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Measures for Investigating, Dealing with and Banning Unlicensed Business Operations

(Adopted at the 67th Executive Meeting of the State Council on December 18, 2002, promulgated by Decree No. 370 of the State Council of the People’s Republic of China on January 6, 2003, and effective as of March 1, 2003)

Article 1 These Measures are formulated for the purposes of maintaining the socialist market economy order, promoting fair competition and protecting the lawful rights and interests of business operators and consumers.

Article 2 No unit or person shall engage in unlicensed business operations by violating laws and regulations.

Article 3 The licensing or approving departments must be in strict compliance with the conditions and procedures specified in laws and regulations when granting license or approval to the business operations that, according to laws and regulations, shall be subject to license or approval and involve human health, public safety, safety in production, environmental protection, development and utilization of natural resources, etc. When going through registration formalities and issuing business licenses, the administrative departments for industry and commerce must take the permit or other approval document issued by the licensing or approving departments as the basis.

Article 4 The following illegal acts shall be investigated and dealt with by the administrative departments for industry and commerce in accordance with the provisions of these Measures:

(1) any unlicensed business operation act conducted by any person who shall acquire the permit or other approval document and the business license but fails to legally acquire them, and engages in business operation activities without authorization;

(2) any unlicensed business operation act conducted by any person who may acquire the business license without the permit or other approval document but fails to legally acquire the business license, and engages in business operation activities without authorization;

(3) any unlicensed business operation act conducted by any person who has legally acquired the permit or other approval document but fails to legally acquire the business license, and engages in business operation activities without authorization;

(4) any unlicensed business operation act conducted by any person who fails to go through the registration formalities again according to the provisions concerned after he has gone through the formalities for the cancellation registration or his business license has been revoked or the validity period of the business license has expired, and still engages in business operation activities without authorization;

(5) any illegal business operation act conducted by any person who exceeds the scope of business verified and registered and engages without authorization in any business operation activity that shall be engaged in only with the permit or other approval document.

Any act provided for in items (1) and (5) of the preceding paragraph shall also be investigated and punished by the licensing or approving departments for public security, land resources, construction, culture, health, quality supervision, environmental protection, press and publication, drug regulation, supervision and administration of safety in production, and so on (hereinafter referred to as “the licensing or approving departments ”)according to their functions and duties vested by laws and regulations. However, the party concerned shall not be given administrative penalty of fine for more than once for the same illegal act.

Article 5 Administrative departments for industry and commerce at all levels shall perform their functions and duties in accordance with law, and timely investigate and deal with the unlicensed business operation acts under their respective jurisdiction.

Article 6 Where any person who has acquired the business license fails to legally acquire the permit or other approval document, or where any person fails to legally go through the formalities for licensing or approval again after the permit or other approval document that he has acquired is revoked or cancelled or the validity period of the permit or other approval document expires, but he still engages in business operation activities concerned without authorization, the administrative departments for industry and commerce shall cancel the registration or revoke the business license if the registration shall be cancelled or the business license shall be revoked as provided by laws and regulations.

Article 7 If the licensing or approving departments legally revoke or cancel the permit or other approval document within the validity period of the business license, or the validity period of the permit or other approval document expires, they shall notify the administrative departments for industry and commerce within five working days after the permit or other approval document is revoked or cancelled or the validity period of the permit or other approval document expires, and the administrative departments for industry and commerce shall cancel the registration or revoke the business license, or order the parties concerned to register the alteration in accordance with law.

Article 8 When investigating and dealing with any unlicensed business operation act, the administrative departments for industry and commerce shall combine investigation and disposition with guidance and combine punishment with education. For laid-off workers and unemployed personnel as well as those whose conditions, scope and items of business operations conform to the provisions of laws and regulations, the administrative departments for industry and commerce shall urge and guide them to go through appropriate formalities according to law so as to legally carry out their business operations.

Article 9 The administrative departments for industry and commerce at or above the county level may perform the following functions and powers when they investigate and deal with any act suspected of unlicensed business operation:

(1)to order to stop the business operations concerned;

(2)to investigate and learn the information from the units and persons involved in unlicensed business operation acts;

(3)to carry out on-the-spot inspection in the premises for unlicensed business operations;

(4)to consult, copy, seal or impound the contracts, bills, account books and other materials relating to unlicensed business operation acts;

(5)to seal or impound the tools, equipment, raw materials, products (goods) and other property that are particularly used for unlicensed business operation activities;

(6)to seal the premises for unlicensed business operations where there is evidence to show that they harm human health, have serious hidden hazard to safety, threaten public safety or destroy environmental resources.

Article 10 The sealing or impoundment conducted by any administrative department for industry and commerce according to Article 9 of these Measures shall be subject to approval of the chief responsible person of the administrative department for industry and commerce at or above the county level.

The law enforcement officials of the administrative department for industry and commerce who conduct sealing or impoundment shall show their law enforcement credentials to the parties concerned, and deliver on the spot the written decision of sealing or impoundment and the detailed list of the property and materials that are sealed or impounded.

In regions with poor communications or if any delay in sealing or impoundment is likely to affect the investigation and disposition of the case, the law enforcement officials of the administrative department for industry and commerce may conduct sealing or impoundment first, and then shall produce the written decision of sealing or impoundment afterwards and deliver it to the parties concerned within 24 hours.

Article 11 The period of sealing or impoundment by the administrative department for industry and commerce shall not exceed 15 days; in cases where the circumstances are complicated, with the approval of the chief responsible person of the administrative department for industry and commerce at or above the county level, the period may be extended by 15 days.

