China to Impose Higher Fines to Business Operating in Mainland without a Local Legal Entity from 1 March 2022
Any company running a business in Mainland China which needs to hire staff must establish a legal entity. Violators will be subject to higher fines, which will go from RMB 10,000 to RMB 100,00 from 1 March 2022 onwards.
Foreign companies that employ individuals or independent contractors to explore the China market will be targeted as well. Even though the authorities might not be able to impose the penalty on a foreign entity, they could decide to blacklist the foreign company, pushing local Chinese business partners such as suppliers and customers away from them, which can negatively impact the foreign company’s business in the Chinese market.
Moreover, locally established entities hiring employees through an entity in one city but deploying the staff to perform duties in another city (such as one hiring an employee via an entity in Shanghai to carry on business in Guangzhou) might be liable and punished.
Personal Information Protection Law Coming into Force on 1 November 2021
The Personal Information Protection Law (“PIPL”) will come into force on 1 November 2021, setting requirements for the processing of personal information of natural persons within the territory of China. PIPL also applies to the processing of the personal information of natural persons within China that takes place outside the territory of China under the circumstances where the purpose is to provide domestic natural persons with products or services or analyze domestic natural persons’ activities.
For a more detailed analysis of the PIPL, please read our article Personal Information Protection Law in China.
Supervision and Administration of Cosmetics for Children to Be Enforced on 1 January 2022
To strengthen the supervision and administration of cosmetics for children, the National Medical Products Administration has organized the formulation of the Provisions for Supervision and Administration of Cosmetics for Children (“Provisions”), which will come into force as of 1 January 2022.
All businesses in the production and operation of cosmetics for children in China should comply with these provisions. The term “cosmetics for children” refers to cosmetics that are applicable to children below 12 years old (inclusive) and have the effects of cleaning, moisturizing, refreshing, and UV-blocking. Products marked with words such as “for the whole population” or “for family use” or implied by trademarks, designs, homophones, letters, Chinese pinyin, numbers, symbols, packaging forms, etc. that the users of the products are children shall be subject to administration as cosmetics for children.
As of 1 May 2022, any cosmetics for children that are applied for registration or filed for record shall be labeled and marked in accordance with the Provisions. For any cosmetics for children that are applied for registration or filed for record previously but fail to be labeled and marked in accordance with the Provisions, the cosmetics registrant or record-filing party shall update the product label before 1 May 2023 to bring the product in compliance with the Provisions.
Administrative Provisions on Commodity Classification of Imports and Exports
The Administrative Provisions of the Customs of the People’s Republic of China on Commodity Classification of Imports and Exports (“Provisions”) will come into force on 1 November 2021. The adoption of these Provisions has caused extensive concern of import and export companies. These provisions focus on adjusting and clarifying the scope of management, legal basis, management requirements of commodity classification. Some highlighted provisions include:
- In examining and determining the commodity classification of the goods as declared by a consignor/consignee or the agent, the Customs may require the consignor/consignee or the agent to provide necessary samples and materials related to the goods, including Chinese translations of the materials in foreign languages.
- Suppose the materials provided to the Customs involve any trade secret, undisclosed information, or confidential business information, and the Customs is requested to keep such materials confidential. In that case, the consignor/consignee or the agent should make a written request to the Customs detailing the contents that need to be kept confidential. Otherwise, no consignor or the consignees or the agents thereof may refuse to provide relevant materials to the Customs on the ground of trade secrets.
- When necessary, the Customs may test and examine the attributes, ingredients, contents, structure, quality, specifications, etc., of imported and exported goods and take the test and examination results as the basis for commodity classification following the national and industrial standards.
Credit Investigation Business on the Rise in China
The People’s Bank of China has issued the Administrative Measures on Credit Investigation Business (“Measures”), which will come into force on 1 January 2022. These measures will apply to businesses that collect, collate, maintain, process credit information of companies and individuals and provide such information to users. The Measures stipulate that the credit investigation agencies must obtain the information subject’s consent and state clearly the purpose before collecting personal credit information.
They should also carry out a necessary review on information sources, information quality, information security, and information subject authorization. In addition, the users of credit information should use such information for legitimate purposes and obtain the explicit consent and permission of the information subject. The Measures are entirely in coherence with the Personal Information Protection Law provisions coming into effect on 1 November 2021.