On August 11, the Chongqing Municipal Administration for Market Regulation issued the Notice on the Promulgation of the “Rules for the Application of Discretion in Administrative Penalties by the Chongqing Municipal Administration for Market Regulation (Trial).”

The “Rules on the Application of Discretion in Administrative Penalties” sets forth a discretionary formula specifically for monetary penalties and specifies the ranges for reduced, mitigated, and aggravated fines. It also provides thorough explanations of relevant terms by taking actual circumstances into full consideration. In the supplementary provisions, it offers definitions and interpretations for terms such as “high-risk products,” “serious harmful consequences,” and “connected relationships.”

If Chinese medicinal decoction pieces manufactured, marketed, or used by pharmaceutical manufacturers, distributors, or medical institutions do not comply with pharmaceutical standards but, following expert review, are determined not to compromise safety or efficacy, they shall, in accordance with Article 117, Paragraph 2 of the Pharmaceutical Administration Law, be ordered to make corrections within a specified time limit and issued a warning; fines may be waived.

To the Market Supervision Administrations of all districts, counties (and autonomous counties), to the Market Supervision Administrations of the Liangjiang New Area, Chongqing High-tech Industrial Development Zone, and Wansheng Economic and Technological Development Zone, to the Municipal Market Supervision Enforcement Corps, to all inspection bureaus under the Bureau, and to all divisions and offices of the Bureau:

The “Rules on the Application of Discretion in Administrative Penalties by the Chongqing Municipal Administration for Market Regulation (Trial)” have been reviewed and approved at the 4th Director’s Office Meeting of 2020 and are hereby circulated to you for compliance.

Chongqing Municipal Drug Administration

                 April 7, 2020

Chongqing Municipal Drug Administration

Rules for the Application of Discretion in Administrative Penalties (Trial)

Chapter 1 General Provisions

Article 1: In order to properly perform the regulatory duties over pharmaceuticals (including drugs, medical devices, and cosmetics, the same shall apply hereinafter), ensure the proper exercise of discretion in administrative penalties, and protect the lawful rights and interests of natural persons, legal persons, and other organizations, these Rules are formulated in accordance with the Administrative Penalty Law of the People’s Republic of China, the Drug Administration Law of the People’s Republic of China, the Vaccine Administration Law of the People’s Republic of China, the Regulations on the Supervision and Administration of Medical Devices, the Regulations on the Supervision and Administration of Cosmetics, the Rules for the Application of Discretion in Administrative Penalties for Drugs and Medical Devices, the Measures of Chongqing Municipality for Standardizing the Exercise of Discretion in Administrative Penalties, and other relevant laws and regulations, and in light of the actual conditions of pharmaceutical regulatory work in this municipality.

Article 2: The Municipal Drug Administration and the Market Supervision Administrations of districts, counties, and autonomous counties (hereinafter referred to as the drug administration authorities) shall exercise discretion in determining the types and ranges of administrative penalties in the pharmaceutical field within the scope of their statutory powers, and these Rules shall apply.

Article 3: For the purposes of these Rules, “discretion in administrative punishment” refers to the authority vested in drug supervision and administration departments at all levels within this municipality to, when imposing administrative punishment for unlawful acts in the pharmaceutical field within their jurisdiction, determine, in accordance with the provisions of laws, regulations, and rules and after comprehensively considering such factors as the facts, nature, circumstances, degree of social harm, and the subjective fault of the party concerned, whether to impose an administrative punishment and, if so, the type and extent of such punishment.

Article 4: Drug regulatory authorities at all levels, in exercising their discretion in imposing administrative penalties, shall adhere to the following principles:

(1) Principle of Legality. Decisions shall be made within the scope of statutory authority, in accordance with the discretionary criteria, types of penalties, and ranges of penalties prescribed by laws, regulations, and rules, and shall comply with statutory procedures.

