02 March 2020

China regulatory and legal round-up | 2 March 2020

General Corporate and Foreign Investment & Trade


1. Measures to support foreign invested enterprises in response to the New Coronavirus Pneumonia epidemic

On February 18, 2020, the Ministry of Commerce of the PRC (“MOFCOM”) issued the Notice on Reacting to the New Coronavirus Pneumonia Epidemic to Ensure Foreign Trade, Stabilize Foreign Investment and Promote Consumption (《商务部关于应对新冠肺炎疫情做好稳外贸稳外资促消费工作的通知》), which aims to minimize the impact of the Novel Coronavirus Pneumonia Epidemic (the “Coronavirus”) on business growth and development.  MOFCOM requests that local authorities shall, among other things, simplify foreign trade management procedures, support the development of new formats and models of foreign trade, strengthen export credit insurance support, enhance dynamic monitoring of foreign-invested companies and follow-up service for large foreign-invested projects.  MOFCOM further requests that the local authorities formulate specific policies within their legal authorities to support foreign-funded enterprises to cope with the impact of the Coronavirus, and to increase the stability of foreign investment.  All related policies, measures and practices should be reported to MOFCOM for replication and promotion in a timely manner. 

KWM’s team has launched a compilation of laws and policies introduced to deal with the Coronavirus. We have also provided our interpretation of these developments.  Please refer here for details and read more on our WeChat account: 

2. U.S. proposes to update the list of developing and least-developed countries

On February 10, 2020, the Office of the United States Trade Representative (“USTR”) announced an update to the List of Developing and Least-Developed Countries.  USTR’s update adjusts the list of countries and regions that can enjoy the exemption of micro-subsidies from developing countries in countervailing investigations.  Given that China has never enjoyed preferential treatment for developing countries in the U.S. countervailing investigations, such updates may have a limited influence on U.S-China businesses.

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3. Rules for regulating audio-visual programs providers

On February 21, 2020, China Netcasting Services Association (中国网络视听节目协会) promulgated the Detailed Rules for Reviewing Internet Variety Program Content (《网络综艺节目内容审核标准细则》). The Rules are formulated by China Netcasting Services Association, CCTV, Mango TV, Tencent, Youku, IQIYI and other audio-visual programs websites under the guidance of Network Audiovisual Program Administration Division of National Radio and Television Administration (国家广播电视总局网络视听节目管理司).  These Rules put forward 94 standards in various aspects of Internet variety programs, including selection of topics, content, selection and behaviors of staff, , modeling and stage art, wording and languages, montage, etc.  Although the Rules are not laws or regulations, or even industry standards, it is likely that they will be treated as “best practice” and used by law enforcement authorities as reference.

4. Shanghai High People’s Court issued principles for application of force majeure during the period of fighting the novel coronavirus pneumonia epidemic

On February 16, 2020, judges of Shanghai High People’s Court noted in a press conference that if a party cannot perform its obligations under any contract due to the implemented Coronavirus prevention and control measures, such performance failure may be considered a result of “force majeure,” which is unforeseeable, unavoidable and insurmountable.  The judges also announced a set of principles for dealing with contract disputes, employment disputes, and tort cases during the Novel Coronavirus Pneumonia Epidemic

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Customs and Foreign Exchange

5. SAFE implements facilitation measures for cross-border trade and investment

On October 23, 2019, the State Administration of Foreign Exchange (“SAFE”) promulgated the Notice of the State Administration of Foreign Exchange on Further Promoting the Facilitation of Cross-border Trade and Investment (《国家外汇管理局关于进一步促进跨境贸易投资便利化的通知》), setting forth facilitation measures for cross-border trade and investment.  The 2020 National Working Conference on Foreign Exchange Administration pointed out that the SAFE is focused on implementing these facilitation measures in 2020. SAFE also proposed to initiate the pilot program cancelling the requirements for the registration of foreign debts borrowed by non-financial enterprises on a transaction-by-transaction basis, and to promote the pilot program of transfer of domestic credit assets in the Guangdong-Hong Kong-Macao Greater Bay Area and Hainan Province.

