On September 5, 2016 with immediate effect, the Chinese Ministry of Transport issued with immediate effect a Notice on Work Guidelines on the Safety Supervision and Inspection of Dangerous Port Goods (“Port DG Work Guidelines”). On the same day, Shanghai People’s Government released the revised Administrative Measures on Dangerous Chemicals (“Shanghai DC Measures”) which will become effective from January 1, 2017.

Port DG Work Guidelines

The targets of these guidelines are local port administration departments which supervise and inspect the safety of dangerous goods (“DG“) port operation. But companies engaging in DG port operation should also be aware of the main content. They concretize the relevant laws and regulations on dangerous chemicals (“DC“) and DG, e.g. the Administrative Regulations on DC Safety, the Work Safety Law, the Port Law, etc., in terms of methods, procedures and other requirements of DG port inspection and have an indirect impact on DC port operators.

Strict compliance is key – according to the Port DG Work Guidelines,

 The local port administration shall conduct comprehensive or special inspections. The periodic or other frequency of inspections is to be determined according to the safety risk grades of the DG port operators as categorized by the port administration based on the operators’ capacity of storage and handling capacity, the fire risk, toxicity and major hazard sources of DG, etc.

• The port administration is entitled to enforce administrative punishments if it finds any illegal operation of the DG port operator; in case of any found major accident potentials, these may be reported to the same level people’s government and suspension of the operation may be ordered.

• The administration’s inspection includes qualification and licenses of the DG companies, personnel qualification for work safety, work safety management rules, emergency plans, etc.

• Violations entitle the port administration to impose rectification orders and/or adopt punitive measures like confiscation of illegal income, penalty up to RMB 200,000 on the DG companies (up to RMB 20,000 on the directly responsible persons), and – much more critical to operations – a revocation of the relevant licenses.

Shanghai DC Measures

The update of the old Shanghai DC Measures (2006 version) was carried out by the Shanghai government to catch up the latest development of the national and local legislation on DC administration (e.g. the Work Safety Law amended in 2014, the Administrative Regulations on DC Safety amended in 2013, the new DC Catalogue in 2015, the Shanghai Work Safety Regulations amended in 2016). The new Shanghai DC Measures, adding 14 articles, tries to meet the updated stand of the national legislation. They also try to address new problems in DC administration which have arisen during the last 10 years.

Some highlights for your Shanghai operations:

“Informatization administration”

The relevant authorities record information regarding DC production, trading, warehousing, use, transport and disposal into their information system on real-time basis to enable information sharing on the governmental data platform. DC companies shall use automatic identification means to realize a dynamic management of DC out and input of the warehouse. The city will encourage centralized DC transactions on an e-commerce platform and will support the establishment and operation of such platform to improve the administrative level.

• “Centralized administration”

New DC construction projects shall in principle only be implemented within special industrial zones or other areas; existing DC production and warehousing companies shall gradually be relocated into such special zones according to the municipal industry layout plan.

• “Credit administration”

The DC administrative authorities shall publicize administrative punishments and accident-related information according to law and enter such information into the city’s public credit and information platform. DC companies with serious violation or several violations may be restricted in governmental procurement or bidding. DC companies’ work safety performance shall be connected with the work-related insurance premium rate subject to detailed rules to be drafted by the labor bureau and work safety administration.

These new rules can lead to increased operation costs to arrange a compliant operation. Otherwise, the costs for violations (economic and reputational) should not be underestimated. Companies manufacturing, trading and using DC, as well as DC service providers (e.g. logistics and storage companies), are recommended to review their existing DC operation carefully against the new laws and re-position themselves if needed to meet the statutory requirements. Concerning any potentially required IT change, the management of DC companies should consider consulting the in-charge DC administrative department to get a clearer official opinion based on applicable laws. Especially, in case of a required relocation, the management of DC companies should review relevant plans and consider suitable new locations as early as possible, with the aim of minimizing losses caused by operation suspensions.