8 Nov 2004

Chapter I  General Provisions
Chapter II  Artifacts for Auction
Chapter III  Parties to an Auction
      Section One:  The Auctioneer
      Section Two:  The Seller
      Section Three:  The Bidder
      Section Four:  The Buyer
Chapter IV  Auction Procedures
      Section One:  Auctioneer and Seller
      Section Two:  Notice of Auction and Viewing
      Section Three:  Conduct of the Auction
      Section Four:  Commission
Chapter V  Legal Liabilities
Chapter VI  Supplementary Articles
 
Chapter I General Provisions

Article 1. This Law has been formulated with a view to standardising auction procedures, and protecting the rights and interests of the various parties involved in auction activities.

Article 2. This Law shall apply to auction activities carried out by auction enterprises within the territory of the People¡¦s Republic of China.

Article 3. Auction means the buying and selling form through which designated artifacts or property rights are transferred, in the form of public bidding, to those providing the highest bidding price.

Article 4. Auction activities shall abide by relevant laws and administrative decrees, and follow the principles of openness, fairness, impartiality, and honesty.

Article 5. The department in charge of auctioning under the State Council is responsible for the supervision and management of the auction industry nationwide.

Departments within governments of provinces, autonomous regions and municipalities directly under the central government and governments of cities with districts are responsible for supervision over and management of the auction industry within their respective administrative regions.

Chapter II Artifacts for Auction

Article 6. Artifacts or property rights which may be auctioned shall be consigned for auction by the owner or be disposable legally.

Article 7. Artifacts or property rights whose purchase and sale are prohibited by law or administrative decree may not be auctioned.

Article 8. Artifacts or property rights whose transfer is subject to examination and approval according to law or in accordance with State Council provisions shall, before being auctioned, go through examination and approval procedures according to the law.    Cultural relics consigned for sale shall, before being auctioned, be assessed and approved according to the law by the cultural administrative department where the auctioneer resides.

Article 9. Artifacts legally confiscated by the state administrative department, artifacts used to pay taxes or fines and other kinds of artifacts consigned for auction in accordance with State Council provisions shall be auctioned by the auctioneers designated by the governments where such property lies.

The auction of artifacts confiscated by the courts according to law, artifacts used to pay fines and unclaimed lost property are subject to the stipulation of the above paragraph.

Chapter III Parties to an Auction

Section One: The Auctioneer

Article 10. An auction enterprise shall be an enterprise legal person that has been established to engage in auction activity in accordance with this Law and the Corporate Law of the People¡¦s Republic of China.

Article 11. An auction enterprise may be set up in a city with districts. The establishment of an auction enterprise is subject to examination and approval by the department in charge of managing the auctioning industry as authorized by the government of a province, an autonomous region or a municipality directly under the central government where it is located, and shall apply and register with the administrative department for industry and commerce and receive a business license.

Article 12. An auction enterprise shall meet the following requirements:

(1) registered capital of at least RMB1million;

(2) trading name, organisational setup, registered address and constitution;

(3) qualified auctioneers and other staff;

(4) rules and procedures that comply with this Law and the stipulations of other relevant laws have been formulated;

(5) compliance with the State Council provisions regarding the development of the auction industry;

(6) meeting other requirements as prescribed by laws and administrative decrees.

Article 13. An auction enterprise handling the auction of cultural relics shall have a registered capital of at least RMB10 million and have personnel with professional expertise of the auction of such items.

Article 14. Auctions shall be run by an auctioneer.

Article 15. An auctioneer shall meet the following requirements:

(1) university or college education and professional auction expertise;

(2) has worked in an auction enterprise for more than two years;

(3) integrity.

Those who have been dismissed from their posts and those whose auctioneer certificates have been revoked within the previous five years, or those who have a criminal record may not serve as auctioneers.

Article 16. The examinations for the qualification of auctioneers shall be organised exclusively by the Auction Industry Association. Those passing the examinations shall be issued auctioneer qualification certificates by the Auction Industry Association.

Article 17. The Auction Industry Association is a mass organisation legal person established according to law, and the self-regulatory body for the auction industry. The Auction Industry Association shall exercise supervision over auction enterprises and auctioneers in accordance with this Law and its constitution.

Article 18. An auction house has the right to ask the seller to state the provenance and defects of items consigned for auction.

The auction house shall state the defects of items to the bidders.

Article 19. An auction house has the obligation of taking care of artifacts submitted by the seller for auction.

Article 20. Having accepted an item for auction, an auction house shall not delegate the sale to another auction house unless approved by the seller.

Article 21. Should a seller or a buyer ask that his or her identity be kept secret, the auction house shall maintain confidentiality.

Article 22. An auction house or its personnel shall not bid in their own auctions and shall not ask others to bid for them.

Article 23. An auction house shall not auction its own articles or property rights in the auction activity organised by it.

Article 24. After an auction is completed, the auction house shall pay the sale proceeds to the seller, and shall transfer the auctioned item to the buyer, in accordance with the terms of sale.

