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On 10 October 2018, the State Council issued a noticed on the reform of “Separation of Operation Permits and Business Licenses”, which pointed out that from 10 November 2018, the first batch of 106 administrative examination and approval items involved with enterprises around the country will be reformed respectively to one of the 4 ways in: 1) direct cancellation of approval; 2) record-keeping instead of approval; 3) implement informed commitment; or 4) optimization of market access services (see Annex 1 for the first batch items in detail of the “Separation of Operation Permits and Business Licenses” reformation).

Background

As early on 29 December 2015, the State Council replied to Shanghai on their overall plan on pilot implementation of the “Separation of Operation Permits and Business Licenses” reformation (State Letter (2015) No. 222). The State Council agreed to implement the pilot reformation in Shanghai Pudong New Area and the pilot period should last for 3 years from the date of approval, with the “Overall Plan for the pilot reformation of “Separation of Operation Permits and Business Licenses” in Shanghai” (hereinafter referred to as the “Overall Plan”) also agreed in principle. The “Overall Plan” selected 116 administrative licensing items for the pilot reformation. Ways of reformation includes: 1) direct cancellation of approval; 2) cancellation of approval, change to record-keeping; 3) simplification of approval, implementation of informed commitment system; 4) improving transparency and predictability of approval; and 5) strengthening the management of marketing access for specific activities involving public safety. Among these 116 items, the reformation of administrative approval for first import non-special use cosmetics was changed from “approval” to “record-keeping”. The pilot reformation will be ended on 28th December 2018.

On 24 May 2016, the State Council approved and issued the “Key points for promoting the reformation of simplifying policy and decentralizing power with optimization of services in 2016”, and mentioned that authorities would continue deepen the reformation on administrative approval. It was also mentioned that more than 50 items on administrative approval process by State Council departments and local authorities designated by central government should be cancelled, together with cancellation of a number of administrative approval services in State Council departments, and reduction of a number of production licenses and business licenses in the same year. All administrative approval process should achieve “zero overtime” in strict accordance with statutory time limit. On 28th September 2017, the State Council issued an opinion on promoting the pilot reformation of “Separation of Operation Permits and Business Licenses” to a larger scale, and mentioned to replicate the pilot policy in Shanghai Pudong New Area to 10 other free trade zones in Tianjin, Liaoning, Zhejiang, Fujian, Henan, Hubei, Guangdong, Chongqing, Sichuan and Shaanxi. Later on 12th March 2018, CFDA issued a notice on implementing the pilot record-keeping system for import non-special use cosmetics to a larger scale. The pilot period is from 12th March 2018 to 21st December 2018.

Key contents of State Letter (2018) No. 35 includes:

1. Explicit methods of reformation

Direct cancellation of approval process – market entity can carry out relevant business activities after obtaining business license
Cancellation of approval process, change to record-keeping – marketing entity can carry out relevant business activities after submitting materials, relevant authorities will not conduct approval afterwards
Simplification of approval process, implement informed commitment system – for certain items that approval cannot be cancelled provisionally, but unqualified behaviors can be rectified during on- and post-market surveillance
Improvement of measures and optimization of market access service – retain administrative approval for items of major public interests that relate to national security, public safety, financial security, ecological security and public health, and optimize market access services

2. Coordinating and promoting the reformation of “Separation of Operation Permits and Business Licenses” and “Combination of Multi-licenses”

Through the reformation of “Separation of Operation Permits and Business Licenses”, more market entities are able to operate when they have obtained the license. Efforts will be made on solving the problem of “allowed to access but not allowed to operate”. After the reformation of “Combination of Multi-licenses”, the information and items recorded on the business license are more abundant, the market entity can carry out general business activities with the business license. In principle, items related to information collection, record and publicity, and management for future inspection should be integrated onto the business license, and make it possible for enterprises to achieve a lot of marketing activities using “only one certificate and one barcode”.

