USCBC member companies,
Following the release of the draft implementing regulations for the Foreign Investment Law (FIL) by the Ministry of Justice on November 1, the Chinese government has released more documents further clarifying and implementing two components of the FIL. Last Friday, the Ministry of Commerce (MOFCOM) released two draft measures on the information reporting system for the FIL for public comment.
According to the draft measures, MOFCOM will be responsible for coordinating and implementing the information reporting system. The new mechanisms for the reporting system through which foreign companies must submit their investment information will be linked to China’s corporate social credit system (SCS).
USCBC is considering submitting comments on the draft measures for the information reporting system and would like to receive input from our member companies. If you are interested in submitting comments to us, please send them to Pearson Goodman and Angela Deng by November 20, 2019. The deadline for submitting comments to MOFCOM is December 2, 2019.
Key takeaways from the implementing measures on the information reporting system:
- Punishment system linked to the corporate SCS: MOFCOM has the authority to confirm information via onsite checks or request other paperwork from the company directly or from other government agencies. Companies will be held liable for submitting false or incomplete information to MOFCOM and can face fines ranging from RMB 100,000 to 500,000 if they do not correct the discrepancies in the information they submitted within 15 days. Company behavior that violates the draft measures will be recorded in the credit information system. Under the existing corporate SCS, the State Administration of Market Regulation (SAMR) already maintains a blacklist, called the List of “Irregular Businesses,” for companies that submit inaccurate or incomplete information on their investment.
- Information sharing across departments linked to the corporate SCS: MOFCOM will establish a foreign investment information sharing mechanism primarily to identify the information that foreign companies do not need to resubmit. In relation to the SCS, MOFCOM will also establish a Filing System of Foreign Investment Honesty Records, and dishonest records submitted by companies will be shared with SAMR, the General Administration of Customs (GAC), the State Administration of Foreign Exchange (SAFE), and the State Taxation Administration (SAT). Local governments can use these records when deciding to grant preferential treatment in areas such as tax, land, and finance. Dishonest records can be removed from the filing system if the company keeps a clean record for one year.
- Clarity on the scope, content, and authority of the information reporting system: Under the information reporting system, companies must submit the initial report, report of changes, de-registration report, and annual report to the Online Enterprise Registration System and the National Enterprise Credit Information Publicity System. These are not new forms, but rather, the same reports that companies have been filing with SAMR for some time.
- Further details on resubmitting information: Registration information and information regarding the investment of foreign-invested enterprises (FIEs) in Mainland China will be shared between departments, and no firms will be required to resubmit this information to multiple departments. It appears that all other reports and information will require multiple submissions.
Related to the draft measures, SAMR released a document last week that implements Article 5 of the FIL detailing the registration system and procedures for FIEs as well as the procedures they must follow when changing their organizational forms or structures. While both are significant, it appears that the MOFCOM documents concerning the information reporting system are more immediately relevant to USCBC members, and we are prioritizing it in our advocacy efforts.