(2) Principle of Fairness and Impartiality. Natural persons, legal persons, and other organizations shall be treated fairly and impartially. Where the facts, nature, circumstances, and degree of social harm are substantially similar or identical, the legal basis applied, the type of penalty imposed, and the range of penalties shall also be substantially the same, so as to prevent the occurrence of “different penalties for the same case.”

(3) The principle of proportionality between offense and penalty. Penalties shall be imposed on the basis of factual evidence, with the type and severity of the penalty commensurate with the facts, nature, circumstances, and degree of social harm caused by the unlawful act.

(4) The principle of combining punishment with education. This principle seeks to both correct unlawful conduct and educate the parties involved, thereby guiding them to voluntarily comply with the law.

(5) Principle of Comprehensive Discretion. In making determinations, all relevant factors shall be taken into account, including the specific circumstances of each case, the level of regional economic and social development, and the subjective and objective circumstances of the parties, so as to achieve unity among legal, social, and political outcomes.

Article 5: Discretion in administrative penalties shall be categorized into five levels: no penalty, mitigated penalty, lenient penalty, standard penalty, and aggravated penalty.

No penalty means that the party is found to have committed an unlawful act, but no administrative penalty is imposed.

Mitigation of punishment refers to, based on the specific circumstances of the unlawful act, selecting a lighter type of penalty than those that would otherwise be imposed, or refraining from imposing multiple penalties where such imposition is permitted by law, as well as, when a fine is imposed either alone or in conjunction with another penalty, setting the amount of the fine below the statutory range.

Mitigation of punishment refers to, in accordance with the specific circumstances of the unlawful act and where multiple types of statutory penalties are available, selecting the lighter type of penalty; or, when a fine is imposed either singly or in conjunction with another penalty, imposing a lower amount within the statutory range for such fines.

Aggravated punishment refers to, in accordance with the specific circumstances of the unlawful act and where multiple types of statutory penalties are available, selecting the more severe penalty; or, when a fine is imposed either alone or in conjunction with another penalty, imposing the upper end of the statutory fine range.

General punishment refers to the imposition of a fine within the statutory range, either singly or in conjunction with other penalties, based on the specific circumstances of the unlawful act and in accordance with the types of penalties prescribed by law.

Chapter 2: Rules for the Application of Discretion

Article 6: When imposing administrative penalties, the following factors shall be comprehensively considered in exercising discretionary power:

(1) Riskiness of the products involved in the case;

(2) Harmful consequences of the unlawful act;

(3) The degree of subjective intent on the part of the offender;

(4) The severity of the unlawful act;

(5) Frequency and duration of the unlawful acts;

(6) The degree of social impact of the unlawful act;

(7) Other factors that affect the discretion in imposing penalties.

Article 7 Where any of the following circumstances exists, no penalty shall be imposed in accordance with the law:

(1) Actively ceasing the unlawful act without causing any harmful consequences;

(2) The violation is minor and has been promptly rectified, with no harmful consequences resulting;

(3) Where a person under the age of fourteen commits an unlawful act;

(4) Where a person with a mental disorder commits an unlawful act while unable to recognize or control their own behavior;

(5) Except as otherwise provided by law, any unlawful act that remains undiscovered for a period of two years;

(6) Other circumstances where administrative punishment shall not be imposed in accordance with the law.

Article 8 Where the unlawful act of a party falls under any of the following circumstances, administrative punishment shall be imposed leniently or reduced in accordance with the law:

(1) Where a person who has reached the age of fourteen but is under the age of eighteen commits an unlawful act;

(2) Actively eliminating or mitigating the harmful consequences of the unlawful act;

(3) Actively ceasing the unlawful act, where the harmful consequences are minor;

(4) Actively reporting and truthfully confessing to the unlawful act;

(5) Where a party reports a serious violation of the law or provides key leads or evidence concerning other serious violations that have not yet been known to the case-handling authority, and such information is verified as true; or where the party renders other meritorious contributions by cooperating with the drug regulatory authority in investigating and handling unlawful acts;

(6) Committing an unlawful act under duress from another person;

(7) The property involved in the case or the illegal gains are relatively small;

(8) Other circumstances where administrative penalties shall be mitigated or reduced in accordance with the law.