3. Strengthening of on- and post- market surveillance

In order to practically implement the principle of “who approves, who supervises, who’s in charge, who supervises”, competent authority of different industries shall earnestly take supervision responsibility. The supervisions of “double random check, one platform publicity” should be promoted, and gradually achieve normalization of the “double random check” in cross-departmental spot check, establish a unified “blacklist” system, and impose restrictions on the untrustworthy entities in industry access. Explore supervision for new technologies, new industries, new models, new products and new formats in a tolerant and prudent way. Strengthen the awareness of the enterprise being the first responsible person in the market, establish and improve credit restore system, give better play to social supervision of professional service organizations, and guide social forces to participate in market order management.

4. Boosting the collecting and sharing of information

The goal is to achieve the sharing of entity’s basic information, related credit information, illegal and irregularity information, and business collaboration. To establish a national unified standard of enterprise legal person’s basic information resource base. The departments of administrative approval, and competent authorities of the industry shall record and publicize the information of record-keeping and post-approval items through the “Credit China” website and the National Enterprise Credit Information Publicity System under the name of the corresponding market entity.

CIRS Comments

1) China gradually expands the pilot reformation of “Separation of Operation Permits and Business Licenses” from Shanghai Pudong New Area, to across the country in 3 years’ time.

2) It indicates that market access for first import non-special use cosmetics will be transferred to local authorities and carry out record-keeping. More strength will be on the on- and post-market surveillance, and the responsible main body will be shifted to the enterprise itself.

3) The new management direction and system are able to facilitate rapid entry of emerging brands in the fast-moving consumer industry into China’s market. But the brand competition will be more and more tense.

Annex 1

First 106 items of the “Separation of Operation Permits and Business Licenses” reformation implemented nationwide

Direct cancellation of approval (2 items)

Item	Reformation
Qualification for agencies for private entry and exit (excluding overseas employment)	1. Amended relevant regulations on the “Decision from the State Council of items that administrative licensing must be obtained”. 2. Promote cross-departmental information sharing; eliminate key points of on- and post-market supervision after approval.
Business operation approval for international ship management (foreign investment)	1. Amended relevant regulations on the “International Shipping Regulations of the People’s Republic of China”. 2. Promote cross-departmental information sharing; strengthen on- and post- market supervision

Administrative approval changed to record-keeping (1 item)

Item	Reformation
Administrative approval for first import of non-special use cosmetics	1. Amended relevant regulations of the “Regulations concerning the hygiene supervision of cosmetics”. 2. Promote cross-departmental information sharing; strengthen on- and post- market supervision

Implement notification commitment system (19 items)

Examination and approval for film screening unit
Licensing for foreign investment cinema
Enterprise business activity approval for packaging and decoration printing and other printing matters (excluding trademarks, receipts, confidential printing)
Activity approval for operators of printing industry with packaging and decoration printing and other printing matters (excluding trademarks, receipts, confidential printing)
Approval for audiovisual production unit
Approval for electronic publication production unit
Approval for the change of name, business scope, merger or separation of audiovisual production unit, electronic publication production unit
Off-site record-keeping of drug advertising
Permission license for medical institution to use radioactive drugs (Class I and II)
Approval for the service of cleaning, collecting, transporting and disposing of urban household waste
License for security training
License for hotel and special industry
Business license for road transport station (field)
Hygiene license for public place
Qualification for production and assembling of prosthesis and orthosis (assistive devices)
Qualification approval for the People’s Air Defense engineering design below Grade B
Qualification approval of project supervision for Grade B for the People’s Air Defense
Qualification approval of project supervision for Grade C for the People’s Air Defense
License for products related to the production of food products
Qualification approval of project supervision for the People’s Air Defense below Grade B

Optimize market access services (84)