On February 7, 2020, SAFE Hainan Branch released the Notice on the Policies for Supporting the Innovative Foreign Exchange Business for the Construction of the Hainan Free Trade Port , officially implementing three policies: (1) cancelling the registration of foreign debts of non-financial enterprises on a transaction-by-transaction basis, (2) carrying out the business of transferring domestic credit assets to overseas parties, and (3) simplifying foreign exchange registration formalities for foreign direct investment.  SAFE Hainan Branch is also working on related rules for three other new policies: (1) implementing the pilot program of facilitating foreign exchange receipt and payment for trade in goods and trade in services, (2) further facilitating administration of inward and outward remittance of funds by qualified foreign limited partners (QFLP), and (3) launching the pilot scheme of qualified domestic limited partners (QDLP).

Twelve facilitation measures are also being implemented in other regions. On February 14, 2020, the People's Bank of China, China Banking and Insurance Regulatory Commission, China Securities Regulatory Commission, the State Administration of Foreign Exchange and Shanghai Municipal Government released the Opinions about Further Accelerating the Construction of Shanghai into International Financial Center and Providing Financial Support to Expedite Integrated Development of the Yangtze River Delta Region (《关于进一步加快推进上海国际金融中心建设和金融支持长三角一体化发展的意见》), proposing exploration and pilot measures to promote investment and trade facilitation.

6. China announces the first set of U.S. products excluded from the second group of U.S. products subject to additional tariffs

On February 21, 2020, the Customs Tariff Commission of the State Council (“CTC”) announced the first set of U.S. products excluded from the second group of U.S. products subject to additional tariffs, including two exclusion lists (the “Exclusion Lists”). 

Products on the Exclusion List I will not be subject to additional tariffs imposed by China as countermeasures against the U.S. Section 301 measures from February 28, 2020 to February 27, 2021 (one year).  The tariffs that have been imposed shall be refunded, and relevant importers shall file an application with Customs requesting a tariff refund within six months from the date of issuance of the Exclusion Lists.

Products on the Exclusion List II will not be subject to additional tariffs imposed by China as countermeasures against the U.S. Section 301 measures from February 28, 2020 to February 27, 2021 (one year). The tariffs that have been imposed will not be refunded.

Prior to these Exclusion Lists,  the CTC had announced measures excluding certain products from the first group of U.S. products subject to additional tariffs on September 11 and December 19, 2019 respectively.  The CTC will continue to formulate and publish  exclusion lists.

7. China carries out exclusion of goods under market-oriented procurement from additional tariff against U.S.

On February 17, 2020, the CTC announced it has decided to exclude goods under market-oriented procurement from the additional tariffs imposed on products imported from the United States. Any PRC domestic enterprise intending to purchase and import U.S. goods included on the list may apply for exclusion through the exclusion declaration system. Upon approval by the CTC, the goods imported will not be subject to anti-tariff measures against the U.S. imposed by the PRC. The declaration system for exclusion will accept applications as of March 2, 2020.

The application and review procedures have been optimized compared with the previous exclusion process.  The scope of goods excluded upon application has also been expanded, and the pass rate and speed of enterprise exclusion applications has been significantly improved.  Meanwhile, according to a related announcement released on February 24, 2020 by the General Administration of Customs (“GAC”), the additional Section 301 measures will be automatically exempted for imported goods originating from the U.S. through express delivery (C-category express items).

8. China lifts restrictions on the import of poultry meat and pet food containing ruminant ingredients from U.S.

On February 14, 2020, the GAC and Ministry of Agriculture and Rural Affairs (“MOAA”) jointly promulgated an announcement  to lift restrictions on the import of poultry and poultry-related products from the United States.

On February 19, 2020, the GAC and the MOAA also lifted the ban on the import of pet food containing ruminants (including cattle, sheep, camels, deer and other animals) from the United States.  Both – imported poultry and pet food will need to meet the requirements of PRC laws and regulations.  However, no specific inspection and quarantine standards for ruminants exported from the United States to China have been issued.  Read more here.

