Measures for the Administration of the Crude Oil Market

Promulgated by the Ministry of Commerce on December 

4,2006 and Effective as of January 1,2007

Decree No.23, 2006 of the Ministry of Commerce of the People’s Republic of China, Promulgating the Measures for Administration of the Market of Crude Oil
Measures for Administration of the Market of Crude Oil have been examined and approved by the 9th ministerial working conference of Ministry of Commerce on November 16, 2006. It is now promulgated and shall be put into effect as from January 1, 2007.
Minister: Bo Xilai
December 4, 2006

Measures for Administration of the Market of Crude Oil
Chapter One General Principles
Article 1 In accordance with the Decision of the State Council on the Enactment of Administrative Licensing for the Confessedly Reserved Items Subject to Administrative Examination and Approval (Decree No. 412 of the State Council) and related laws and administrative regulations, Measures for Administration of the Market of Crude Oil (hereinafter referred to as the Measures)are constituted for the purposes of strengthening supervision and administration on crude oil market, regulating the operation and maintaining the market order of crude oil market, and safeguarding legal rights and interests of the operators and consumers of crude oil.
Article 2 All operators dealing with crude oil businesses shall follow the related laws and regulations as well as the Measures.
The enterprises dealing with crude oil businesses mentioned in the Measures refer to the enterprises undertaking the sale and storage activities of crude oil.
Article 3 China implements licensing system on crude oil operation.
Ministry of Commerce is responsible for drafting laws and regulations for the administration of crude oil market, drawing up department rules and organizing the implementation. The department of commercial administration of all levels shall supervise and administer the crude oil operations within the jurisdiction district.

Article 4 The crude oil mentioned in the Measures refers to the crude oil exploited and produced within the territory or extent of territorial waters of the People’s Republic of China and imported crude oil.

Chapter Two Application and Acceptance of Crude Oil Operation Licensing
Article 5 Enterprises applying for the qualifications of crude oil sale and storage operations shall submit applications to departments of commercial administration of provincial governments. With the examination, the departments shall submit the opinions of preliminary examination and the applying materials to Ministry of Commerce for decisions of whether granting crude oil sale and storage licensing or not.

Article 6 Enterprises applying for the crude oil sale qualifications shall be provided with the following conditions:
I. the applying body shall have qualification of Chinese enterprises as legal persons, with registered capital no less than 100 million RMB;
II. with long-term and steady supply channel of crude oil:
1. crude oil exploitation enterprises obtaining Crude Oil Mining License with the approval of the State Council, and with actual output, or;
2. import enterprises with qualification for crude oil import, and with an annual import volume of more than 500 thousand tons, or
3. sign the crude oil supply agreements for more than 1 year with the enterprises subject to the above-mentioned item 1 and 2;
III. with long-term, steady and legal sale channel of crude oil:
IV. have a crude oil depot with capacity of no less than 200 thousand cubic meters, the construction of which shall be in line with the domestic urban-rural programming and oil depot layout, and shall be checked and accepted by departments of land resources, planning construction, safety supervision, public security and fire protection, environmental protection, meteorology and quality supervision.

Article 7 Enterprises applying for the crude oil storage qualifications shall be provided with the following conditions:
I. the applying body shall have qualification of Chinese enterprises as legal persons, with registered capital no less than 50 million RMB;
II. have a crude oil depot with capacity of no less than 500 thousand cubic meters, the construction of which shall be in line with the domestic urban-rural programming and oil depot layout, and shall be checked and accepted by departments of land resources, planning construction, safety supervision, public security and fire protection, environmental protection, meteorology and quality supervision;
III. have facilities like conveying pipes, specific railways, or water carriage dock that can deal with no less than 50 thousand tons of crude oil.

Article 8 To establish foreign-invested crude oil enterprises, the Measures, related national policies and related laws, regulations of foreign investment shall be followed.

