Multiple new laws and regulations that affect doing business in China came into force on 1 January 2022. Foreign investors and businesses engaging in cosmetics, food and beverage, import and export, and businesses that care for older adults should pay special attention
1. Negative Lists for Foreign Investment Access
The National Development and Reform Commission and the Ministry of Commerce released the Special Administrative Measures (Negative List) for Foreign Investment Access (2021 Edition) and the Special Administrative Measures (Negative List) for Foreign Investment in Pilot Free Trade Zones (2021 Edition) on 27 December 2021.
Why it matters: It’s all about market access. These two negative lists detail the industries where foreign investment will either be prohibited or restricted. All foreign investment needs to follow the special administrative measures, such as the cap on the share ratio of foreign investment, set in the corresponding negative lists. The 2021 National Negative List and the 2021 FTZ Negative List were shortened to 31 and 27 items, respectively. Both lists further widened the opening of the automobile manufacturing and the radio and TV device manufacturing sectors.
The FTZ Negative List removed all the entries relating to the manufacturing sector and proposed exploring the possibility of relaxing foreign investment access to the services sector, including market research and social surveys.
2. The 2022 Tariff Adjustment Plan
On 13 December 2021, the Customs Tariff Commission of the State Council released the 2022 Tariff Adjustment Plan to adjust the import and export tariffs of selected goods from 1 January 2022.
Why it matters: It’s all about how much tariff you will need to pay in 2022 if you are engaging in relevant import-export businesses.
From 1 January 2022, China will impose interim import tax rates on 954 commodities, which were previously subject to the default most favoured nation (MFN) tariffs – which are higher. These commodities include anti-cancer drugs and medical products, aquatic products and sports equipment, oil paintings and antique artwork, high-efficiency auto parts, materials for environmental restoration, manufacturing components and raw materials, and mineral resources.
To promote the high-quality opening of markets, China will apply agreed tax rates on selected goods originating in 29 countries and regions for 2022 in accordance with China’s free trade agreements (FTA), including the Regional Comprehensive Economic Partnership (RCEP) and the China-Cambodia FTA, both of which will come into effect on 1 January 2022.
China will raise import and export duties on some commodities to balance domestic demand and supply as well as upgrade its industries, including re-imposing MFN tariffs on some amino acids, lead-acid battery parts, gelatin, and pork.
3. New Guidelines for Trademark Examination
On 16 November 2021, China’s National Intellectual Property Administration released the Guideline for Trademark Examination and Trial, to be implemented from 1 January 2022.
Why it matters: The guideline provides detailed and updated rules about trademark registration in China, with new chapters added regarding the examination of Madrid trademarks and bad faith trademark applications, as well as detailed rules for trademark examination.
The Guideline has two parts. Part I relates to formal examination and routine work, setting out standardised terms and expressions involved in trademark examination and trial. Part II clarifies the examination and trial of “malicious trademark registration,” “signs that shall not be used as trademarks” and the “lack of distinctive features of trademarks”, among other factors.
4. The Evaluation and Repair of Taxpayer Credit
The State Taxation Administration recently released the Announcement on Matters Relating to the Evaluation and Repair of Taxpayer Credit, to be implemented from 1 January 2022.
Why it matters: The taxpayer credit rating is becoming increasingly important for foreign companies operating in China. A good tax credit rating means a company can access more favourable treatment when obtaining tax incentives, applying for loans and obtaining business qualifications, while a poor rating can lead to more stringent scrutiny in a wide range of tax-related matters.
This new announcement details the circumstances under which a taxpayer may apply to restore its taxpayer credit after it corrects dishonest behaviour, performs tax legal liability, is waived from the release of its major tax violating information and records no dishonest tax-pay behaviour for six or 12 months.
5. New Measures for Import/Export Food Safety
On 12 April 2021, the General Administration of Customs (GAC) released the Measures for the Safety Administration of Imported and Exported Food (GAC Decree No.249) and the Provisions on the Administrative Provisions on Registration of Overseas Manufacturers of Imported Food (GAC Decree No.248).
Why it matters: GAC Decree No.249 covers a broad range of requirements on food exports to China, including the registration of overseas facilities, record filing by importers and exporters, quarantine and inspection, and product labelling.
In comparison with the measures currently in effect, among other things, GAC Decree No.249 emphasises that producers and operators are accountable for the safety of the food products they produce and handle and requires food importers to establish a system for the review of their suppliers, including overseas exporters and production facilities.
GAC Decree No.248 changes in registration and application methods and imposes new packing and labelling requirements.
6. Cosmetics Manufacturing and Operations
On 2 August 2021, the State Administration for Market Regulation (SAMR) released the Measures for Supervision of Cosmetics Production and Operation (SAMR Decree No.46) to be implemented from 1 January 2022.
Why it matters: SAMR Decree No.46 provides more detailed rules on the management of cosmetics production licenses and the production and sales of cosmetic products.
Among other regulations, the SAMR Decree No.46 will:
- Implement a notification and commitment system for the renewal of cosmetics production licenses, strengthen regulatory measures, and revoke the licenses of the unqualified producers and operators.
- Require the registrants and entrusted manufacturers of cosmetics to establish a sound production quality management system and implement the quality and safety responsibility system.
- Require trading markets and exhibition organisers to examine, inspect and report unlawful activities, and step up regulatory measures and responsibilities.
7. New regulations for Children’s Cosmetics
To strengthen the supervision and administration of children’s cosmetics and ensure the safe use of children’s cosmetics, on 8 October 2021, the National Medical Products Administration (NMPA) released the Provisions on the Supervision and Administration of Children’s Cosmetics (NMPA Announcement [2021] No.123).
Why it matters: The regulation specifies that children’s cosmetics should be specifically labelled. “Attention” or “Warning” should be used as guiding wording for children’s cosmetics, and warning words, such as “should be used under adult supervision”, should be clearly marked on the packaging.
Furthermore, the regulation stipulates that children’s cosmetics must not be labelled with wording that indicates it is made with food-grade or edible materials or labelled with food pictures.
8. Amended Trade Union Law
On 24 December 2021, the 32nd session of the Standing Committee of the 13th National People’s Congress adopted the Decision on Amending the Trade Union Law of the People’s Republic of China.
Why it matters: The Decision decided to expand the coverage of grassroots trade union organisations. It states that people working in enterprises, public institutions, government organs and social organisations in China, regardless of their nationality, race, gender, occupation, religious belief and educational level, all have the legal right to join and organise trade unions. No organisation or individual may obstruct or restrict their rights.
9. A New National Standard for Service in Senior Care Organisations
On 27 December 2019, the State Administration for Market Regulation (SAMR) and the Standardisation Administration of China (SAC) approved and released the Basic Specification of Service Safety for Senior Care Organisations (GB38600-2019), which came into force on 1 January 2022.
Why it matters: This is the first mandatory national standard in the field of elderly care services in China, clarifying a “bottom line” of service safety in elderly care institutions. It aims to help prevent, investigate and rectify potential safety hazards in elderly care institutions.
The basic requirements state that institutions for the elderly should comply with mandatory provisions for fire protection, sanitation and health, environmental protection, food and medicine, construction, and facilities and equipment standards. At the same time, service safety risk assessments should be carried out before the elderly are admitted to nursing homes, and the scope of service safety risk assessment should include choking, accidental ingestion of food and drugs, pressure ulcers, falls, and accidents in recreational activities, among others.
A version of this article was first published by China Briefing, which is produced by Dezan Shira & Associates. The firm assists foreign investors throughout Asia from offices across the world.