9. China announces the inspection and quarantine requirements for the import of potatoes from the U.S.

On February 21, 2020, the GAC promulgated inspection and quarantine requirements for the import of fresh potatoes from the United States, allowing potatoes and tubers that meet the relevant requirements and are produced in the states of Washington, Oregon and Idaho to be exported to China. Read more here



Tax


10. China releases preferential tax policies amid national combat against Coronavirus outbreak

In the past month, China’s state and local governments  have released a series of preferential tax policies for taxpayers involved in the fight against the Coronavirus outbreak.  The measures include: full tax deduction for charitable donations made through qualified organizations and hospitals for the prevention and control of coronavirus; value-added tax exemption on income derived from the provision of public transportation services, life necessity services, and express pickup and delivery services; tax incentives and financial subsidies for the production and transportation of key anti-epidemic materials; and, extension of the carry-forward period for tax losses incurred in 2020 from a statutory 5 years to 8 years for the worst affected industries, including transportation, hospitality, hotel and tourism. Tax authorities nationwide are encouraging on-line tax filing with the February tax filing deadline extended – see below for more information.

It is expected that more fiscal and tax preferential policies will be unveiled in due course to help businesses overcome the disruption and difficulties caused by the epidemic and boost economic recovery.

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11. First-ever tax season for annual personal tax filing in China

The new PRC Individual Income Tax Law, which became effective in 2019, requires the annual filing of individual income tax (“IIT”) for taxpayers, including both Chinese residents and non-residents.  IIT filing for 2019 will be completed between March 1 and June 30, 2020.  While the detailed filing forms are not yet available, both taxpayers and employers should be aware of the major changes and implications.  To ensure compliance and avoid mistakes, employers are encouraged to train employees and arrange for document filing.

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Labor


12. State Council decided to reduce or exempt social insurance contribution of enterprises in phases and implement the policy of deferring enterprises’ housing fund contribution

On February 18, 2020, the executive meeting of the State Council decided to reduce or exempt social insurance contribution of enterprises in phases, and to implement the policy of deferring enterprises’ housing fund contribution. Read more here.

To mitigate the impact of the Coronavirus outbreak on enterprises, especially on medium-sized, small and micro enterprises, basic pension insurance, unemployment insurance and work-related injury insurance contribution of enterprises can be reduced or exempt in phases.  For all provinces – except for Hubei province – medium-sized, small and micro enterprises can be exempt from the above three types of social insurance contribution from February to June. Large corporations’ contributions towards the same  can be reduced by half from February to April.  For Hubei province, all types of enterprises participating in social insurance can be exempt from contribution of the above three types of social insurance from February to June.  Meanwhile, certain enterprises may apply to defer housing fund contribution before the end of June.

On February 21, 2020, the Ministry of Human Resources and Social Security, the Ministry of Finance and the State Taxation Administration jointly issued the Notice on Reduction or Exemption of Social Insurance Contributions of Enterprises in Phases, implementing the instruction of the executive meeting of the State Council.  It further clarifies that basic pension insurance, unemployment insurance and work-related injury insurance contributions of enterprises nationwide can be exempt or reduced within a certain period based on the categories of enterprises starting from February 2020.

 All these measures are designed to help ease the financial burden, reduce enterprises’ employment costs during the outbreak, and stabilize employment.



Data Protection


13. CAC Stresses Personal Information Protection in Using Big Data to Support Epidemic Prevention

On February 9, 2020, Cyberspace Administration of China (“CAC”) issued the Notice on Personal Information Protection and Use of Big Data to Support Joint Prevention and Control of Coronavirus Outbreak in an effort to emphasize the importance of personal information protection and use of big data during the joint epidemic prevention and control work.  While brief, the notice covers a wide range of issues. For example, for the purposes of epidemic prevention and control, the Notice stresses that exceptions to the principle of notification and consent before collecting personal information should be clearly stipulated by laws and administrative regulations, and authorized by relevant departments. Meanwhile, enterprises are encouraged to use their Big Data capabilities to support epidemic prevention and protection efforts.

