Administration of the Oil Products Market Tentative Procedures

Article 2: Enterprises engaging in wholesale, storage and retail operation activities for oil products in the People's Republic of China shall abide by relevant laws and regulations and these Procedures.

Article 3: The Ministry of Commerce shall regulate the national oil products market in accordance with the law.

The administrative authorities of the people's government in charge of commerce for provinces, autonomous regions, municipalities directly under the central government and cities directly under central planning ("Provincial Government Commerce Authorities") shall be responsible for formulating the development plans for petrol stations and the storage industry within their own jurisdictions and for organizing and coordinating the supervision and administration of the business activities for oil products within their own areas of jurisdiction.

Article 4: For the purposes of these Procedures, the term "oil products" shall mean petrol, kerosene and diesel.

PART TWO: APPLICATION FOR OPERATION PERMITS FOR OIL PRODUCTS AND THE ACCEPTANCE FOR HANDLING THEREOF

Article 5: Any enterprise applying to engage in the wholesale operation of oil products shall submit its application to the Provincial Government Commerce Authority of the place where such enterprise is located. The Provincial Government Commerce Authority shall, after examination, submit its preliminary opinion and the application materials to the Ministry of Commerce, which shall decide whether or not to grant the wholesale operation permit for oil products.

Article 6: Any enterprise applying to engage in the storage or retail operation of oil products shall submit its application to the administrative authority in charge of commerce of the people's government at the level of cities (cities with districts, same hereinafter) ("Municipal Authority") of the place where such enterprise is located. The Municipal Authority shall, after examination, submit its preliminary opinion and the application materials to the Provincial Government Commerce Authority, which shall decide whether or not to grant the storage or retail operation permit for oil products.

Article 7: Any enterprise applying to engage in the wholesale operation of oil products shall meet the following requirements:

(1) it has a stable supply channel for oil products;

(2) it has an oil tank farm with a storage capacity of not less than 4,000 cubic metres, which is either wholly-owned by such enterprise or in which such enterprise holds a controlling interest, and the construction of which meets the "Design Standards for Oil Tank Farms" (GBJ74-84);

(3) it is equipped with facilities such as a pipeline, exclusive railway or marine oil terminal for receiving and unloading of oil products;

(4) its oil tank farm and other facilities are in compliance with the relevant state provisions on work safety and environmental protection;

(5) it is equipped with professional technicians for such matter as the inspection, measurement, storage and fire safety of oil products;

(6) it meets the requirements of the development plan for the wholesale network for oil products; and

(7) its management systems are sound.

Article 8: Any enterprise applying to engage in the storage operation of oil products shall meet the following requirements:

(1) its oil storage facilities meet the requirements of the layout plan for oil tank farms;

(2) its oil tank farm has a storage capacity of not less than 4,000 cubic metres, and the construction of which meets the Design Standards for Oil Tank Farms (GBJ74-84);

(3) it is equipped with facilities such as a pipeline, exclusive railway or marine oil terminal for receiving and unloading of oil products;

(4) the design and construction of its oil tank farm are in compliance with the provisions on work safety and environmental protection;

(5) it is equipped with professional technicians with knowledge of such matter as the inspection, measurement, storage and fire safety of oil products; and

(6) its management systems are sound.

Article 9: Any enterprise applying to engage in the retail operation of oil products shall meet the following requirements:

(1) it has a stable supply channel for oil products and has entered into an oil supply agreement with an oil products operating enterprise qualified for wholesale operation;

(2) it complies with the development plan for the local petrol station industry;

(3) the design and construction of its petrol stations meet the relevant state standards;

(4) the construction of its petrol stations is in compliance with the relevant state provisions on, among others, land administration, fire safety and environmental protection;

(5) it is equipped with professional technicians with knowledge of such matter as the inspection, measurement, storage and fire safety of oil products; and

(6) its floating petrol stations (vessels) engaged in the supply of oil products for vessels shall, apart from meeting the above-mentioned requirements, be in compliance with relevant provisions on, among others, ports, marine traffic safety and prevention of sea pollution.

For petrol stations serving rural villages and selling diesel only, the Provincial Government Commerce Authority shall formulate its own requirements and administrative procedures according to relevant local conditions.

Article 10: The administrative authority in charge of commerce shall publicly post in their office premises the requirements, procedures and deadlines for the application of operation permits for oil products, the list of documents to be submitted and the form of sample application document.

