Measures for the Approval of Sales Agency Qualifications for China Civil Air Transport

(Issued by the China Air Transport Association on March 27 2006 and effective as of March 31 2006.)

PART ONE: GENERAL PROVISIONS

Article 1: These Measures have been formulated pursuant to the relevant provisions of the Charter of the China Air Transport Association and General Administration of Civil Aviation of China, Circular on Transferring the Task of Recognizing Sales Agency Qualifications for Air Transport (Min Hang Han [2006] No.141) in order to strengthen the self-regulation of sales agency activities of air transport and promote the healthy and orderly development of the sales agency market of air transport.

Article 2: For the purposes of these Measures, the term "sales agency" means an enterprise legal person that has obtained a Sales Agency Qualification Certificate for China Civil Air Transport (a Qualification Certificate) issued by the China Air Transport Association (CATA), and that accepts appointments from air carriers to engage in sales agency activities within the entrusted business scope in accordance with the sales agency contracts executed by the parties.

For the purposes of these Measures, the term "sales agency activities" means the sales agency business activities of air passenger transport and air cargo transport engaged in by a sales agency with a Qualification Certificate in its own name within the sales business scope entrusted to it by an air carrier.

Article 3: These Measures shall govern sales agency activities of air transport engaged in by sales agencies as entrusted by civil air carriers established in the People's Republic of China.

Foreign air carriers that appoint sales agencies in the People's Republic of China to engage in sales agency activities shall comply with these Measures.

These Measures shall not govern the administration of air transport sales activities engaged in by air carriers themselves in their own names for air transport marketing purposes.

Article 4: CATA shall, in accordance with the law, exercise the function of approving the qualifications of air transport sales agencies, has the authority to issue, replace, amend and cancel Qualification Certificates and shall regulate sales agencies that have obtained Qualification Certificates.

Article 5: To engage in sales agency activities of air transport, a sales agency shall obtain a Qualification Certificate issued by CATA.

No work unit or individual may engage in sales agency business activities of air transport without a Qualification Certificate.

An air carrier (including foreign air carriers) must select an agency at its own discretion from among the sales agencies approved by CATA to engage in the enterprise's entrusted sales matters.

Article 6: When approving sales agency qualifications and carrying out its regulatory work, CATA shall comply with the principles of transparency, fairness and impartiality.

When engaging in sales agency activities, sales agencies shall comply with the principles of facilitating matters for people, good faith and fair competition and abide by state laws and administrative regulations, and the industry standards formulated by CATA.

PART TWO: ORGANIZATION RESPONSIBLE FOR APPROVING SALES AGENCY QUALIFICATIONS

Article 7: CATA shall be responsible for approving sales agency qualifications of civil air transport nationwide.

Its regional representative offices (RROs) shall carry out the approval of sales agency qualifications in their jurisdiction within the scope authorized by CATA, be responsible for accepting the qualification approval applications of sales agencies in their jurisdiction and regulate the business activities of sales agencies in their jurisdiction.

Article 8: CATA shall exercise the following functions:

(1) formulating and publishing the working procedures for the approval of sales agency qualifications, charge items and charge rates;

(2) accepting and reviewing qualification approval applications;

(3) issuing, replacing, amending and cancelling Qualification Certificates;

(4) conducting monitoring inspections of the qualifications of sales agencies, their acceptance of appointments, the quality of their services and their business standards;

(5) approving the qualifications of and effecting administration over institutions that train the professional personnel of sales agencies;

(6) effecting administration of air transport tickets;

(7) regulating security and insurance related matters in sales agency business activities;

(8) accepting and handling complaints relating to sales agency business activities;

(9) investigating, handling and imposing penalties for violations of regulations committed in the course of sales agency activities; and

(10) other functions necessary to the administration of the approval of qualifications.

Article 9: With a view to safeguarding the interests of the air transport industry and promoting fair competition, CATA may, based on the state of development of the air transport market, exercise suitable re-adjustment over sales agency qualifications. When necessary, CATA may suspend acceptance of applications for sales agency qualifications for a certain period of time.

PART THREE: SALES AGENCY QUALIFICATION CONDITIONS

Article 10: Sales agency qualifications are divided into type 1 and type 2 sales agency qualifications for air transport.

