03 February 2014

Calling Public Opinion on Amendments to Coal Trading Measures

This article is written by Dina Yin

As anticipated in our Client Alert[1] dated August 2013, the National Development and Reform Commission (“NDRC”) has proposed amendments to the Coal Trading Measures[2] (“Amendments”)[3]. It has invited companies and individuals to comment on the Amendments before December 17, 2013[4]. The Amendments finalize the changes made to the Coal Industry Law[5] in June 2013 to remove the need for coal trading licenses (煤炭经营许可证). In addition, the Amendments propose a number of other changes to the Coal Trading Measures, which are described in more detail below.

1. New registration process

According to the Amendments, a company that wishes to distribute coal must register with the relevant coal trading supervisory authority (煤炭经营监督管理部门).It must do so within 30 working days after obtaining its business license from the Administration for Industry and Commerce (“AIC”). When registering, the company will need to provide general information about its company and business. The new registration process replaces the previous approval process to obtain a coal trading license.

2. Increased public monitoring of coal trading activities

The Amendments aim to further improve the administration and supervision of coal trading activities in China. It is proposed that the NDRC should continue to supervise coal trading activities across China, and that coal trading supervisory administrations (at the county or higher level) should supervise coal trading activities within their respective administrative regions.

According to the Amendments, a “real-time” information system (动态监测信息系统) will be set up to monitor and provide information about companies and their coal trading activities. The coal trading supervisory administration will publish the names of all coal trading companies and certain of their information for public monitoring. For example, a company will need to submit its annual report to the coal trading supervisory administration via the information system within a certain time limit each year.

Further, companies conducting illegal business activities will be listed on the information system. In case of serious violations, the relevant company may be prevented from carrying out coal trading activities, as the coal trading supervisory administration will have the power to request the AIC to delete coal trading operation items (煤炭经营项目) from the company’s business license.

3. More concise definition of “coal trading”

The Amendments propose a more concise definition of “coal trading” (煤炭经营). Previously, under the Coal Trading Measures, “coal trading” was defined as (i) the wholesale and retail of raw coal and washed and processed coal products, and (ii)the processing and distribution of “coal briquette for civil use” (民用型煤). The Amendments propose a new definition of coal trading as the “distribution of raw coal, washed and processed coal products”.

Accordingly, the proposed new definition no longer refers to wholesale, retail and processing activities but, rather, uses the term “distribution” to refer to all such activities.Further, “coal briquette for civil use” is no longer identified as a separate category of coal product but is considered to be a part of the larger category of “washed and processed coal products”.Nevertheless, under the Coal Trading Measures and the Amendments, companies engaged in business activities relating to coal briquette for civil use must still ensure the quality of the products, a stable supply and convenience for the consumers.

4. Fewer requirements for sales contracts

The Coal Trading Measures expressly state that parties must enter into a sales contract in order to buy or sell coal. Further, the Coal Trading Measures regulate certain general provisions of a sales contract, such as quantity, specification, quality, price, delivery methods, term of performance, payment methods, default liability, and dispute solution.Under the Amendments, there is no longer an express requirement that a sales contract must be entered into.Further, the Amendments provide that, if the consumers have a special requirement for the quality of the coal being traded, the parties should enter into a coal sales contract specifying such requirement.

Notes:

[1] Client Alert dated August 2013 entitled “Coal Production Licenses and Coal Trading Licenses No Longer Required” found at http://www.chinalawinsight.com/2013/08/articles/corporate/mergers-acquisitions/coal-production-licenses-and-coal-trading-licenses-no-longer-required/

[2] “Measures for the Supervision and Administration of Coal Trading”《煤炭经营监管办法》(“Coal Trading Measures” ) issued by the NDRC in December 2004, which came into effect in January 2005.

[3] Amendments to the Coal Trading Measures《煤炭经营监管办法(修订稿)》as found on the NDRC website at: http://yxj.ndrc.gov.cn/mtjyjgbf.pdf

[4] See NDRC’s “Notice on Seeking Public Comments on the Coal Trading Measures (Amendment)” 关于《煤炭经营监管办法(修订稿)》公开征求意见的公告 published on NDRC’s website http://www.ndrc.gov.cn/yjzx/yjzx_add_jb.jsp?SiteId=66 on December 6, 2013. 

[5] “Law of the People’s Republic of China on the Coal Industry”《中华人民共和国煤炭法》.

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