Article 11: In the event that the administrative authority in charge of commerce receiving an application deems the application materials incomplete or not in compliance with the provisions, such authority shall inform the applicant once, on the spot or within five working days upon receipt of such application, of all the details that are required to be submitted or corrected. If such authority fails to inform the applicant within the specified period, the application shall be deemed accepted for handling from the date the application materials are received.

Article 12: The administrative authority in charge of commerce shall accept an application for an oil products operation permit if the application materials submitted by the applicant are complete and in compliance with the statutory format or if the applicant subsequently submits and corrects all the application materials required to be submitted or corrected in accordance with the requirements.

The administrative authority in charge of commerce shall, when accepting an application for an oil products operation permit, issue a written document, dated and affixed with the official seal of such authority.

The administrative authority in charge of commerce shall, when rejecting an application for an oil products operation permit, issue a written document, dated, affixed with the official seal of such authority and stating the reasons therefor, and inform the applicant of its right to apply for an administrative review or initiate administrative proceedings in accordance with the law.

Article 13: The administrative authority in charge of commerce that accepts an application shall carefully examine and verify the materials submitted by the applicant and issue its opinion. If an application is required to be submitted to a higher level administrative authority in charge of commerce for examination and verification, the preliminary opinion and the application materials shall be submitted to such higher level administrative authority.

PART THREE: PROCEDURES AND TIME LIMITS FOR EXAMINATION FOR OIL PRODUCTS OPERATION PERMITS

Article 14: The Provincial Government Commerce Authority shall, upon receipt of an application for the wholesale operation of oil products, assign at least two members of the working personnel to complete the examination within 20 working days and submit its preliminary opinion and the application materials to the Ministry of Commerce.

The Ministry of Commerce shall, within 20 working days from the date of its receipt of the materials submitted by the Provincial Government Commerce Authority, complete its examination and verification. An operation permit for the wholesale operation of oil products shall be granted to an applicant who meets the requirements prescribed in Article 7 and the Approval Certificate for the Wholesale Operation of Oil Products shall be issued. For those applicants who fail to meet the requirements, they shall be notified in writing of the decision of, and the reasons for, not granting such permit.

Article 15: The Municipal Authority shall, upon receipt of an application for the storage operation of oil products, assign at least two members of the working personnel to complete the examination within 20 working days and submit its preliminary opinion and the application materials to the Provincial Government Commerce Authority.

The Provincial Government Commerce Authority shall, within 20 working days from the date of receipt of the materials submitted by the Municipal Authority complete its examination and verification. An operation permit for the storage operation of oil products shall be granted to the applicant who meets the requirements prescribed in Article 8 and the Approval Certificate for the Storage Operation of Oil Products shall be issued after submission of the case to the Ministry of Commerce for the record. For those applicants who fail to meet the requirements, they shall be notified in writing of the decision of, and the reasons for, not granting such permit. In the event that a decision cannot be made within 20 working days, such period may be extended for 10 working days upon approval of the person in charge of such authority, and the applicant shall be notified of the reasons for such an extension.

Article 16: The Municipal Authority shall, upon receipt of an application for the retail operation of oil products, assign at least two members of the working personnel to complete the examination within 20 working days and submit its preliminary opinion and the application materials to the Provincial Government Commerce Authority.

The Provincial Government Commerce Authority shall, within 20 working days from the date of receipt of the materials submitted by the Municipal Authority complete its examination and verification. An operation permit for the retail operation of oil products shall be granted to the applicant who meets the requirements prescribed in Article 9 and the Approval Certificate for the Retail Operation of Oil Products shall be issued. For those applicants who fail to meet the requirements, they shall be notified in writing of the decision of, and the reasons for, not granting such permit. In the event that a decision cannot be made within 20 working days, such period may be extended for 10 working days upon approval of the person in charge of such authority, and the applicant shall be notified of the reasons for such an extension.

Article 17: If the administrative authority in charge of commerce accepting an application for an operation permit for oil products submitted by an applicant deems that a hearing is necessary, such authority shall make a public announcement and hold the hearing.

Article 18: For the establishment of any branch or sub-branch by an oil products operating enterprise, the application formalities shall be completed separately in accordance with the provisions of these Procedures.

In the event of the winding-up or the termination of the operations of an oil products operating enterprise, such enterprise shall complete the formalities for the suspension or cancellation of its operating qualification with the relevant permit issuing authority.

