Problems relating to Trade and Investment on China

24. Indigested legislation, abrupt changes
Issue	Issue details	Requests	Reference

(1) Frequent and Abrupt Legislative Changes

- Changes in legal systems and administration policy are frequent and some changes are made, abruptly without advance notice.
- The tax bases of bad debt requirement are based on the assumption of legal measures (liquidation, etc.)
- Abrupt changes are frequently on decrees, regulations, etc., driving business operators into a spot. They are at a loss how to respond properly.

- It is requested that GOC:
-- establishes a long lasting permanent legislative system and administrative policy, and
-- gives sufficient explanation before implementing changes and revisions.
- It is requested that GOC cleans up substantially bankrupt cases, and deliberates on measures to reduce the substantive tax burdens.
- It is requested that GOC gives notification upon implementation, and considers lessening of tax burdens.

- SFDA Accreditation (Regulation on the Supervision and Administration of Medical Devices)
- CCC Certification (Measures for the Administration of Medical Device Registration)

(2) Incompatible, Disorganised Interpretation of Legislation System Among Competent Authorities and their Personnel in Charge	- Inconsistency has arisen between the legal systems over the jurisdictional issues between taxation and customs. Consequently, grey zones exist (on VAT refund scheme, etc.) - Legislative wordings are not transparent, creating differences in interpretation among the Taxation/Customs/Foreign Exchange Bureaux or their officials, and differences in their interpretation may result in disputes after the business commencement. For example, the issue concerning interpretation of "Possibility for One-Day-Round-Trip under the Direct Transaction". - In many cases, if the person in charge is different, his judgement differs from his predecessor. Likewise, over the same phenomenon, if region is different, a different judgement results. It takes much time and labour to confirm and to avoid running risks. (For example, regional gaps on interpretation of tax refund in case of shipment from Export Process Zone, Interpretative differences in tax payment between the persons in charge of taxation.) - On legal issues such as tax laws, against practical questions received from the person in charge of private entities, the competent authority at best gives its response verbally so that any change in personnel including the superior can cause problems. - Amendments in regulations if made can result in differences among regions. It can also vary among the departments of competent authorities. - Occasional arbitrariness or disunity in legislative interpretation by persons in charge affects stability in business. - Interpretation remains unstable by each competent authority on legislative provision/tax law. Interpretation varies by the person in charge at the window, giving arbitrary impression at times. The person in charge sticks to verbal response, never in writing.	- It is requested that GOC streamlines the legislative provisions to avoid inter-departmental or officials' interpretation of the legislative provisions. - It is requested that GOC takes steps to overhaul the legislation to avoid differences in legislative interpretation among departments and persons in charge. - It is requested that GOC takes steps to overhaul the laws to avoid interpretative differences from arising among departments and persons in charge. - It is requested that GOC takes step to overhaul the legislation to avoid differences in interpretation among departments and persons in charge. - It is requested that GOC ensures uniformity in legislative interpretation throughout the entire administrative organisations. - It is requested that GOC eliminates regional or personal differences and harmonises implementation of legislative provisions/tax law.
	(Action) - At the Transitional Review Mechanism (TRM) forum last year, GOC explained: GOC restricts manufacture and sales of game machines as a measure 'necessary to protect public morals or to maintain public order' under Article XIV of WTO GATS. - General Administration of Press and Publication (GAPP) empowered for advance examination of online publications and examination and approval of imported online games promulgated on 28 September 2009 "Notice of the General Administration of Press and Publication, the National Copyright Administration and the Office of the National Work Group for "Combating Pornography and Illegal Publications" on Implementing the Provisions of the State Council on "Three Determinations" and the Relevant Explanations of the State Commission Office for Public Sector Reform and Further Strengthening the Administration of the Pre-approval of Online Games and Examination and Approval of Imported Online Games" (Xin Chu Lian [2009] No. 13).

(3) Regional Gaps and Disunity in the Legislative Implementation

- Interpretation differs between local provinces such as Dongbei Province and Shanghai Region on employment of tariff, external remittance, and capital investment. A member firm experiences a hard time in grasping information on its business operation.
- Example): Upon effecting the change from business tax to value added tax, it is provided into law that tax exemption applies to enterprises in consulting service with 100% sales made in overseas. However, while tax exemption applies in certain regions, another region holds it is taxable and demands retroactive tax payment.

- It is requested that GOC standardises interpretation of laws and regulations.
- It is requested that GOC ensures transparency in administering the taxation system.

- Chinese Laws and Regulations

(4) Shortage of the Transitional Period For New Law Enforcement

- While 6-months transitional period is a norm for a compulsory legislation in PRC at minimum, Implementing rules for energy efficiency labels (printer/facsimile)(IREEL), promulgated on 14 September 2011 and enforced since 1 December 2011, requires IREEL printed on the designated design label with proper individual information for each product, in total disregard to the preparation period legally granted to the manufacturers.

- It is requested that GOC:
-- secures ample preparation period in promulgating new legislation, and
-- disseminates advance information on the legislative progress (current status, schedule, etc.).

- Implementing Rules for Energy Efficiency Labels (Printer/Facsimile)

(5) Inadequate Implementing Legislative Provisions / Delays in Implementation

- In numerous cases, after the law enforcement, it takes a longtime for promulgation of its detailed implementing regulation. Enterprises are unable to make practical preparation for responsive measures against the new legislation.
- After enforcement of the Law in the superior position, announcement lags behind on its measures for the Administration, attached list of restricted materials, guidelines, etc. It makes it difficult for all to make requisite preparation for compliance, etc.
- There still remains a number of cases of which public announcements for detailed rules for implementation in the field of taxation and foreign exchange control are made right before their enforcement

- It is requested that GOC promptly gets the implementing detailed regulations promulgated following the law promulgation.
- It is requested that GOC takes steps to ensure that the Law is promulgated after completion of its subordinate measures for the Administration, Guidelines, etc. (namely, no enforcement, pending completion of thorough preparation.)
- It is requested that GOC takes step to:
-- prepare detailed rules before implementation, and
-- takes systematic approach for implementation.

