposing confidentiality obligations on them. However, under such arrangement, the Group will need to disclose the confidential technical information to third parties, which is not in the best interest of the Company. For those common parts and components which can be easily accessible in the market, the Group will follow the pricing as determined during the Group’s commercial procurement tender process.
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