PART FOUR: ISSUANCE AND MODIFICATION OF APPROVAL CERTIFICATES FOR OIL PRODUCTS OPERATION

Article 19: Approval certificates for oil products operation shall be printed centrally by the Ministry of Commerce. The Approval Certificate for the Wholesale Operation of Oil Products shall be issued by the Ministry of Commerce; whereas the Approval Certificate for the Storage Operation of Oil Products and the Approval Certificate for the Retail Operation of Oil Products shall be issued by the Provincial Government Commerce Authority.

Article 20: If a wholesale oil products enterprise requests a modification of any detail in the Approval Certificate for the Wholesale Operation of Oil Products, such application shall be centrally submitted, on the strength of the relevant supporting materials and the original approval certificate, to the Ministry of Commerce by the Provincial Government Commerce Authority. Where such modification is for changing the name of the legal person, the certificate for changing the name of such legal person issued by the administrative authority for industry and commerce shall be provided. Where such modification is for changing the legal representative, the relevant certification shall be provided. For enterprises that meet the requirements for continuing to engage in the storage operation of oil products, the modified Approval Certificate for the Wholesale Operation of Oil Products shall be replaced and issued by the Ministry of Commerce.

Article 21: If an oil products storage or retail enterprise requests to modify the relevant details, such application shall be submitted to the Provincial Government Commerce Authority and the certification for the details to be modified shall be provided. Where such modification is for changing the name of the legal person, the certificate for changing the name of an enterprise legal person issued by the administrative Authority for industry and commerce shall be provided. Where such modification is for changing the legal representative, the relevant certification shall be provided. The Provincial Government Commerce Authority shall, after examination and verification, replace and issue the modified Approval Certificate for the Storage Operation of Oil Products for those enterprises that meet the requirements for continuing to engage in the storage operation of oil products; and shall replace and issue the modified Approval Certificate for the Retail Operation of Oil Products for those enterprises that meet the requirements for continuing to engage in the retail operation of oil products.

Article 22: Any modification to an Approval Certificate for the Wholesale Operation of Oil Products, Approval Certificate for the Storage Operation of Oil Products or Approval Certificate for the Retail Operation of Oil Products required as a result of any changes to the relevant authority-in-charge shall be provided for separately.

PART FIVE: SUPERVISION AND ADMINISTRATION

Article 23: The higher level administrative authority in charge of commerce shall strengthen the supervision and inspection of the administration of the oil products market implemented by the higher level administrative authority in charge of commerce and rectify promptly any act in violation of the regulations in the administration of the oil products market.

Article 24: The administrative authorities in charge of commerce of the people's governments at all levels shall strengthen the supervision and inspection on the oil products market within their own jurisdiction and shall investigate and handle those acts of the oil products operating enterprises that are in violation of the regulations.

Article 25: The administrative authorities in charge of commerce shall not charge any fee for granting operating permits for oil products or for subsequent supervision and administration. The operating funds for the administration of the oil products market shall be applied for by the administrative authority in charge of commerce to the finance department at the same level.

Article 26: The Ministry of Commerce and the Provincial Government Commerce Authority shall publish the list of enterprises granted with oil products operation permits and the list of oil products operating enterprises that have made modifications or been shut down.

Article 27: Approval certificates for oil products operation may not be forged, or purchased, sold, leased, loaned or otherwise transferred in any manner.

Article 28: Oil for special purpose of special users of oil products shall be used in accordance with the quantity and purpose for consumption and the scope of supply provided for by the state and must not be sold outside of the PRC.

Article 29: Oil products operating enterprises shall conduct their operations in accordance with the law and shall be prohibited from the following acts:

(1) operating without a permit or licence or with an inappropriate permit or licence, or beyond the scope of its operation;

(2) running petrol stations that do not use measuring apparatus such as petrol filling machines to fill up petrol or that do not use tax-monitored devices as required;

(3) using petrol filling machines that have not been inspected or calibrated or that are overdue for inspection and calibration or are not in compliance with the requirements for anti-explosion, altering petrol filling machine without authorization or deducting any volume of petrol through other means;

(4) mixing oil products with other products or faked products, passing off faked products as genuine products or passing off inferior products as good products;

(5) selling oil products that have expressly been specified by the state as obsolete or of sub-standard quality;

(6) dealing in smuggled or illegally refined oil products;

(7) violating state pricing policies for oil products and driving up oil prices or dumping the products; or

(8) other operating acts prohibited by state laws or regulations.