Article 9 Where the unlawful act of a party falls under any of the following circumstances, administrative punishment may be imposed leniently or reduced in accordance with the law:

(1) The unlawful act is minor and poses limited social harm;

(2) Committing an unlawful act as a result of being induced by another person;

(3) Those who play a secondary or auxiliary role in joint unlawful acts;

(4) Where the party concerned has sufficient evidence to demonstrate that no subjective intent or gross negligence existed;

(5) Where the party concerned is genuinely experiencing hardship in life due to disability or a serious illness, among other reasons;

(6) Actively cooperating with the drug regulatory authority’s investigation, truthfully stating the facts of the violation, and proactively providing supporting evidence;

(7) Other circumstances where administrative penalties may be mitigated or reduced in accordance with the law.

Article 10: Where any of the following circumstances exists, administrative penalties shall be imposed more severely in accordance with the law:

(1) Where the unlawful act has persisted for more than six months, or where the entity has, over any consecutive 12-month period, incurred a total of three penalties other than revocation of its license;

(2) Where there is intent or gross negligence on the part of the party;

(3) Coercing, deceiving, or instigating others to commit unlawful acts, where such unlawful acts actually occur;

(4) Obstructing, refusing, or evading supervisory and inspection activities; falsifying, destroying, or concealing relevant evidence; or unauthorized use of seized or detained items (or premises).

(5) Engaging in retaliation against complainants, whistleblowers, witnesses, and other relevant personnel;

(6) The offender refuses to take corrective measures or initiate a voluntary product recall, thereby causing serious harmful consequences;

(7) Continuing to commit the unlawful act after being ordered to cease such conduct or to rectify the unlawful act;

(8) Where the products involved in the case pose a high risk;

(9) Repeated offenses involving the production or sale of counterfeit drugs, substandard drugs, or medical devices and cosmetics that do not meet relevant standards, after such offenses have already been dealt with;

(10) Causing significant social harm or serious harm to human health;

(11) During periods of emergencies such as natural disasters, accident-related disasters, public health incidents, and social security incidents, the production or sale of pharmaceuticals intended for responding to such emergencies that are counterfeit or substandard, or the production or sale of medical devices intended for responding to such emergencies that do not comply with applicable standards;

(12) Where any of the circumstances stipulated in Article 137 of the Drug Administration Law applies;

(13) Other circumstances where heavier punishment shall be imposed as stipulated by laws and regulations.

Article 11: Except for the circumstances specified in Articles 7 through 10 under which penalties shall not be imposed, mitigated, reduced, or aggravated, general administrative penalties shall apply.

Article 12: Where any of the following circumstances exists, penalties shall be imposed in accordance with the “serious circumstances” provisions stipulated in the relevant laws, regulations, and rules:

(1) Where, in the course of pharmaceutical production, drug ingredients are illegally added or raw materials are unlawfully used, resulting in the production of counterfeit drugs;

(2) Illegal use of excipients in pharmaceutical production, resulting in the production of substandard drugs and causing serious consequences;

(3) Engaging in production or business operations in violation of statutory conditions and requirements, or producing or selling products that do not meet statutory requirements, thereby causing serious consequences;

(4) Where a manufacturing enterprise discovers safety hazards in its products that may cause harm to human health and life, yet fails to notify the seller to cease sales, fails to inform consumers to stop using the products, fails to initiate a product recall, and fails to report the matter to the competent supervisory and administrative authorities, thereby resulting in serious consequences;

(5) Where an operating enterprise discovers that the products it sells pose safety hazards that may harm human health and life, yet fails to immediately cease selling such products, fail to notify the manufacturer or supplier, and fail to report the matter to the competent supervisory and administrative authority, thereby causing serious consequences;

(6) Refusing or evading supervisory inspections, or falsifying, destroying, or concealing relevant evidence materials, or unauthorized use of seized or detained items, thereby making it difficult to recover the products, eliminating the hazards, or resulting in serious consequences;

(7) Where an operating enterprise has failed to establish or implement a system for inspecting and accepting incoming goods, or where it has sold products that have been publicly ordered to be discontinued, thereby causing serious consequences;

(8) Those that have a significant social impact;

(9) Other circumstances that constitute “serious circumstances.”