Article 9 Enterprises applying for the crude oil sale qualifications shall provide the following documents:
I. application documents
II. legal document and related materials of long-term and steady supply channel of crude oil;
III. legal document and related materials of long-term, steady and legal sale channel of crude oil;
IV. property right certification of crude oil depot and supporting establishments; approval certificate and acceptance documents of the oil depot and other establishments issued by departments of land resources, planning construction, safety supervision, public security and fire protection, environmental protection, meteorology and quality supervision;
V. Business Licence of Enterprises as Legal Persons or Notification of Pre-approval of Enterprises Name issued by department of industry and commerce;
VI. Business Certificate of Hazardous Chemicals issued by department of safety supervision and administration;
VII. foreign-invested enterprises shall provide Approval Certificate for Foreign-invested Enterprises of the People’s Republic of China;
VIII. other documents required by the auditing departments.

Article 10 Enterprises applying for the crude oil storage qualifications shall provide the following documents:
I. application documents;
II. property right certification of crude oil depot and supporting establishments; approval certificate and acceptance documents of the oil depot and other establishments issued by departments of land resources, planning construction, safety supervision, public security and fire protection, environmental protection, meteorology and quality supervision;
III. property right certification of establishments like conveying pipes, specific railways, or water carriage dock that can deal with no less than 50 thousand tons of crude oil;
IV. Business Licence of Enterprises as Legal Persons or Notification of Pre-approval of Enterprises Name issued by department of industry and commerce;
V. Business Certificate of Hazardous Chemicals issued by department of safety supervision and administration;
VI. foreign-invested enterprises shall provide Approval Certificate for Foreign-invested Enterprises of the People’s Republic of China;
VII. other documents required by the auditing departments.

Article 11 Departments of commercial administration of above provincial levels shall publicize the requirements, procedures, time limit and catalogue of required materials for applying for crude oil sale and storage licensing, as well as the standard sample of application letter.

Article 12 Departments of commercial administration of provincial government shall inform the applicants of the missing or improper application materials within 5 working days after reception of the application for amendment. If the informing behavior does not happen within the time limit, the application materials shall be considered as acceptable as from the day of reception.

Article 13 Departments of commercial administration of provincial government shall accept the applications, when the applicants submitting full required materials in regulated forms or submitting all the required supplement application materials.

Departments of commercial administration of provincial government shall provide written certification with the specific seal of the department and date, when the applications are acceptable. If not, written certification with the specific seal of the department, unacceptable reasons and date shall be provided, with informing the applicants the right of conducing administrative review or lawsuit in line with related laws and regulations.


Chapter Three Procedures and Time Limit for Examination of Crude Oil Sale and Storage Licensing

Article 14 Departments of commercial administration of provincial government shall complete the work of examination within 20 working days and submit the preliminary opinions and applying materials to Ministry of Commerce, after receiving the application for crude oil sale and storage qualifications.

Article 15 Ministry of Commerce shall complete the examination within 20 working days after receiving the materials submitted by departments of commercial administration of provincial government. Those complying with Article 6 of the Measures shall be granted crude oil sale licensing and Approval Certificate of Crude Oil Sale Business; those complying with Article 7 of the Measures shall be granted crude oil storage licensing and Approval Certificate of Crude Oil Storage Business. For those failing to comply with the requirements, Ministry of Commerce will release written notification of reason and decision of not granting to the applicants, with informing the applicants the right of conducing administrative review or lawsuit in line with related laws and regulations.

The enterprises shall conduct the registration procedures with the Approval Certificate of Crude Oil Sale Business and Approval Certificate of Crude Oil Storage Business issued by Ministry of Commerce.

Article 16 In case of building, moving or expanding the building of storage facilities, enterprises of crude oil operations shall transact the checking and accepting procedure of departments of land resources, planning construction, safety supervision, public security and fire protection, environmental protection, meteorology and quality supervision and then submit to Ministry of Commerce for a record.
Article 17 Foreign-invested enterprises shall put forward applications to departments of commercial administration of provincial government in case they want to establish new business, alter business scope or acquire and merge domestic enterprises related to crude oil business. With receipt of all applying documents, departments of commercial administration of provincial government shall complete examination within 1 month and submit the preliminary opinions as well as applying documents to Ministry of Commerce. Ministry of Commerce will decide whether to approve or not within 3 month since receiving all applying documents.