Article 30: Retail oil products enterprises shall purchase oil products from enterprises qualified for the wholesale operation of oil products.

Retail oil products enterprises may not sell oil products as an agent for any work unit not qualified for the wholesale operation of oil products.

Wholesale oil products enterprises may not sell oil products to enterprises without oil products operation qualifications.

Oil products storage enterprises shall, when storing oil products for other work units, inspect and verify the legal source of such oil products.

Article 31: In the event of any of the following, the administrative authority in charge of commerce making the decision for approving the oil products operation permit or the administrative authority in charge of commerce at the next higher level may revoke such decision at the request of an interested party or according to its functions and powers:

(1) a decision to grant such permit is made in relation to an application that is not in compliance with the statutory requirements due to abuse of power or dereliction of duty of the working personnel of the administrative authority;

(2) a decision to grant such permit is made beyond its statutory functions and powers;

(3) a decision to grant such permit is made to an applicant who is not qualified or who does not meet the statutory requirements; or

(4) other circumstances where the administrative permit may be revoked in accordance with the law.

PART SIX: LEGAL LIABILITY

Article 32: In the event that the administrative authority in charge of commerce or its working personnel violates the provisions of these Procedures in any of the following cases, the higher level administrative authority shall order it to rectify the same. If the case is serious, administrative sanctions shall be imposed on the person directly in charge and other directly responsible persons:

(1) not handling an application that meets the statutory requirements;

(2) not explaining the reasons to the applicant for not handling its application or not granting the permit;

(3) granting a permit to an applicant who does not meet the requirements or granting a permit beyond its statutory functions and powers;

(4) not granting an approval to an applicant who meets the statutory requirements, or failing to render an approval decision within the statutory time period without proper reason; or

(5) not performing the duties of supervision in accordance with the law or not putting sufficient effort into such supervision, thereby causing serious consequences.

Article 33: In the event that the administrative authority in charge of commerce charges any fee without authorization for granting an oil products operation permit, the higher level administrative authority shall order it to refund such illegally charged fee and impose administrative sanctions on the directly responsible personnel.

Article 34: In the event of any of the following acts conducted by an oil products operating enterprise, the administrative authority in charge of commerce shall impose administrative sanctions in accordance with the law. If the case is serious, the approval certificate for the oil products operation shall be revoked:

(1) altering, scalping, leasing, lending or otherwise illegally transferring an approval certificate for oil products operation;

(2) selling externally, without authorization, oil for special purpose by a special user of oil products in violation of these Procedures;

(3) building new petrol stations or oil tank farms without authorization in violation of the conditions and procedures prescribed in these Procedures;

(4) selling oil products by means of, amongst others, mixing oil products with other products or faked products, passing off faked products as genuine products, passing off inferior products as good products, passing off sub-standard products as quality products or selling oil products that have been specified by the state as obsolete or prohibited from selling;

(5) selling smuggled oil products;

(6) selling oil products by a wholesale oil products operating enterprise to an enterprise without oil products operation qualifications;

(7) purchasing oil products by a retail oil products enterprise from enterprises not qualified for the wholesale operation of oil products;

(8) obtaining an operation permit through improper means such as deception or bribery;

(9) conducting business activities beyond the scope of business;

(10) concealing relevant information from, providing false materials to, or refusing to provide true materials reflecting its business activities to, the administrative authority in charge of supervision and inspection; or

(11) other illegal acts specified by laws, regulations or rules.

Article 35: If the actual condition is concealed or false materials are provided when applying for an oil products operation permit, the administrative authority in charge of commerce shall render a decision of not handling such application or not granting the permit, and shall issue a warning.

Article 36: If a citizen, legal person or another organization engages in oil products operation activities without the permission of the administrative authority in charge of commerce, the relevant administrative authority in charge of commerce in such locality shall, in conjunction with relevant higher level authority, stop such activities, and shall impose administrative sanctions on such citizen, legal person or organization.

PART SEVEN: SUPPLEMENTARY PROVISIONS

Article 37: The Ministry of Commerce shall be responsible for interpreting these Procedures.

Article 38: These Procedures shall be effective as of January 1 2005.

1 Translation provided by White & Case.