Article 13: Where a pharmaceutical business or a medical institution falls under any of the following circumstances, such circumstances shall be deemed to constitute “sufficient evidence” as referred to in Article 75 of the Implementing Regulations of the Drug Administration Law. In accordance with that article, any counterfeit drugs, substandard drugs, and illegal gains derived from their sale or use shall be confiscated; however, other administrative penalties may be waived.

(1) The procurement channels are lawful, and authentic and valid certificates such as drug production or operation licenses, business licenses, letters of authorization, and sales invoices can be provided as proof;

(2) Drug purchase (sales) records and inbound inspection and acceptance records are truthful and complete;

(3) The storage, custody, and maintenance of pharmaceutical products comply with relevant regulations and are supported by authentic and complete records.

If Chinese medicinal decoction pieces manufactured, marketed, or used by pharmaceutical manufacturers, distributors, or medical institutions fail to comply with pharmaceutical standards but are determined by an expert panel to pose no risk to safety or efficacy, they shall, in accordance with Article 117, Paragraph 2 of the Pharmaceutical Administration Law, be ordered to make corrections within a specified time limit and issued a warning; fines may be waived.

Article 14: In accordance with laws and regulations, the minimum amount of an administrative penalty fine shall be denoted by A, and the maximum amount by B. Where an administrative fine is imposed, the discretionary range for mitigated punishment, lenient punishment, standard punishment, and aggravated punishment shall be determined in accordance with the following criteria:

(1) Range of discretion for mitigating punishment: 0 to below A;

(2) Discretionary range for mitigated punishment: from A to no more than A + 30% of (B – A);

(3) General range of discretionary penalties: from “A + (B − A) × 30%” to below “A + (B − A) × 70%”;

(4) Discretionary range for imposing a heavier penalty: “A + (B – A) × 70% to B.”

Article 15: Where an administrative penalty consists of a fine imposed as a multiple within a specified range, the actual multiple of the penalty shall be calculated in accordance with the provisions of Article 14, unless otherwise provided by laws or regulations.

Article 16: For administrative penalties that specify only a maximum fine but not a minimum fine, where mitigation of the penalty is applied, the penalty shall be imposed at no less than 0% and no more than 10% of the maximum fine; where leniency is applied, the penalty shall be imposed at no less than 10% and no more than 30% of the maximum fine; where standard punishment is applied, the penalty shall be imposed at no less than 30% and no more than 70% of the maximum fine; and where aggravation is applied, the penalty shall be imposed at no less than 70% and no more than 100% of the maximum fine.

Article 17: Unless otherwise provided by laws, regulations, or rules, where a single unlawful act committed by the same party involves multiple circumstances for discretionary penalty imposition, the penalty shall be imposed in accordance with the following rules:

(1) Where a party simultaneously meets two or more circumstances that warrant mitigation or reduction of punishment, such mitigation or reduction shall be applied; where a party meets two or more circumstances that warrant mitigation but does not meet any circumstances that warrant aggravation, the penalty shall be imposed at the lower end of the statutory range.

(2) Where a party is subject to two or more aggravating circumstances but none of the mitigating or lenient circumstances, the penalty shall be imposed at the upper limit of the statutory range.

(3) Where a party is subject to both aggravating circumstances and mitigating or reduced circumstances, the penalty shall be determined through comprehensive consideration of the facts of the case; however, the penalty may not be reduced.

Where laws and regulations provide for a range of fines for “serious circumstances,” such fines shall be determined within that range by applying the three levels of leniency, standard severity, and severity, in accordance with these Provisions.