Chapter Four Issuance and Alteration of Approval Certification of Crude Oil Sale and Storage

Article 18 Approval Certificate of Crude Oil Sale Business and Approval Certificate of Crude Oil Storage Business shall be printed and issued by Ministry of Commerce.

Article 19 In case crude oil operation enterprises require altering Approval Certificate of Crude Oil Sale Business and Approval Certificate of Crude Oil Storage Business, they shall apply to departments of commercial administration of provincial government who will carry out preliminary examination and submit to Ministry of Commerce the preliminary opinions and application materials.
If acceptable, Ministry of Commerce will issue the altered Approval Certificate of Crude Oil Sale Business and Approval Certificate of Crude Oil Storage Business.

Article 20 Crude oil operation enterprises requiring altering the Approval Certificate of Crude Oil Sale Business and Approval Certificate of Crude Oil Storage Business shall provide the following documents:
I. provide Notification of Pre-approval of Enterprises Name when name alteration required;
II. provide position certification and ID certification of the new legal person if legal person alteration required;
III. provide legitimate certification of usage right of business location if the alteration of storage and delivery locations not included;
IV. the former enterprises shall transact logout procedure of qualifications, the new operator shall reapply for related qualifications if the investing entity alteration required.

Chapter Five Supervision and Administration

Article 21 Departments of commercial administration at all levels shall enhance supervision and examination on crude oil market of the jurisdiction district and punish the illegal behaviors.

Article 22 Departments of commercial administrations at all levels shall organize annual investigation on enterprises with crude oil operation qualifications, and submit the investigation results to Ministry of Commerce.

Ministry of Commerce shall urge ineligible enterprises in annual investigation to rectify; the ones remaining ineligible after rectifying will be deprived with the crude oil operation qualifications.

Article 23 Main items of annual investigation on crude oil sale enterprises:
I. operation conditions of last year
II. subscription and implementation situations of crude oil supply and sale agreements
III. whether the crude oil sale enterprises and their facilities comply with the Measures and related technical specification
IV. fire protection, security and environmental protection conditions of the enterprises

Article 24 Main items of annual investigation on crude oil storage enterprises:
I. storage conditions of last year
II. whether the crude oil storage enterprises and their facilities comply with the Measures and related technical specification
III. fire protection, security and environmental protection conditions of the enterprises

Article 25 Crude oil enterprises that prepare to temporary close or terminate the business shall transact suspending or logout procedures of the crude oil operation qualifications at Ministry of Commerce. The temporary closure shall last no longer than 18 months. The enterprises with no suspending or logout procedures or terminating the operation for more than 18 months will be deprived with crude oil operation certificate, Approval Certificate of Crude Oil Sale Business and Approval Certificate of Crude Oil Storage Business by Ministry of Commerce.

Article 26 Departments of commercial administration at all levels cannot charge fees for crude oil licensing and market supervision and administration.

Article 27 Ministry of Commerce shall publicize the list of enterprises with crude oil licensing as well as the alteration and cancellation situations.

Article 28 Approval Certificate of Crude Oil Sale Business and Approval Certificate of Crude Oil Storage Business shall not be forged, modified, traded, leased, lent after borrowing or transferred by any other means. The Approval Certificate of Crude Oil Sale Business and Approval Certificate of Crude Oil Storage Business that have been altered or cancelled shall be submitted back to Ministry of Commerce, no units or individuals could secretly keep it.