The administrative department for industry and commerce shall appropriately keep the sealed or impounded property, and may not utilize or destroy them. If the sealed or impounded property is perishable or easily becomes deteriorated,with the approval of the chief responsible person of the administrative department for industry and commerce at or above the county level, the administrative department for industry and commerce may first have the property auctioned or sold off after the preservation of evidence.
Article 12 The administrative department for industry and commerce shall make a decision of disposition during the period of sealing or impoundment. Where the administrative department for industry and commerce fails to make the decision of disposition within the time limit, the sealing or impoundment shall be deemed terminated.

Where, upon investigation and verification, no law-breaking act is found or the sealing or impoundment is not necessary any longer, the administrative department for industry and commerce shall immediately terminate the sealing or impoundment after making the decision of disposition. If the sealed or impounded property that is perishable or easily becomes deteriorated has been auctioned or sold off according to the second paragraph of Article 11 of these Measures, all the money got from the auction or sale shall be returned.

Where the sealed or impounded property shall be confiscated according to these Measures, it shall be confiscated according to law.

Article 13 Where, in violation of these Measures, the administrative department for industry and commerce utilizes or destroys the sealed or impounded property, thus causing economic losses to the parties concerned, it shall be liable for the compensations therefor.

Article 14 As regards unlicensed business operation acts, the administrative department for industry and commerce shall ban them and confiscate the illegal gains according to law; if the Criminal Law is violated, the parties concerned shall be investigated for criminal liability according to the provisions of the Criminal Law on the crime of illegal business operation, the crime of negligently causing a serious accident, the crime of major labor safety accident, the crime of causing an accident in the control of dangerous articles or any other crime; if such activities are not serious enough for criminal punishment, a fine of not more than 20,000 yuan shall be concurrently imposed; as regards any unlicensed business operation act which is large in scale or causes serious social damage, a fine of not less than 20,000 yuan but not more than 200,000 yuan shall be concurrently imposed; as regards any unlicensed business operation act that harms human health, has serious hidden hazard to safety, threatens public safety or destroys environmental resources, the tools, equipment, raw materials, products (goods) and other property that are particularly used for unlicensed business operation acts shall be confiscated, and a fine of not less than 50,000 yuan but not more than 500,000 yuan shall be concurrently imposed.

If any law or regulation stipulates otherwise in respect of the punishments for the unlicensed business operation acts, such law or regulation shall prevail.

Article 15 Where any party concerned provides premises for business operations, transportation, safekeeping, storage or other convenience if it knows or should know that the activities concerned belong to unlicensed business operation acts provided for in these Measures, the administrative department for industry and commerce shall order it to immediately stop the illegal acts, confiscate the illegal gains, and concurrently impose a fine of not more than 20,000 yuan; if it provides premises for business operations, transportation, safekeeping, storage or other convenience for any unlicensed business operation act that harms human health, has serious hidden hazard to safety, threatens public safety or destroys environmental resources, a fine of not less than 50,000 yuan but not more than 500,000 yuan shall be imposed thereupon concurrently.

Article 16 Any party concerned who uses, exchanges, transfers or destroys the sealed or impounded property shall be ordered to make corrections by the administrative department for industry and commerce, and a fine of not less than 5% but not more than 20% of the value of the used, exchanged, transferred or destroyed property shall be imposed thereupon; if it refuses to make corrections, a fine of not less than one time but not more than three times of the value of the used, exchanged, transferred or destroyed property shall be imposed thereupon.

Article 17 Where the licensing or approving departments investigate and deal with the illegal acts specified in item (1) or (5) of the first paragraph of Article 4 of these Measures, the penalties imposed by them shall be in conformity with the provisions of the relevant laws and regulations; if no penalties for such illegal acts are provided for in the relevant laws or regulations, the licensing or approving departments shall impose penalties according to Article 14, 15 or 16 of these Measures.

Article 18 If any refusal or hindering of investigation and disposition of unlicensed business operation acts by the administrative department for industry and commerce according to law constitutes an act that is in violation of public security administration, the public security organ concerned shall give a penalty according to the Regulations of the People's Republic of China on Administrative Penalties for Public Security; if a crime is constituted, criminal liability shall be investigated according to law.

Article 19 If the administrative department for industry and commerce, the licensing or approving departments or their staff abuse their powers, neglect their duties, commit illegalities for personal gains or by fraudulent means, by failing to verify and issue business licenses, permits or other approval documents according to laws and regulations, failing to revoke business licenses or cancel registration, permits or other approval documents according to laws and regulations, failing to investigate and deal with unlicensed business operation acts according to the functions and procedures provided for in these Measures, or failing to investigate and deal with unlicensed business operation acts after the discovery thereof, or supporting, covering up, or conniving at unlicensed business operation acts, thus violating the Criminal Law, the person in charge who is directly responsible and other directly responsible persons shall be investigated for criminal liability according to the provisions of the Criminal Law on the crime of accepting a bribe, the crime of power abuse, the crime of dereliction or any other crime; if such acts are not serious enough for criminal punishment, an administrative sanction of degradation, dismissal or discharge shall be given according to law.

Article 20 Any unit or person has the right to inform the administrative department for industry and commerce of any unlicensed business operation act, and the administrative department for industry and commerce shall, upon receipt of the information, immediately conduct an investigation to verify the information and make a decision of disposition according to law.

The administrative department for industry and commerce shall keep secrets for the informers, and grant awards to them according to the relevant provisions of the State.

Article 21 The sale of self-produced agricultural and sideline products by farmers in fair trade markets or in the regions designated by the local people’s governments does not belong to the unlicensed business operation acts referred to in these Measures.

Article 22 These Measures shall be effective as of March 1, 2003.