The term "type 1 sales agency qualifications for air transport" means sales agency qualifications for civil air passenger transport and cargo transport for international routes and for Hong Kong, Macao and Taiwan routes.

The term "type 2 sales agency qualifications for air transport" means sales agency qualifications for civil air passenger transport and cargo transport for domestic routes other than Hong Kong, Macao and Taiwan routes.

These Measures shall not apply to sales agency qualifications for air transport for hazardous goods.

Article 11: An enterprise wishing to apply for sales agency qualifications shall obtain, in accordance with the law, an enterprise legal person business licence registered by the administration for industry and commerce.

Article 12: The registered capital of an enterprise wishing to apply for a Qualification Certificate shall comply with the following requirements:

(1) to engage in type 1 air transport sales agency business, paid-in capital of not less than Rmb1.5 million; and

(2) to engage in type 2 air transport sales agency business, paid-in capital of not less than Rmb500,000.

Article 13: Sino-foreign equity and cooperative joint ventures established in the People's Republic of China in accordance with the law may apply for type 1 sales agency qualifications for passenger transport and cargo transport and type 2 sales agency qualifications for cargo transport. The foreign investment therein and the percentage thereof shall comply with relevant state laws and regulations.

A wholly foreign-owned enterprise may not establish a wholly-owned sales agency or engage in sales agency business activities.

The investment percentage of Hong Kong, Macao and Taiwan enterprises that apply for sales agency qualifications shall be handled in accordance with relevant state provisions.

Article 14: An enterprise wishing to apply for a Qualification Certificate shall satisfy the following conditions:

(1) the requirements specified in Articles 12 and 13 hereof;

(2) having at least three professional personnel members who have obtained appropriate qualification certificates for air transport sales agents;

(3) having a fixed and independent place of business;

(4) having telecommunications equipment and other necessary business facilities; and

(5) other conditions specified by CATA.

Article 15: For each branch organization that it applies to establish, a sales agency must increase its registered capital by Rmb500,000 and its qualified air transport sales agent personnel by three persons, and satisfy other conditions required hereby.

Article 16: Enterprises or work units that state laws or regulations prohibit or restrict from investing in the sales agency business may not engage in sales agency activities.

PART FOUR: PROCEDURE FOR THE APPROVAL OF SALES AGENCY QUALIFICATIONS

Article 17: The qualification approval matters for which CATA and its RROs are responsible, including the format of applications, application conditions, handling procedure, approval term, etc., shall be publicly announced.

Article 18: When applying for sales agency qualifications, an Application Form for Sales Agency Qualifications for Air Transport centrally formulated by CATA shall be used.

Article 19: Applications for type 1 and type 2 sales agency qualifications for air transport shall be submitted to RROs, which shall conduct a preliminary examination thereof.

After passing preliminary examination by the RRO, a qualification application shall be forwarded to CATA for re-examination. CATA shall decide whether or not to issue a Qualification Certificate.

Article 20: When applying for sales agency qualifications for air transport, the following documents and information shall be submitted:

(1) an Application Form for Sales Agency Qualifications for Air Transport;

(2) the enterprise's articles of association and the original (duplicate) and photocopy of its business licence;

(3) a capital verification report or a recent audit report;

(4) supporting documents for financial security (including the enterprise legal person business licence of the guarantor and its proof of creditworthiness);

(5) a photocopy of the proof of identity and the résum?of the enterprise's legal representative or principal person in charge;

(6) a list of telecommunications equipment and business facilities and supporting documents for the enterprise's domicile and place of business (including detailed address, photocopy of proof of title to office/business real property or lease contract and photographs of the interior and exterior of the premises); if sales agency qualifications for cargo transport are being applied for, supporting documentation for the cargo storage premises shall also be submitted;

(7) the qualification certificates and photocopies thereof of at least three sales agents;

(8) the shareholder investment agreement executed by the investors in the enterprise and the shareholders' legal person business licences (duplicate) or natural person proofs of identity; and

(9) other necessary documents and information.

Article 21: The applicant for sales agency qualifications for air transport shall ensure that the application documents and information that it submits are true, lawful and valid.

Article 22: An RRO shall examine the application documents and information to determine whether they are complete and render its decision on whether or not to accept the application within five working days of receipt of an application for sales agency qualifications for air transport.

If the application materials are complete, it shall render a decision to accept the application and issue a written note.