Article 29 Crude oil enterprises shall operate in line with laws, the following behaviors are prohibited:
I. without certificate or license; the certificate and license do not match; exceeding regulated business scope;
II. using the fake instead of the real products, using the inferior instead of the superior products;
III. sale or storage of the crude oil obtained from illegal means;
IV. providing sale or storage services to the enterprises with no state approval;
V. violating price laws and regulation, bidding up oil prices or dumping in low prices;
VI. other operation behaviors prohibited by the state laws and regulations.

Article 30 Ministry of Commerce shall cancel crude oil operation licensing, when any one of the following situations occurs:
I. making the decision of granting the licensing to the applicants who are not qualified or do not comply with regulations or laws;
II. making the decision of granting the licensing exceeding the authority;
III. making the decision of granting the licensing via law –violating procedures;
IV. crude oil enterprises that no longer qualified with regulations of Article 6 of the Measures;
V. crude oil enterprises that no longer qualified with regulations of Article 7 of the Measures;
VI. missing or failing to pass the annual investigation;
VII. obtaining the operation licensing by malfeasance, like cheating or bribe etc.;
VIII. concealing related situation, providing false materials or refusing to provide actual materials of the operation;
IX. other situations that require the cancellation of the administrative licensing.

Chapter Six Legal Responsibilities

Article 31 In case that departments of commercial administration or their staff act against the Measures and fall in the following situations, the related superior administration or supervision departments shall charge them to rectify; in case of grievous violation occurs, the direct related chief staffs shall be punished administratively:
I. refusing to accept the law-obeying applications;
II. failing to explain the reasons of not accepting the application or not granting the licensing;
III. granting licensing to the unqualified applicants or making the decision of granting exceeding their authorities;
IV. refusing to granting licensing to the qualified applicants or failing to make the decision of granting within the legal time limit;
V. failing to carry out supervision according to law or supervising ineffectively, which causing severe aftermath.

Article 32 In case that the departments of commercial administration make bold to charge fees during the granting process of crude oil licensing, the superior administrative or supervision departments shall command a return of the fees, with administrative punishment on the chief staff and directly related staff

Article 33 In case that one of the following behaviors, providing which is prescribed by laws and regulation, occurs to the crude oil enterprises, the related laws and regulations shall be followed; providing which is not prescribed by laws and regulation, the Ministry of Commerce shall punish the involved enterprises according to specific circumstances, like warning, commanding rectification or imposing a penalty money of 3 times of the illegal income or that of no more than 30 thousand yuan:
I. illegally transferring crude oil licensing by modifying, trading, leasing, lending or by any other means;
II. making bold to build, move and expand crude oil depot by violating the conditions and procedures regulated in the Measures;
III. using the fake instead of the real products, using the inferior instead of the superior products in the sale of crude oil;
IV. sale or storage of the crude oil obtained from illegal means;
V. providing sale or storage services to the enterprises with no state approval;
VI. violating price laws and regulation in the sale of crude oil;
VII. other illegal behaviors regulated by the state laws and regulations.

Article 34 In case that any of the following behaviors happens to the enterprises applying for crude oil operation qualifications, the Ministry of Commerce shall, with warning, make the decision of not accepting application or not granting licensing; and the applicants shall not reapply for the crude oil operation licensing within 1 year.
I. concealing the actual situations;
II. providing false materials;
III. violating the related policies and application procedures, and in severe situations.

Chapter Seven Supplementary Articles

Article 35 Foreign operators dealing with land or sea crude oil resource exploration together with their Chinese partners in the territory of the People’s Republic of China shall follow the related regulations in the Regulation of the People's Republic of China on Cooperated Exploration of the Land Crude Oil Resources and The Regulation of the People's Republic of China on Cooperated Exploration of the Sea Crude Oil Resources.

Before the issuance of the Measures, the former crude oil production enterprises, which are legally approved and in line with the state policies, shall apply for the Approval Certificate of Crude Oil Sale in accordance with the Measures.

Article 36 Ministry of Commerce shall be responsible for the explanation of the Measures.

Article 37 The Measures shall take effect as from January 1, 2007.

(From:Mofcom)