(16) Commitments and Contingencies

Operating Lease

The Company leases 32.95 acres of land from a local government in Xushui County, Baoding City, Hebei, China through a real estate lease with a 30-year term, which expires on December 31, 2031. The lease requires an annual rental payment of approximately $18,788 (RMB 120,000). This operating lease is renewable at the end of the 30-year term.

On November 27, 2012, the company entered into a 49.4 acres land lease with an investment company in the Economic Development Zone in Wei County, Hebei Province, China. The lease term of the Wei County land lease commences on the date of the lease and lasts for 15 years. The lease requires an annual rental payment of $563,645 (RMB 3,600,000). The Company is currently building two new tissue paper production lines and future production facilities in the leased Wei County land.

As mentioned in Note (8) Related Party Transactions, in connection with the sale of Industrial Buildings to Hebei Fangsheng, Hebei Fangsheng agrees to lease the Industrial Buildings back to the Company at an annual rental of $156,568 (RMB 1,000,000), for a total term of up to five years.

Future minimum lease payments of all operating leases are as follows:

June 30,	Amount
2019		574,817
2020		562,222
2021		562,222
2022		562,222
2023		562,222
Thereafter		2,375,843
Total operating lease payments	$	5,199,548

Capital commitment

As of June 30, 2018, the Company has signed several contracts for construction of equipment and facilities, including a new tissue paper production line PM8. Total outstanding commitments under these contracts were $10,528,048 and $11,227,896 as of June 30, 2018 and December 31, 2017, respectively. The Company expected to pay off all the balances within 1 year.

Guarantees and Indemnities

The Company agreed with Baoding Huanrun Trading Co., a major supplier of raw materials, to guarantee certain obligations of this third party, and as of June 30, 2018 and December 31, 2017, the Company guaranteed its long-term loan from financial institutions amounting to $8,463,561 (RMB56,000,000) and $8,570,292 (RMB56,000,000) that matured at various times in 2018. If Huanrun Trading Co., were to become insolvent, the Company could be materially adversely affected.