China

The newly passed Cybersecurity Law of the People’s Republic of China will take effect in June 2017, and it is expected to have a significant impact on multinationals doing business in mainland China. The law affects both domestic and foreign companies operating on the Chinese mainland and covers a wide range of activities including the use of the internet, information and communications technologies, personal data, national security and more.

The difficulties with determining the steps needed to comply with such sweeping changes are only complicated by the fact that a large number of key terms in the law have yet to be clearly defined. As a result, China’s new Cybersecurity Law will continue to evolve as the national government interprets it.

Here are some key provisions to follow in the coming months.

On Wednesday, Judge Richard Sullivan of the Southern District of New York relieved the Bank of China from an order issuing $50,000 of daily fines for failing to comply with two subpoenas for information on account holders accused of selling goods counterfeit “Gucci” goods. The matter provides an interesting case study of at least one dilemma facing foreign companies doing business in the United States – whether to comply with a US-issued subpoena knowing that compliance  would break foreign law.

On Sunday, March 1, 2015, CBS newsmagazine “60 Minutes” ran a lengthy piece reported by Anderson Cooper regarding accusations that Lumber Liquidators imported laminated flooring products that did not meet the standards set by the California Air Resources Board (CARB) for levels of formaldehyde. The focus of the story was on Lumber Liquidators, but the issue is likely to affect almost every importer of flooring and other wood products from China.

During the segment, Cooper referenced various lawsuits that are pending against Lumber Liquidators alleging that the company failed to meet CARB standards in California for formaldehyde. Cooper interviewed the CEO of Lumber Liquidators, Robert Lynch. Lynch said the company has a good system in place and checks carefully to make sure that CARB standards are met.

After making this statement, Lynch was shown a video interview of the plant manager of a Chinese plant that manufactures products for Lumber Liquidators. In the video, the plant manager plainly states that the flooring did not meet CARB standards. The journalist narrating the video adds that visits made to two other plants that manufacture flooring for the company revealed that the company’s flooring failed to meet the standards.

On September 27, 2013, the State Council of the People’s Republic of China issued the Blueprint of the China (Shanghai) Pilot Free Trade Zone (“FTZ”). On September 29, 2013, the FTZ went into effect. This is the first FTZ in China, and, as per the Blueprint, it would relax certain regulatory restrictions – particularly regarding foreign investment in some industries.

There was a time when the decision to offshore manufacturing operations to an emerging market was an easy business decision.  However, the past decade has many companies questioning that business model.  Rising labor costs, uncertain supply chains, labor unrest and the costly and lengthy delivery time for manufactured goods coming from Asia has exponentially increased the cost to offshore manufacturing.

On Aug 5, 2013, the China Food and Drug Administration (CFDA) opened its draft Rules of the China Food and Drug Administration Legislation Procedure (the “Draft”) for public comment. The CFDA provided one month (August 5-September 5) to submit opinions on the new rules in the Draft. The Draft states the purposes of the new Rules are to regulate legislative procedures, guarantee the quality of legislation, and improve the efficiency of the legislation.