If the application materials are incomplete, it shall inform the applicant on one occasion as to all the missing information that needs to be provided or the information that needs to be corrected.

Article 23: If, following examination, the materials are found to be complete and to comply with the requirements hereof, the RRO shall render a preliminary approval decision within 15 working days of the date of accepting the application and, within five working days of the date of rendering its decision, forward the application to CATA for re-examination.

CATA shall render its re-examination decision within 15 working days of the date of receipt of the preliminarily examined materials and prepare the Qualification Certificate and related licence.

If an applicant does not satisfy the approval conditions for sales agency qualifications, the RRO shall render a decision to withhold approval within 15 working days, inform the applicant as to the reason why it withheld its approval and return the application materials. If the applicant objects to the rejection, it has the right to apply to CATA for reconsideration and the reconsideration decision shall be the final decision of CATA.

Article 24: A Qualification Certificate shall be valid for three years.

Article 25: If the requirements of Article 15 hereof are satisfied, an application may be made to establish a branch organization.

Branch organizations shall not have independent legal personality and the sales agency shall bear legal liability for all of the business acts of its branch organizations.

Article 26: When a sales agency applies to establish a branch organization, it shall apply separately for a Qualification Certificate for a sales agency branch organization.

When a sales agency applies to establish a branch organization, it shall submit the following documents and information:

(1) an application to establish a branch organization;

(2) its enterprise legal person business licence and the business licence of its branch organization;

(3) a photocopy of its Qualification Certificate;

(4) if the branch organization is to be established in another region, the written opinion of the RRO of the place where the sales agency is located;

(5) a list of telecommunications equipment and business facilities and supporting documents for the enterprise's domicile and place of business (including detailed address, photocopy of proof of title to office/business real property or lease contract and photographs of the interior and exterior of the premises); if sales agency qualifications for cargo transport are being applied for, supporting documentation for the cargo storage premises shall also be submitted;

(6) the document of appointment of the person in charge of the branch organization and photocopies of the qualification certificates for the appropriate positions of at least three sales agents; and

(7) other necessary documents and information.

Article 27: The relevant provisions of this Part shall apply to the procedures for the acceptance, examination of, and the rendering of decisions on, applications for the establishment of branch organizations.

Article 28: Sales agency activities may not be engaged in over the internet without a Qualification Certificate issued by CATA.

If a sales agency opts to engage in sales agency activities over the Internet, it shall report the following to CATA for the record;

(1) the name and domain name of its website;

(2) the nature of its website, its scope of application and the address of the required server; and

(3) detailed information and other written materials on its server or proxy.

To engage in sales activities over the internet, state laws and administrative regulations and relevant industry provisions shall be complied with.

PART FIVE: ADMINISTRATION OF QUALIFICATION CERTIFICATES

Article 29: When a change to the registered business particulars of an air transport sales agency occurs, it shall notify CATA of the same in a timely manner, and apply for amendment of the relevant particulars on its Qualification Certificate.

When the following particulars on a Qualification Certificate change, an application for amendment shall be submitted to the RRO within 30 working days of the date on which the decision to make the change was made, and the RRO shall examine the same:

(1) the enterprise's name;

(2) business address; or

(3) legal representative.

Article 30: Without the approval of CATA, a sales agency may not change the particulars recorded on its Qualification Certificate.

If the investors that have invested in a sales agency or their equity percentages change, the same shall be reported to the local RRO for the record.

Article 31: When a sales agency applies to the RRO to change its name, business address or legal representative, it shall submit an amendment application and the relevant documents. The relevant provisions of Part Four shall apply to the procedures for the acceptance, examination of, and the rendering of decisions on, amendment applications.

If the submitted materials are complete and comply herewith, CATA shall effect the amendment and replace the applicant's Qualification Certificate.

Article 32: CATA shall carry out annual inspections of the qualifications of sales agencies. Such annual inspections shall be conducted between March 1 and June 30 each year.

The focus of annual inspections shall be the following matters:

(1) the term of validity of Qualification Certificates;

(2) changes in registered particulars;

(3) the qualification certificates of the professional personnel; and

(4) sales performance.

Article 33: When applying for an annual inspection, a sales agency shall submit to the RRO the original of its Qualification Certificate, the original of its enterprise legal person business licence that has passed the annual inspection of the administration for industry and commerce, the qualification certificates of all of its professional personnel, its sales volume and other necessary information for the annual inspection.