Section Two: The Seller

Article 25. A seller means the natural person, legal person or other organisation appointing the auction house to auction his or her artifacts or property rights.

Article 26. Sellers may handle auction procedures themselves, and may also ask their agents to handle auction procedures for them.

Article 27. A seller shall state the provenance and defects of items consigned for auction to the auction house.

Article 28. A seller has the right to set a reserve price.

Should the auction of state-owned assets require an evaluation according to law or in accordance with State Council provisions, such assets shall be evaluated by an evaluation agency established according to law and the reserve price shall be set in line with the evaluation result.

Article 29. A seller may withdraw an artifact from auction before the auction begins. If a seller does so, he or she shall pay costs as agreed upon to the auction house. In the absence of an agreement, he or she shall pay the auction house¡¦s reasonable costs.

Article 30. Sellers shall not bid or ask others to bid for them for their own items.

Article 31. After the auction is completed, the seller shall transfer the auctioned item to the buyer.

Section Three: The Bidder

Article 32. A bidder means a natural person, a legal person or other organisation participating in the bidding at an auction.

Article 33. Should laws and administrative decrees stipulate buying and selling requirements for items at auction, a bidder shall comply with the prescribed requirements.

Article 34. Bidders may bid themselves, or may appoint agents to bid on their behalf.

Article 35. A bidder has the right to know the defects of an item to be auctioned, to examine the item and consult relevant auction data.

Article 36. Once a bid is made, a bidder shall not withdraw it. If another bidder makes a higher bid, the previous bid shall no longer be valid.

Article 37. Bidders shall not maliciously collaborate with other bidders or the auctioneer to damage the interests of others.

Section Four: The Buyer

Article 38. A buyer means a bidder who purchases an item at auction with the highest bid.

Article 39. A buyer shall pay the sum of money for the item as agreed upon. If the buyer fails to pay the agreed price, it shall bear the liabilities of breaking a contract or, with the approval of the seller, the auction house may re-auction the item.

In the case of re-auctioning, the original buyer shall pay the commission for the first auction. Should the price on re-auction be lower than the price achieved at the original auction, the original buyer shall pay the difference.

Article 40. Should a buyer fail to obtain an item as agreed upon, he or she has the right to demand that the auction house or the seller bear the liabilities of breaking a contract.

Should a buyer fail to remove an item as agreed upon, he or she shall pay the storage costs arising thereafter.

Chapter IV Auction Procedures

Section One: Auctioneer and Seller

Article 41. Should a seller instruct an auction house to auction articles or property rights, he or she shall provide his or her identity certificate, or the certificate of the ownership of the item for auction as required by the auction house, or the certificate or other data which can demonstrate that he or she may dispose of the item.

Article 42. An auction house shall verify the relevant documents and data provided by the seller. Should the auction house accept instructions, it shall sign a written contract with the seller.

Article 43. Should an auction house deem it necessary to verify an item, it may do so.

Should the verification conclusion not correspond to the condition of an item stated by the seller, the auction house has the right to demand a change or rescind the contract.

Article 44. An auction contract shall contain the following:

(1) The names of the seller and the auction house and their addresses;

(2) The name, specification, number and quality of the item(s) for auction;

(3) The reserve price set by the seller;

(4) The time and place of the auction;

(5) The delivery of the item for auction or the time and method of transferring such item;

(6) The commission and the method and time limit for paying commission;

(7) The method and time limit for paying the purchase price;

(8) The liabilities for breaking the contract;

(9) Other matters as agreed upon by both parties.

Section Two: Notice of Auction and Viewing

Article 45. An auction house shall issue notice of auction seven days before the auction day.

Article 46. An auction notice shall define the following matters:

(1) The time and place of the auction;

(2) Items to be auctioned;

(3) The time and place for viewing items;

(4) The procedures to be followed by bidders;

(5) Other matters that need to be announced.

Article 47. Notice of auction shall be given via newspapers or other news media.

Article 48. An auction house shall display items for auction before the auction, and provide conditions necessary for inspecting items, as well as relevant data.

The viewing period shall not be less than two days.

Section Three: Conduct of the Auction

Article 49. The auctioneer shall announce auction rules and matters needing attention before an auction.

Article 50. Should an item for auction have no reserve price, the auctioneer shall state this before the sale.

Should an item have a reserve price, if the highest bid fails to meet the reserve price, the highest bid shall not be valid and the auctioneer shall stop auctioning the item.

Article 51. The auctioneer shall indicate the highest bid and conclude the sale by dropping his hammer or by another clear method.

Article 52. After an auction is completed, the buyer and auction house shall sign a deal conclusion letter.

Article 53. During the auction, an auction house shall make a written auction record. The written auction record shall be signed by the auctioneer and the recorder. At the conclusion of an auction, the record shall also be signed by the buyer.

Article 54. An auction house shall keep complete account books related to its business and operations, written auction records, and other relevant data.