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14. People’s Bank of China Issues Personal Financial Information Protection Technical Specification

On February 13, 2020, the People’s Bank of China (PBC) issued the Personal Financial Information Protection Technical Specification (the “Specification”) as a recommended standard for financial businesses.  The Specification provides detailed guidelines for the protection of personal financial information in various stages of data processing, including collection, transmission, use, storage, sharing, deletion, and destruction, from the perspectives of security technology and security management.  It also classifies personal financial information into three categories based on it sensitivity: C3, C2, and C1.

The Specification is a guideline for the protection of personal financial information in in the financial industry or other businesses processing personal financial information. In practice, the Specification could become an important reference for regulatory authorities when supervising and inspecting or carrying out law enforcement activities.  Therefore, the Specification has a relatively strong guiding effect for relevant enterprises.  For example, the Specification prevents financial institutions from entrusting or authorizing organizations without relevant financial industry certificates to collect C3 and C2 information, or engage third-parties to process the information under C3 or the auxiliary information for user ID authentication under C2. Since the scope of C3 and C2 information is rather broad, and may cover most types of personal financial information, such requirements may make it difficult for enterprises to obtain personal financial information for providing outsourced services to financial institutions, especially if these enterprises  lack financial industry certificates.

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15. President Xi Addresses Establishing Legislation System of Biosecurity Protection

On February 14, 2020, the 12th Session of the Central Deepening Reform Commission took place.  President Xi Jinping stated that biosecurity will be incorporated into the national security system, and promoted the introduction of biosecurity legislation to accelerate the establishment of a national biosecurity law and regulation system. On October 21, 2019, the Biosecurity Law of the People's Republic of China (Draft) was first submitted to the 14th Session of the 13th National People’s Congress. Currently, the draft law is about to enter a second round of consideration. In general, the draft law refers to international treaties and experiences, such as the Convention on Biological Diversity and the Cartagena Protocol on Biosafety and will provide institutional arrangements for the use of biological resources such as human genetic resources and biotechnology research and development.  Now that biosecurity has risen to the level of national security, foreign companies may need to carefully review their biosecurity-related obligations in the collection or usage of biological resources in China.

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16. Implementation Measures for Inspection and Certification of Commercial Encryption (Draft for Comments)

On February 20, 2020, the State Administration for Market Regulation (SAMR) issued the Implementation Opinions on Inspection and Certification of Commercial Encryption (Draft for Comments) (the “Draft Opinions”). Under the Cryptography Law of the People’s Republic of China, effective since January 1, 2020, commercial encryption products involving national security and public welfare must be inspected and pass certification by qualified agencies.  Inspection and certification are also encouraged, but not required, for other commercial encryption products. The Draft Opinions supplement and further specify the rights and obligations concerning such inspection and certification under the Cryptography Law, such as the inspection and certification agencies’ obligations of qualification, record-keeping, public disclosure, filing, and confidentiality.  The Draft Opinions also supplement the rights and obligations concerning the clients’ rights to appeal to inspection and certification agencies, and to lodge complaints with the local authorities of the SAMR or the State Administration of Cryptography (SAC) regarding the results of the inspection and certification. While it is still unclear what particular commercial encryption products are mandated for inspection and certification, the Draft Opinions provide that the SAMR and SAC will jointly issue the list of such commercial encryption products, and the SAMR will also issue detailed measures for commercial encryption certification. 



Litigation


17.   The Supreme People’s Court issued Notice on Online Hearing in the period of Coronavirus

On February 14, 2020, the Supreme People’s Court issued the Notice on Standardizing Online Hearing Work during the Prevention and Control of Novel Coronavirus (《关于新冠肺炎疫情防控期间加强和规范在线诉讼工作的通知》), putting forward clear requirements and specific rules regarding online hearings for people’s courts at all levels.  The notice includes specific requirements for the implementation of online hearing systems by local courts, emphasizing that people’s courts at all levels should take responsibilities to promote online case handling as a normal mechanism to cope with the Coronavirus.



Should you need any additional information, or if you would like to discuss how recent updates in Chinese law may affect your business, please feel free to contact us.

Disclaimer

This client alert is not intended to be legal advice. Readers should seek specific legal advice from KWM legal professionals before acting on the information contained in this  alert.

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