Article 34: When a sales agency passes the annual inspection, the RRO shall affix the designated stamp indicating a pass on annual inspection to its Qualification Certificate.

Article 35: CATA may decide not to give a pass on the annual inspection if a sales agency:

(1) no longer satisfies the criteria and conditions hereof;

(2) failed to carry out the procedure for the amendment of relevant particulars on its Qualification Certificate in accordance herewith;

(3) was penalized or punished two or more times by an administrative authority or CATA during the year;

(4) carried out illegal sales on numerous occasions during the year and a relatively large number of complaints were made against it by air carriers, passengers and/or cargo owners, and, after review, such complaints were found to accord with the facts; or

(5) committed another serious violation of laws or regulations.

Article 36: A sales agency shall apply to the RRO for a new certificate 30 days prior to the expiration of its Qualification Certificate.

If a sales agency fails to apply by the time mentioned above without a legitimate reason, CATA will cancel its Qualification Certificate.

Article 37: When a sales agency applies for replacement of its Qualification Certificate, it shall submit the following documents and information:

(1) an application;

(2) the résum?of the enterprise's legal representative or principal person in charge, a photocopy of his/her proof of identity and a capital verification report or a recent audit report;

(3) the qualification certificates of its professional personnel;

(4) a photocopy of its business licence that has passed annual inspection and that bears the official stamp;

(5) the original of its Qualification Certificate; and

(6) other necessary documents and information.

Article 38: The relevant provisions of Part Four hereof shall apply to the procedure for the replacement of a Qualification Certificate.

Article 39: If a sales agency is divided or merged, or if it is closed down or is declared bankrupt in accordance with the law and ceases to engage in sales agency business, it shall apply to the RRO for cancellation of and return its Qualification Certificate in a timely manner.

When the Qualification Certificate of a sales agency is cancelled or its certificate becomes void, air carriers shall promptly terminate the air transport sales agency contracts executed with it.

Article 40: If its Qualification Certificate is destroyed or lost for any reason, a sales agency shall apply to the RRO for a replacement.

PART SIX: SUPERVISION AND INSPECTIONS

Article 41: The working personnel of CATA and its RROs shall act responsibly and with care, be honest and impartial, serve with engagement and consciously submit themselves to monitoring by the public in carrying out their work related to qualification approval.

Sales agencies shall guard against errors, prevent latent security dangers, serve in a polite manner and consciously submit themselves to monitoring inspections by CATA in accordance with the requirements of the service quality standards for the civil aviation industry and of the business standards of air carriers.

Article 42: Sales agencies may not forge, alter, rent out, sell, deal in or transfer Qualification Certificates.

Article 43: When engaging in sales agency business activities, a sales agency shall place its sales agent licence and business licence in a prominent location in its place of business, and place the qualification certificates of its professional personnel in the work premises, so as to facilitate examination thereof.

Article 44: In the course of its sales agency activities, a sales agency shall, in accordance with relevant provisions, make and preserve truthful records of the relevant information of passengers and cargo owners, and may not itself print or use tickets or receipts that violate state provisions.

Article 45: A sales agency may not engage in sales agency activities that exceed the scope of business specified on its Qualification Certificate.

Article 46: A sales agency may not use improper means to prepare non-compliant transport documents in order to obtain illegal gains.

Article 47: A sales agency may not transfer transport documents to another enterprise, work unit or individual for sale on its behalf or engage in sales agency activities anywhere outside the business address specified on its Qualification Certificate.

Article 48: A sales agency may not provide access to data on the civil aviation computer system to any enterprise, work unit or individual that has not obtained a Qualification Certificate.

Article 49: A sales agency may not engage in illegal sales that harm the lawful rights and interests of air carriers, other sales agencies, passengers or cargo owners.

Article 50: A sales agency may not exploit its monopoly position in a market to manipulate market prices and harm the lawful rights and interests of other operators or consumers.

Article 51: A sales agency may not engage in dumping at below-cost prices or use other means to disguise price reductions in order to eliminate or harm competitors.

