China Legal Update: Legal News: Foreign Investment: China Unveils Shortened Negative List for Market Access

I. Legal News

On December 16, 2020, the National Development and Reform Commission together with the Ministry of Commerce announced the Negative List for Market Access (2020 version), with immediate effect (the “2020 List”).

Different from the Negative List for Foreign Investment¹, the 2020 List grants equal treatment to foreign enterprises as well as domestic Chinese investors. For example, if any permit is requested for selling wine, a license shall be obtained regardless of whether the investor is foreign or domestic investor. Compared to the 2019 version which contains 131 items, the 2020 List only contains 123 items.

The following administrative measures were removed in the 2020 List to ease the market access:

(1) Registration License for Customs declaration enterprises²

(2) Inspection license for imported and exported commodities inspection and appraisal³

(3) Qualification approval for asset evaluation agencies to engage in securities services⁴

In addition, a new item was added in the 2020 List: in the future, to obtain land contractual management right⁵ through transfer, a qualification/project review shall first be conducted by the Ministry of Agriculture and Rural Affairs. Detailed procedural legislations will be released soon.

(https://www.ndrc.gov.cn/xxgk/zcfb/ghxwj/202012/t20201216_1252897.html)

In China, solid wastes importation is classified into three categories defined in the Catalog of Solid Wastes subject to Forbidden Importation, Restricted Importation and Non-Restricted Importation (the “Catalog”). The Catalog is adjusted by the government from time to time following the goal of banning all solid wastes importation by end of 2020. The current Catalog includes (1) 125 forbidden items including battery wastes, (2) 32 restricted items including steel and iron wastes which can only be imported upon receipt of the importation permit, as well as (3) 18 non-restricted items including wood scarp which can be imported automatically.

Heading to realize the goal of zero importation of solid wastes, on November 25, 2020, the Ministry of Ecology and Environment (“MEE”), the Ministry of Commerce, the National Development and Reform Commission, and the General Administration of Customs have jointly issued the Announcement on Matters Relating to Ban of Importation of Solid Wastes (the “Announcement”), which will be implemented as of January 1, 2021.

The Announcement contains four simple sentences, which can be briefly summarized from the following two main aspects:

1. China will ban the importation of all solid waste completely as of 2021, as well as will prohibit the dumping, stacking or disposal of the solid waste coming outside the territory of China.

2. As all solid wastes’ importation shall be banned, the previous administrative approval process for granting importation permit for non-restricted solid wastes will be ceased. Accordingly, MEE will stop accepting any application for granting importation permit, and the importation permit already granted in 2020 shall be invalid automatically on date mentioned on the importation permit, which is a date within 2020.

For more details about what kind of items are considered as solid wastes, or the potential sanctions for importing solid wastes in 2021, please feel free to contact us via Asiallians@asiallians.com.

(http://www.mee.gov.cn/xxgk2018/xxgk/xxgk01/202011/t20201125_809835.html)

According to the Amendment to PRC Individual Income Tax (“IIT”) effective as of January 1, 2019, the amount of income not subject to IIT has raised to RMB 60,000 yuan per year. It also stipulates that an employer is responsible to withhold IIT of employees on a monthly basis, and IIT shall be withheld/prepaid once the employee’s monthly salary is more than RMB 5000 yuan⁶. However, monthly salary of an employee can also be non-fixed. For example, a salesman’s monthly salary in 2019 might sometimes be higher than RMB 5000 yuan and sometimes lower than RMB 5000 yuan, then, for certain months of which the monthly salary is higher than RMB 5000 yuan, IIT shall be withheld/prepaid by the employer; For the remaining months of which the salary is less than RMB 5000 yuan, IIT is exempted. If the total 2019 annual salary of a salesman after calculation is lower than RMB 60,000 yuan, then, corresponding tax refund formalities shall be conducted for returning the IIT already paid in 2019 for certain months.

To simplify the IIT payment formalities and to avoid unnecessary tax pre-payment/refund formalities for certain resident individual, recently, the State Taxation Administration issued an Announcement on Further Simplifying the Withholding of IIT on Certain Taxpayers (the “Announcement”), and according to the Announcement, for eligible resident individual who meet the following two conditions, as of January 1, 2021, IIT will only be withhold/pre-paid starting from the month when the cumulative income of the resident individual has reached RMB 60,000 yuan, instead of being withheld/prepaid whenever monthly salary is more than RMB 5000 yuan.

The two conditions are:

1. The resident individual’s income is withheld/prepaid by the same employer during the previous full calendar year; and

2. The total annual income of the resident individual for the previous full calendar year does not exceed RMB 60,000 yuan.

