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Establishing Your E-Commerce Platform in China: ICP Commercial License or ICP Filing?

Anyone establishing a website to provide internet information services in China must know the term “ICP”, short for Internet Content Providers. Yet, not everyone is clear about what type of ICP license is required for the intended business. This article provides a simple explanation.

In China, there are two types of internet information services:

  • Commercial Internet Information Services
  • Non-commercial Internet Information Services

Commercial Internet Information Services require internet users to pay for the information, while Non-commercial Internet Information Services refer to free access to open and shared information. As a result, different registration procedures will apply depending on the above two types of internet information services. Currently, China mandates an ICP filing system for non-commercial Internet information services and an ICP licensing system for commercial Internet information services.

As an Internet Content Provider (ICP) in China, you must ensure compliance with the relevant regulations in the administration of Internet Information Services and Non-Commercial Internet Information Services. A website that has not obtained an ICP filing or an ICP commercial license is prohibited from providing non-commercial internet information services or commercial internet information services.

Non-commercial Internet Information Services – ICP Filing System

To deploy a website in Mainland China for information purposes, you must apply for an ICP Filing (Bei’An in Chinese) from the Ministry of Industry and Information Technology. By obtaining an ICP Filing, your website will be eligible to be accessed in Mainland China. However, the website cannot be used for generating revenue.

Foreign companies with a registered business entity in mainland China or foreign individuals with a fixed residence in China may apply for an ICP Filing. The prerequisite of obtaining an ICP filing is that the website must be hosted on an instance deployed in Mainland China.

Commercial Internet Information Services – ICP Commercial Licensing System

Any website involving paid services such as online forums or charging the merchant for fees such as platform management fees requires an ICP Commercial License. The common forms of paid services are below:

  • E-Business Model
    • Charging the platform users such as membership fee
    • Charging the platform resident sellers such as technical service fee
    • Mixed a) and b) charges
  • Information Services Model
    • Charging the platform users such as paid reading
    • Charging the information service providers such as advertising fee
    • Mixed a) and b) charges

According to the license classification of value-added telecommunication business, there are two common categories, B21 and B25 license. For platforms operating online data processing and transaction processing business, i.e., E-business model, a category B21 license is required, for example, JP.com and Taobao.

For information service business providers who run the information services model, they will need to apply for a B25 license. The common forms of information services include:

  • Information search services (such as baidu.com)
  • Information dissemination platforms (such as 58.com, 51job.com)
  • Information community services (such as weibo)
  • Real-time interactive information services (such as QQ, WeChat)
  • Information protection and processing services (such as internet security, online anti-virus service, encrypt messaging)

Different categories of value-added telecommunications businesses require different license categories and cannot operate beyond the scope of the license. Therefore, if you wish to engage in other telecommunication business categories, applying for a new license for the appropriate category is required; otherwise, you will be fined.

The application for B21 license by e-commerce platforms is commonly referred to as EDI License (Electronic Data Interchange), while the application for B25 license by information service providers is commonly referred to as “ICP” License.

A foreign-invested enterprise in China with 100% foreign capital is able to apply for an EDI License. It means that foreign companies with 100% foreign shares can establish an e-commerce platform in China, providing users with online data processing and transaction processing services through the internet, such as online food ordering platforms, ticket booking systems, B2B exchange of business information. The basic requirements of applying for an EDI License are:

  • Having a company established in China with enough funds (a high level of minimum registered capital will apply);
  • It has a good track record and operation experience in providing online data processing and transaction processing services.

As for the ICP Commercial License for other internet information services, such as charging the platform users paid reading, advertising fee, forum membership fee, and information publishing fee, it requires that the foreign investors not hold more than 50% of the shares of the business entity in China.

Although it is possible for foreign companies to apply for an EDI License in China, the requirements, processing times, and procedures of the application impose great difficulties once started. Besides, foreign companies must also pay attention to other rules, such as personal data protection, intellectual property protection, e-commerce law, and ensuring it has adequate funds and professional management in the daily operation of the e-commerce business. Therefore, foreign investors are strongly advised to conduct a complete feasibility study to ensure the fulfillment of the conditions.

If you have any further questions, please contact our China FDI Legal Counsel, Phenix Zheng (phenix.zheng@cwhkcpa.com).

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