PART SEVEN: HANDLING OF VIOLATIONS OF REGULATIONS

Article 52: If a member of the working personnel of CATA violates the provisions hereof concerning the handling of approval matters, issues a Qualification Certificate to an applicant that fails to meet the specified conditions or does not issue a Qualification Certificate to an applicant that satisfies the specified conditions, he/she shall be ordered to rectify the matter and his/her liability shall be pursued by CATA.

If such person solicits or accepts others' property or seeks illegitimate gains in the process of approving sales agency qualifications, his/her legal liability shall be pursued in accordance with the law.

Article 53: If an applicant violates Article 21 hereof by providing false materials but has not yet received its Qualification Certificate, it may not reapply for a period of one year; if it has obtained its Qualification Certificate, the same shall be revoked.

Article 54: If Article 28 hereof is violated by making sales over the internet that are in violation of relevant provisions, CATA may order rectification. If the perpetrator refuses to rectify the matter, its Qualification Certificate shall be cancelled.

Article 55: If Article 29 or 30 hereof is violated by amending particulars on the certificate without authorization or failing to notify CATA in a timely manner after amendment of business registration, CATA may give a warning, order rectification or circulate a notice of criticism. If the perpetrator refuses to rectify the matter, its Qualification Certificate shall be cancelled.

Article 56: If Article 35 hereof is violated by failing to submit to an annual inspection, CATA shall order rectification within a specified period of time. If the perpetrator refuses to rectify the matter, its Qualification Certificate shall be cancelled.

Article 57: If any of the following is violated, CATA shall give a warning and order rectification. If the perpetrator refuses to rectify the matter, its Qualification Certificate shall be cancelled:

(1) Article 42 hereof, by forging, altering, renting out, selling, dealing in or transferring Qualification Certificates;

(2) Article 43 hereof, by failing to place the licence in accordance with the Article; or

(3) Article 44 hereof, by failing to preserve truthful relevant information or printing or using tickets or receipts that are in violation of state provisions.

Article 58: If any of the following is violated, CATA shall give a warning or circulate a notice of criticism; if the circumstances are serious, it shall suspend the Qualification Certificate for a period between one month (inclusive) and three months; if the perpetrator refuses to rectify the matter, its Qualification Certificate shall be cancelled:

(1) Article 45 hereof, by engaging in operations that exceed the scope of business;

(2) Article 46 hereof, by preparing non-compliant transport documents;

(3) Article 47 hereof, by transferring transport documents to a third party for sale on its behalf or conducting sales outside the place of business;

(4) Article 48 hereof, by illegally permitting access to data;

(5) Article 49 hereof, by conducting illegal sales;

(6) Article 50 hereof, by manipulating market prices; or

(7) Article 51 hereof, by dumping at below-cost price or taking other means to reduce prices in a disguised manner.

Article 59: CATA may, depending on the seriousness of a violation of provisions by a sales agency, render a decision to reduce its trustworthiness rating. If the circumstances are serious and a violation of the law is constituted, CATA may transfer the case in accordance with the law to the administrative or judicial authorities for handling.

PART EIGHT: TRANSITIONAL PROVISIONS

Article 60: The approval certificates for engaging in sales agency business issued by civil aviation administrative authorities may continue to be used during their terms of validity. Thirty days prior to the expiration of such certificate, the concerned sales agency shall apply to CATA for the issuance of a Qualification Certificate.

If a sales agency fails to obtain a Qualification Certificate after the expiration of its approval certificate for engaging in sales agency business, its sales agency qualifications shall automatically become void.

If a sales agency wishes to have its certificate replaced early during the term of validity of its approval certificate, CATA may carry out the relevant procedures for it.

Article 61: The sales agent training certificates issued by training institutions approved by the civil aviation administrative authorities may continue to be used during their terms of validity.

The measures of CATA for the approval of institutions that train the professional personnel of sales agencies, and for the examination of their training curriculums and training materials shall be formulated and issued separately.

PART NINE: SUPPLEMENTARY PROVISIONS

Article 62: CATA may, based on changes in reservation and sales methods, formulate and issue relevant administrative measures in a timely manner.

Article 63: CATA, in exercising its function of approving sales agency qualifications in accordance with the law, shall not bear any joint and several liability for losses incurred due to operations of sales agencies carried out in violation of laws or regulations.

Article 64: The authority to interpret these Measures lies with CATA.

Article 65: These Measures shall be effective as of March 31 2006.