(http://www.chinatax.gov.cn/chinatax/n363/c5159450/content.html)

II. Dispute Resolution

Previously, the Agreement Concerning Mutual Enforcement of Arbitration Awards Between Mainland and Hong Kong (the “Arrangement”) was effective as of February 1, 2000, which enables the court of either jurisdiction to enforce the arbitration award made by the other jurisdiction. The Agreement explicitly stipulates that the enforcement application cannot be filed at Mainland China court and Hong Kong court simultaneously. Only if the result of the enforcement proceedings in one jurisdiction is inadequate to pay up the debts, another enforcement application can be filed at the other jurisdiction for requesting the remaining outstanding debts, provided that the total amount received from the two jurisdictions does not exceed the amount prescribed in the arbitration award. In addition, there is no specific rule released concerning assets preservation measures such as freezing of bank account/real estate transaction before or during the recognition/enforcement proceedings, which made it difficult to ask the court to conduct relevant assets preservation measures.

After 20 years’ implementation, the Agreement was currently amended by PRC Supreme People’s Court as well as the Hong Kong government’s Department of Justice to make the mutual enforcement process more effective and more convenient. On November 27, 2020, the PRC Supreme People’s Court (“SPC”) released the Supplementary Arrangement Concerning Mutual Enforcement of Arbitration Awards between Mainland and Hong Kong (the “Supplementary Arrangement”). Although the Supplementary Agreement only contains five short written articles, the above two circumstances left in the Agreement have been pointed out and improved:

1. An applicant will be entitled to apply for the enforcement of an arbitration award at Mainland China court and Hong Kong court simultaneously, and the two courts shall share information to make sure that the total amount enforced by the two courts will not exceed the amount determined in the arbitration award. However, the specific implementation date of the new “simultaneous application mechanism” is not clear yet and it is stipulated that the concrete implementation date will be further published by SPC after the Hong Kong Special Administrative Region completed relevant procedures.

2. As of November 27, 2020, preservation measures as well as compulsory measures can be conducted before or after the court accepts the application for enforcement of an arbitration award in accordance with the law of the place of enforcement.

Should you need to know more details about the preservation measures as well as the compulsory measures to be taken in PRC court, please feel free to contact us via asiallians@asiallians.com.

(http://www.court.gov.cn/fabu-xiangqing-275301.html)

On December 9, 2020, the Interpretations I of Supreme People’s Court (“SPC”) on Several Issues Concerning the Application of Law in Handling Civil Disputes on Food Safety was released by SPC (the “Interpretation”), which will become effective as of January 1, 2021.

The Interpretation includes 14 clauses and the most eye-catching clauses are summarized as follows:

1. Certain circumstances are clearly defined as “the seller knowingly sells food that fails to meet the food safety standards⁷”, which are:

(1) The shelf life of food has expired but the food is still on sale;

(2) It is impossible for the seller to show where the food was purchased;

(3) Food was purchased at an obviously unreasonable low price without any good reason;

(4) The seller failed to perform food inspection when purchasing the food;

(5) The seller falsely marks or changes the production date/batch number of food; and

(6) The seller transfers, conceals or illegally destroys food purchasing/sales records or intentionally provides false information.

2. To better regulate the food provided in the public transportation (for example, in-flight food provided by the airline), the Interpretation stipulates that carrier of public transportation will be held accountable if the food they provided in the public transportation does not meet the food safety standards. In addition, it also stipulates that the following defenses raised by the carrier of public transportation to exempt its liabilities for any food safety incidents shall not be accepted by the court:

(1) The food is not manufacturered/operated by the carrier of public transportation; or

(2) The food is provided to the passengers free of charge.

(http://www.court.gov.cn/fabu-xiangqing-278191.html)

Should you have any inquiry, please contact us at asiallians@asiallians.com. As always, Asiallians remains at your service and our team are currently mobilized in our offices in China, Hong Kong and Taipei.

1.For more details of updated Negative List for Foreign Investment, see
https://asiallians.com/china-legal-update-negative-list-2020-ftz-
negative-list-2020-newly-released-ndrc-mofcom/

2. Previously, Customs declaration entities shall go through the registration procedures with Customs to obtain the registration license.

3. Previously, institutions engaging in imported and exported commodities Inspection and appraisal business shall apply for the inspection license at relevant Administration of Quality Supervision, Inspection and Quarantine.

4. On October 21, 2020, an announcement has been issued by the Ministry of Finance and Securities Supervision Commission in which qualification approval process for asset evaluation agencies to engage in securities services has been modified to a record-filing process.

5. In China, according to PRC Real Right Law, cultivated land, woodland, grassland, and other lands for agricultural use that are owned by rural collectives or are owned by the State but used by rural collectives, shall be used under the system of land contract management. A holder of land contractual management rights has the right to possess, use and seek profit from the cultivated land, woodland or grassland, etc., and is entitled to the engagement in agricultural production activities such as planting, forestry, stockbreeding, etc.

6. RMB 60,000÷12=RMB 5000

7. According to PRC Food Safety Law revised in 2018, where the seller knowingly sells food not meeting the food safety standards, consumers may request to compensate the loss, as well as require the sellers to make compensation equal to 10 times of the value of the food or 3 times of the losses caused by the food. If the compensation is less than RMB 1000, the consumer may still claim RMB 1000.

Feel free to contact asiallians@asiallians.com for more information.