Article 18: Unless otherwise provided by laws, regulations, or rules, where the same unlawful act is subject to concurrent penalties, such penalties shall be imposed in accordance with the following rules, taking into account the circumstances of the party’s unlawful conduct:

(1) Where the only relevant circumstances are those that warrant mitigation or leniency, a single penalty shall be imposed;

(2) Where only aggravating circumstances are present, concurrent imposition shall be applied.

Article 19: Where there are two or more unlawful acts that are not causally related, each shall be separately assessed and the penalties shall be imposed concurrently; where such acts are causally related, the principle of absorption shall apply, and the heavier of the unlawful acts shall be selected for imposition of a more severe penalty.

Where a party’s conduct violates two or more legal norms of different content, or two or more provisions of the same legal norm that differ in content, administrative penalties shall be imposed in accordance with the provision prescribing the most severe penalty.

Chapter 3: Rules of the Discretionary Procedure

Article 20: Drug regulatory authorities at all levels shall comprehensively and objectively collect evidence relevant to the exercise of discretion in imposing administrative penalties, and shall not limit their evidence collection to only those pieces that are favorable or unfavorable to the party concerned.

Article 21: For violations for which laws, regulations, and rules expressly provide that an order to make corrections must be issued first and that administrative penalties shall be imposed only if the violation remains uncorrected after the deadline, the competent authority must first issue a written order requiring the party concerned to make corrections within a specified time limit; following a subsequent inspection, if it is found that the correction has not been made by the deadline, the authority shall then impose the administrative penalty.

Where the party concerned is ordered to make corrections, guiding opinions on such corrections shall be provided. The time limit for compliance with the order to make corrections shall be reasonably determined in light of the specific circumstances; unless otherwise provided by laws or regulations, the time limit shall generally not exceed 30 days. If, due to special circumstances, compliance cannot be achieved within the prescribed time limit and the party concerned applies for an extension, the extension may be granted upon approval by the administrative penalty enforcement authority.

Article 22: When preparing the final report on case investigations, hearing reports, notices of administrative penalties, penalty decisions, or other disposition decisions, drug regulatory authorities at all levels shall set forth the circumstances of discretionary administrative punishment, specifying the relevant facts, reasons, and legal basis.

Where a decision is made not to impose a penalty, the facts, reasons, and legal basis shall be set forth in both the case investigation termination report and the decision not to impose a penalty.

Where an administrative penalty decision is made, the case investigation termination report, the notice of administrative penalty or administrative penalty hearing, and the administrative penalty decision itself shall set forth the facts, reasons, and legal basis for the decision.

In cases where administrative penalties are imposed or the type of penalty is changed due to the party’s refusal to rectify the unlawful act, the final investigation report, the notice of administrative penalty or administrative penalty hearing, and the administrative penalty decision shall all set forth the fact that, despite being ordered to make corrections, the party has nonetheless refused to do so. In addition, the case file shall include such materials as the “Notice of Order to Rectify,” the “Delivery Acknowledgment,” and the records of follow-up inspections.

Article 23: Where a party to an administrative penalty case submits objections or defenses regarding the exercise of discretionary power in imposing the penalty, the agency handling the case shall conduct a thorough review, decide whether to accept such objections or defenses, and provide written reasons or legal grounds for either accepting or rejecting them. These reasons or grounds shall be set forth in the final investigation report and the penalty decision, and shall be recorded in writing by the case file clerk and filed in the case file.

Chapter 4: Guidance and Supervision of Discretionary Actions

Article 24: Municipal-level drug regulatory authorities shall strengthen guidance and oversight over the exercise of discretionary power in administrative penalties by district- and county-level (including autonomous county-level) drug regulatory authorities, and standardize the exercise of such discretionary power.

