A State Council Decision(1), made public on July 26, 2013, repealed the administrative measures regarding coal production licenses. The decision came following changes to China’s Coal Industry Law(2) which abolished the need for the license. As a result of the changes to the Coal Industry Law, companies (both domestic and foreign-invested enterprises) will no longer need to obtain a coal production license to produce coal or a coal trading license to sell coal.

Abolishment of the Coal Production License and Coal Trading License

On June 29, 2013, the Standing Committee of the National People’s Congress amended the Coal Industry Law by abolishing the need for: (i) a mining company to obtain a coal production license (???????) to produce coal, and (ii) a company to obtain a coal trading license (???????) to sell coal.(3) In order to finalize these amendments to the law, the State Council Decision was issued to repeal the Coal Production Measures(4) on July 18, 2013. The Coal Production Measures set out the requirements and procedures for mining companies to obtain the coal production license previously required by the Coal Industry Law. The State Council Decision, which was published on the State Council website on July 26, 2013, also made corresponding changes to four other regulations related to the coal industry, namely, amending references to coal production licenses. We anticipate that the Coal Business Measures(5) will be revised to repeal the requirements to obtain a coal trading license.

Reasons for the Changes?

The changes to the Coal Industry Law and the abolishment of the Coal Production Measures (referred to above) are aimed at improving the efficiency of the approval process for companies wanting to produce or trade in coal. The changes are part of a larger reform movement, started in 2001, aimed at increasing the efficiency of the government’s administrative processes.

What Does This Mean for the Coal Industry in China?

  1. Coal Production

Previously, in order to produce coal, a mining company had to obtain both a coal production license and a production safety license (???????). The coal production license was intended to strengthen the administration of the coal industry and improve the safety of coal production.(6) To obtain the license, mining companies had to meet a number of requirements such as having an approved mining design, having a production system in compliance with mine safety standards, and having qualified personnel.(7) The purpose of the coal production license, however, was similar to the purpose of the production safety license, which aimed to strengthen production safety supervision and administration.(8) Some of the requirements for obtaining each license were also similar, such as the safety requirements and personnel qualifications. In order to eliminate this “overlap” of requirements and increase the efficiency of the approval process, the need for a coal production license was abolished (however, a production safety license, amongst others, is still required).

  1. Coal Trading

Similarly, in order to trade in coal, a company previously had to obtain a coal trading license. This license was intended to regulate and control coal trade activities such as the wholesale and retail of raw coal, coal washing, the selection and processing of coal products, and the processing and sale of coal for residential use.(9) Apart from other corporate licenses and certificates, the coal trading license often took the longest time to obtain (up to 40 business days from the acceptance (rather than the receipt) of an application by the relevant authorities). Now, a company wishing to trade in coal will be able to do so without applying for a coal trading license. Other than the generally required corporate licenses and certificates, the company does not need to obtain any licenses specifically related to coal trading.