Account books, written auction records and other relevant data shall be kept for at least five years from the date when the auction contract is completed.

Article 55. The seller and buyer shall handle the necessary procedures with the relevant administrative department to change the certification and transfer property rights, using the auction completion certificate and relevant materials produced by the auction house.

Section Four: Commission

Article 56. A seller and a buyer may agree the commission rate with the auction house.

If the seller, the buyer and the auction house have not set a commission rate prior to completion of an auction, the auction house may collect commissions not in excess of five percent of the sale price from each of the seller and buyer. The commission rate shall be set in accordance with the principle of the commission scale making an inverse ratio to the sale price.

If an item is unsold, an auction house may collect charges as agreed upon from the seller; and in the absence of any prior agreement, the auction house may collect reasonable charges from the seller to cover auction expenses.

Article 57. With respect to the sale of items as referred to in Article 9 of this Law, the auction house may collect from the buyer commission not exceeding five percent of the sale price. The commission rate shall be set in accordance with the principle of the commission scale making an inverse ratio to the sale price.

In the absence of a sale, the stipulation of Section 3 of Article 56 of this Law shall apply.

Chapter V Legal Liabilities

Article 58. Should a seller violate the stipulation of Article 6 of this law by consigning for auction items or property rights which he or she does not own or which he or she may not dispose according to the law, he or she shall bear liabilities arising thereafter according to the law. Should an auction house clearly know that a seller does not own an item or property right consigned for auction or that the seller may not legally dispose of such items or property rights, he or she shall bear joint liability.

Article 59. Should an organ of state violate the stipulation of Article 9 of this Law by disposing illicitly of articles that should be auctioned by an auction house designated by the government of a province, an autonomous region or a municipality directly under the central government, or by the government of a city with districts where the property lies, relevant personnel in charge who are held directly responsible and other personnel who are also held directly responsible shall receive administrative punishment according to law, and those who have caused losses to the state shall also bear the liability of compensation.

Article 60. Whoever violates the stipulation of Article 11 of this Law by establishing an auction enterprise without approval or registration shall have his or her enterprise banned and his or her illegal income confiscated by the administrative department for industry and commerce, and may be given a fine that ranges from 100 percent to 500 percent of his or her illegal earnings.

Article 61. Should an auctioneer or a seller violate the stipulation of the second paragraph of Article 18 and Article 27 of this Law by failing to state the defects of item in auction, thus causing loss to a buyer, the buyer has the right to demand compensation from the auction house; should the responsibility rest with the seller, the auction house has the right to demand compensation from the seller.

Should an auction house and a seller state before an auction that they cannot guarantee the quality of an item in auction or that it is genuine, they shall not bear liability for defects.

If no statement is made that an item in auction has defects, the buyer may demand compensation within one year from the date when the party concerned knows or should have known that his or her rights have been damaged.

The period for demanding compensation for personal and property damage caused by the defects of an item purchased at auction is subject to the relevant stipulations of the "Product Quality Law of the People's Republic of China" and other laws.

Article 62. Should an auction house or its staff violate the stipulation of Article 22 of this Law by bidding or asking others to bid for them, the administrative department for industry and commerce shall give the auction house a warning and may impose a fine that ranges from 100 percent to 500 percent or the auction commissions; in serious cases, the business license shall be revoked.

Article 63. Should an auction house violate the stipulation of Article 23 of this Law by auctioning its own items or property rights, the administrative department for industry and commerce shall confiscate its earnings from the auction.

Article 64. Should a seller violate the stipulation of Article 30 of this Law by bidding or asking others to bid for him or her, the administrative department for industry and commerce may impose on the seller a fine that is up to 30 percent of the sale price.

Article 65. If, in violation of Article 37 of this Law, bidders collaborate with other bidders or with auctioneers, causing loss to others, the auction shall become null and void and they shall bear the liability of compensation according to law. The administrative department for industry and commerce shall impose on the bidders participating in such collaboration a fine that is 10 percent to 30 percent of the highest bidding price; and impose on the auctioneers participating in such collaboration a fine that 10 percent to 50 percent of the highest bidding price.

Article 66. By accepting commissions in violation of the stipulation of Section Four of Chapter Four of this Law concerning the rate of commission, an auction house shall return that part in excess of the reasonable amount to the seller and the buyer. The price control department may impose on the auctioneer a fine that is 100 percent to 500 percent of the commissions.

Chapter VI   Supplementary Articles

Article 67. This Law is applicable to foreigners, foreign enterprises and foreign organisations selling or bidding at auction within the territory of the People's Republic of China.

Article 68. Should an auction enterprise established before the implementation of this Law not meet the requirements as prescribed in this Law, it shall meet the requirements as stipulated in this Law within the prescribed time limit; those still failing to meet the prescribed requirements after the time limit shall have their registrations revoked and their business licenses taken back by the administrative department for industry and commerce. Specific implementation measures shall be formulated by the State Council separately.

Article 69. This Law shall come into force from January 1, 1997.