Article 25: Drug regulatory authorities at all levels shall conduct oversight and inspection over the exercise of their discretionary power in imposing administrative penalties through such means as administrative law enforcement supervision and inspection, and review of administrative penalty case files. Where improper exercise of such discretionary power is discovered, corrective action shall be taken promptly and proactively. With respect to abuses of discretionary power, such as imposing lenient penalties for serious offenses or severe penalties for minor offenses, the relevant personnel shall be held accountable for their negligence in accordance with applicable provisions.

If a municipal-level drug supervision and administration authority finds that the discretionary power exercised by a district- or county-level drug supervision and administration authority is manifestly inappropriate, it shall order the latter to make corrections within a specified time limit; if the corrections are not made by the deadline, the municipal authority shall modify or revoke the relevant decision.

Chapter V Supplementary Provisions

Article 26: These Provisions and their discretionary guidelines may be used to interpret the exercise of discretionary power; however, they shall not be directly cited as the basis for imposing administrative penalties.

Article 27: Administrative penalty cases handled by drug regulatory authorities at all levels through simplified procedures shall, by analogy, be subject to the relevant provisions of these Regulations.

Article 28: The term “high-risk products” as used in these Rules includes the following products:

(1) The pharmaceutical products involved in the case are narcotic drugs, psychotropic drugs, blood products, biological products, toxic drugs for medical use, injectable drugs, radioactive drugs, or compound preparations containing special pharmaceuticals, among others;

(2) The pharmaceutical products involved in the case have been illegally adulterated with Western pharmaceutical ingredients or prohibited/limited-use substances, or have been manufactured using non-pharmaceutical raw materials;

(3) The medical devices involved in the case are listed in the National Key Supervision Catalogue of Medical Devices, or are classified as high-risk medical devices as recognized by the state;

(4) Where the cosmetics involved in the case contain prohibited substances or exceed the permitted limits for restricted substances;

(5) The primary intended users of the products involved in the case are pregnant and postpartum women, infants and young children, children, or other specific population groups;

(6) Other products that can be classified as high-risk.

Article 29: For the purposes of these Rules, “serious harmful consequences” shall include the circumstances specified in the Interpretation of the Supreme People’s Court and the Supreme People’s Procuratorate on Several Issues Concerning the Handling of Criminal Cases Involving Harm to Pharmaceutical Safety, namely “causing serious harm to human health” or “other serious circumstances” and “other particularly serious circumstances.”

Whether the products involved in the case have caused “serious social harm” or “severe harm to human health” may be determined by experts in accordance with laws, regulations, or relevant provisions.

Article 30: For the purposes of these Rules, “a small amount of property involved in a case or illegal gains” means that the value of the products involved in the case is RMB 1,000 or less, or that the illegal gains are RMB 500 or less.

Article 31: In these Rules, the term “below” shall not include the specified number itself.

Article 32: For the purposes of these Rules, “consecutive relationship” refers to a situation in which a party commits a single unlawful act, and the means or result of that act also satisfies the constitutive elements of other unlawful acts. To constitute a consecutive relationship, there must be several independent unlawful acts; the perpetrator pursues a single unlawful purpose; there exists an inherent and necessary connection among the several unlawful acts; and each of the unlawful acts separately violates different legal norms or statutory provisions.

Article 33: The Municipal Drug Administration shall formulate and promulgate specific discretionary benchmark tables in accordance with these Rules, which shall be observed and implemented by drug regulatory authorities at all levels.

Article 34: Where laws and regulations introduce new provisions regarding the types and ranges of penalties for unlawful acts, the Municipal Drug Administration shall, as appropriate, revise the standards for exercising discretion in imposing administrative penalties and shall publicly announce such revisions.

Article 35: These Rules shall be interpreted by the Chongqing Municipal Administration for Market Regulation—Drug Administration, and shall come into force as of the date of their issuance. The “Rules on the Application of Discretion in Administrative Penalties by the Chongqing Municipal Administration for Market Regulation—Food and Drug Administration” (Document No. 13 of 2017 issued by the Chongqing Municipal Administration for Market Regulation—Food and Drug Administration) is hereby repealed simultaneously.