Business license for foreign investment travel agency
Business license for travel agency
Business license for domestic waterage transport
Port operation license
Business license for motor vehicle driving training
Business license for road passenger transport
Business license for road freight transport
Approval for Chinese-foreign equity joint venture, Chinese-foreign cooperative operation brokerage agency
Approval for joint venture, cooperative and sole proprietorship brokerage agency for stage performance in the Mainland with investors from HK and Macao
Approval for joint venture or cooperative brokerage agency for stage performance in the Mainland with investors from Taiwan
Approval for business premise for providing internet access service in the Mainland by HK and Macao suppliers
Business license for Auction
Auction license for auction of enterprise operated historical relic
Approval for singing and dancing entertainment venue
Approval for game and entertainment venue
Port hygiene license
License for inspection and appraisal of import and export commodity
Approval for accounting firms and their subsidiaries
Approval for agency in accounting bookkeeping business
Approval for production of feed and feed additive
Approval for profitable medical institution (including HK, Macao and Taiwan-funded, excluding foreign-owned)
Hygiene license for production of disinfectant products (excluding manufacturers of disposable medical supplies)
Qualification license for mapping activity unit
License for gas business
License for high risk sport business
Qualification for grain purchase
License for security service
License for the wholesale of publication
Approval for Chinese-foreign joint venture and cooperative printing enterprise and foreign-owned packaging and decoration printing enterprise
Approval for the establishment and changing of financial guarantee institution
Approval for insurance company’s name, registration capital, place of business of the company or its branches, cancellation of the branch, division of the company or merger, revision of company’s rules, change of shareholders with capital contribution of more than 5% of the total capital of the ltd. liability company, or change of shareholders with more than 5% stock share of the ltd. liability company and the termination (dissolution, bankrupt) of the insurance company
Qualification approval of wholesale of petroleum oil product (initial review)
Qualification approval of retail of petroleum oil product
Approval for establishment, change of business scope or merger, separation of film distributing unit
Approval for establishment of operating internet culture unit
License for television and video on demand service (Type B)
License for cosmetic production
License for food (including food additives) production (excluding health food, formulas for special medical use, infant formula)
License for food (health food, formula for special medical use, infant formula)
License for food sales, catering service (combined into food business license)
Approval for internet drug information service
Review of medical device advertising
Approval for drug production
Approval for pharmaceutical business (wholesale, retail chain headquarters)
Registration of Class II medical device product
License for production of Class II and III medical devices
Business approval for pharmaceutical retail
Business license for Class III medical devices
License for use of radioactive drugs by medical institution (Class III and IV)
Approval for production and marketing of new drug
License for production of special equipment
Approval for special equipment inspection and testing
Approval for production and operation of crop seeds and edible fungi
License for blasting operation unit
Approval for manufacturing, selling crossbow or operating crossbow shooting gallery
Approval for establishment and change of direct selling company and its branches
License for wholesale of fireworks and firecrackers
License for retail fireworks and firecrackers
Business license for hazardous chemicals
License for safety production of hazardous chemicals
License for safety use of hazardous chemicals
Review of safety conditions for new construction, reconstruction, production expansion and storage (including using long distance pipelines to transport hazardous chemicals) of hazardous chemicals
Business license of road transportation of dangerous goods
Approval of setting of outdoor advertising facility
License for sales of civil explosive material
License for production of civil explosive material
Registration of medical institution
Registration of physician
Qualification of foreign related investigation agency
Approval for business operation of international marine transportation and marine auxiliary business
License for marine transport business between the Mainland and Taiwan
License for marine transport business between HK and Macao
Re-registration of domestic drug
Approval of contract drug production
Production license for major industrial product
Approval for establishment of business activity for packaging and decoration printing and other printing matters (only for trademarks, receipts, confidential printing)
Printing operator merge with other printing operators (excluding publication printing company)
Approval of setting up new printing operators due to merger or separation (excluding publication printing company)
Activity approval for printing operators with packaging and decoration printing and other printing matters (only for trademarks, receipts, confidential printing)
License for animal epidemic prevention
Approval for construction of port facilities using non-deep water shoreline (including temporary approval for port shoreline, approval for changing of user for port shoreline, functions and scope of use)
Registration of import drug
Registration of import medicinal material
Business license for small catering, small food shop, small food workshops

Source:

http://www.gov.cn/zhengce/content/2018-10/10/content_5329182.htm

http://www.gov.cn/zhengce/content/2017-09/28/content_5228228.htm

http://www.gov.cn/zhengce/content/2016-05/24/content_5076241.htm

http://www.gov.cn/zhengce/content/2015-12/29/content_10519.htm

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The Reform on “Separation of Operation Permits and Business Licenses” is Implementing Nationwide