- Social Insurance Law
- Notice of the General Office of the Ministry of Commerce on the Relevant Issues concerning the Examination, Approval and Administration of Projects of Foreign Investment in Internet and Vending Machine Sales MOF[2010]No. 272
- Regulation on the Safety Management of Hazardous Chemicals
- Measures for the Administration of Registration of Hazardous Chemicals

(6) Delays in Preparation of Internet Related Legislation

- Preparation of internet related legislation has delayed so that the legislative control remains weak against slander upon enterprises or leakage of enterprises' internal information.

(7) Inadequate Personal Information Protection Law

- From time to time, it is difficult to get removal of personal addresses or an abusive attack on a person's character or good name on the internet by requesting the removal to service providers. Reactions could be quite frightening to steps taken on labour disputes, reprimanded employees, etc.

- It is requested that GOC:
-- suspends disclosure of personal information on the webpage,
-- extends Public Security's assistance, as necessary.

(8) Poorly prepared Consultation Windows on Law Amendments

- Pursuant to new Tourism Law (enforced on 1 October 2013), a Member Firm's subsidiary (MFS) incorporated in Shanghai city made its first business under the overseas trip licence of firm A (its trading partner) in accordance with the scheme, whereby MFS acts as consignee of Firm A's consultation service business. The Competent authority pointed out: "It is a scheme susceptible of being questioned that it amounts to name-lending." There was no Window open in Japan for consulting this law amendment.

- It is requested that GOC opens a window in Japan that provides legal consultation as soon as possible.

- New Tourism Law (Date issued: 04-25-2013)

(9) Abrupt Change in Schedule for National Holidays just before the Holiday begins

- State Council announces annual holidays during the affixed period, provided, however, that from time to time (with a short notice of less than a month) State Council changes the schedule, disrupting the production activity and business schedule.

- It is requested that state council sticks to the annual holidays once affixed.

(10) Nebulous Subsidy Policy on High-Efficiency Products

- While no conclusion has been reached after the long time study under the top runner scheme to promote development of energy saving products, it is difficult for enterprises to nail down the production policy. They must face the risk of wasting production resources by abrupt change.

- It is requested that GOC expedites its policy decision on aiding the development of energy saving, high efficiency products.

- Legislation relative to aiding High Efficiency Products Development

(11) Laws, Regulations, Notices Diverged from Reality

- Many laws and regulations are impossible to be handled in practice.
(1) On overtime work: Article 41, in part, reads: "The work hours to be prolonged, in general, shall be no longer than one hour a day, or no more than three hours a day if such prolonging is called for due to special reasons and under the condition that the physical health of labourers is guaranteed. The work time to be prolonged shall not exceed, however, 36 hours a month." This provision is hardly observed. It does not reflect reality.
(2) Rules on Visa: The New Rule on Visa enforced since January 2015 has not been observed at all by either the local authority in PRC or China embassy in Japan. Both take the position that the old rule prevails even after January 2015, which has given rise to much confusion.

- It is requested that GOC:
(1) amends the law into an executable legislation, and
(2) promulgates executable notification and ensures its thorough execution.

- Labour Law, Article 41
- Notice (No. 78 [2014]) of MOHRSS, MOF, MOPS, MOC on Issuing the Relevant Handling Procedures for a Foreign National's Entry into China to Complete a Short-Term Work Assignment (for Trial Implementation) of the Ministry of Human Resources and Social Security

(12) Barely Developed Pharmaceutical Affairs Law/Related Schemes/ Regulations

- Legislative system and mutual authentication scheme relative to Pharmaceutical Affairs Law (PAL) are yet to be overhauled. It takes much time and cost to obtain the import licence for overseas products.

- In light of the fact that overhaul on PAL has been introduced in recent years, especially in Asia, it is requested that GOC overhauls its own law, and makes possible mutual authentication of PAL with the Japanese PAL.

- Pharmaceutical Affairs Law

(13) Halting Issuance of Designer Qualification to Foreign Engineers

- Previously, qualification as "project manager" was necessary to become project manager, allowing foreign engineers to manage project by acquisition of "foreigner's project manager qualifications". However, since 2008, it has been decided that only designer may act as project manager. With this change, it was decided not to issue first project manager qualification certificate, closing the door to foreign engineers' becoming designer. The change affects not only execution of individual projects, but the total business management as well. Constructors' business license includes the cap on the number of designers per project. Inability to include foreign engineers with equal qualifications for ability and experience presents problems on business management.

- It is requested that GOC grants opportunity to file application upon foreigners with equivalent designer qualification as designer qualification.

- Notice Concerning Announcement of List of Names (JianShiZiHan [2006]) No.89

(14) Abrupt implementation of Cap upon Annual Increase in Car Ownership

- On 29 December 2014, Shenzhen city abruptly put a cap on the number of annual car ownership. It is possible that a handful of affluent classes monopolize car ownership so that cost of car reservation, etc. may jump up.

- It is requested that Shenzhen Municipal Authority repeals the cap on car ownership, as its enforcement is extremely abrupt.

- Legislative Affairs Office of the Guandong Provincial People's Government

<<BACK