“Forewarned Is Forearmed” - The Rise of Chinese Data-Flow Restrictions

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Manufacturers with operations, employees, and/or customers in China must be aware of a long list of China-specific data-flow and content restrictions. Data-flow restrictions in particular affect manufacturers employing or launching mobile apps and other IT initiatives, both internal and external. Manufacturers must be very sensitive to China’s rules and guidelines restricting data flow, as these can affect plans for data storage, transmission and even analysis.

American industry associations have called upon China to openly discuss changes to its data-flow rules. These associations argue China’s rules are “overly broad, opaque, [and a] discriminatory approach to cybersecurity policy.” According to the associations, the Chinese rules may, among other things, require companies to divulge sensitive intellectual property and restrict cross-border flows of commercial data. Chinese entrepreneurs have reportedly marketed Chinese-developed replacements for foreign technology, which validates U.S. industry concerns. Continue reading this entry

China Proposes New Restriction of Hazardous Substance (“RoHS”) Requirements for Electronics Manufacturers

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Do you manufacture electrical and electronic products, parts or components?  Do you manage manufacturing design for such products? Do you oversee Chinese suppliers manufacturing such products? If so, you need to follow Restriction of Hazardous Substance (“RoHS”) developments closely for possible future changes to product content restrictions in China.

Earlier this week, on May 18, 2015, China’s Ministry of Industry and Information Technology (“MIIT”) released a draft, public-comment version of revised “Management Methods for the Restriction of the Use of Hazardous Substances in Electrical and Electronic Products.” Access our full English reference translation of this draft here. The public-comment period for the draft ends June 17, 2015.

The draft, and the existing regulation the draft proposes to replace, are often referred to as “China RoHS” regulations, with the existing regulation commonly called “China RoHS 1” and the draft regulation referred to as “China RoHS 2.” The “RoHS” reference arises from similarities to and apparent influences of the European Community RoHS Directive.

For manufacturers unfamiliar with China RoHS, this regulatory program establishes the following key requirements:

  • Hazardous-substance content limits for lead, mercury, cadmium, and hexavalent chromium compounds, polybrominated biphenyls and polybrominated diphenyl ethers and
  • Labeling and information-disclosure requirements involving product, part, component and material hazardous substance content and product “environmental protection use periods.”

The hazardous-substance content limits have not been implemented under China RoHS 1. However, the labeling and information-disclosure requirements have been in place for specific “electronic information products” under this program since March 2007.

For all manufacturers, including those that have been following China RoHS developments, the draft China RoHS 2 regulation released on May 18 would effectuate a number of important changes to the program, such as the following:

  • Expanding/adjusting the scope of applicable labeling and information-disclosure requirements, mentioned above, focusing on “electrical and electronic products,” which are defined as:
    • “Devices and accessory products with rated working electrical voltages of no more than 1500 volts direct current and 1000 volts alternating current which function by means of current or electromagnetic fields, and generate, transmit and measure such currents and electromagnetic fields”;
  • Excluding power generation, transmission and distribution equipment from the definition of “electrical and electronic products”;
  • Applying hazardous-substance content limits to electrical and electronic products included in a “Compliance Management Catalogue” (i.e., a to-be-developed list of electronic and electrical products, to be issued in successive batches over the duration of the regulatory program);
  • Modifying the “compulsory certification” approach reflected in RoHS 1 for a potentially more flexible “conformity assessment system” that MIIT recommends to the Certification and Accreditation Administration (“CNCA”) and that CNCA and MIIT issue and implement, with input from other agencies;
  • Re-introducing packaging material standard conformity requirements (that had been removed in earlier drafts); and
  • Removing the “products manufactured for export” exemption included in China RoHS 1.

The labeling and information-disclosure requirements under China RoHS 2, specified in a separate labeling standard, (SJ/T 11364-2014) (the English reference translation for which is available here), would become effective at the same time as China RoHS 2, per earlier MIIT guidance. The hazardous-substance content limits would not become effective under China RoHS 2 until a specified time following the promulgation of the “Compliance Management Catalogue.”

It remains to be seen whether all of the language in the May 18 draft will end up in the final RoHS 2 regulation when promulgated later this year. As anticipated in our earlier post “Trends in Chinese Regulation for Manufacturers to Watch in 2015;” however, the release of the draft RoHS 2 regulation that underscores product content restrictions are a major area for manufacturers of electrical and electronic products to continue to watch.

E-Commerce’s Hidden Legal Issues

Manage Your Risks Along the Supply Chain While Obtaining All You Want

Less than 25 years ago, e-commerce was something not far removed from the stuff of science fiction. Today, it annually accounts for trillions of dollars in global sales. But, you should know, e-commerce presents legal issues that should be addressed before jumping headlong into the internet marketplace.

If you aren’t already selling your products to end users online, your dealers and distributors probably are. And you probably will be before long. When entering the e-commerce realm, you may be focused on some of the obvious logistical issues. Yet the legal issues may present an even bigger impediment to doing it “your way,” especially if you have traditionally relied on distributors and/or dealers to market and sell your products to end users. Continue reading this entry

Making the FCPA “Reasonable”— Exceptions and Affirmative Defenses

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So, we have covered the Foreign Corrupt Practices Act’s (“FCPA”) scope, but the FCPA anti-bribery provisions also contain certain exceptions and affirmative defenses. These exceptions and affirmative defenses attempt to carve out legitimate payments to foreign officials, so the FCPA does not unreasonably hamper international business. Be wary, however, because prosecutors narrowly interpret these exceptions and affirmative defenses. Moreover, as most FCPA cases settle, the prosecutor’s perspective will ultimately drive the settlement negotiations and the prosecutor may have a different view of a company’s payments to the foreign officials.

As an important point, these “exceptions and affirmative defenses” are really affirmative defenses. Simply put, if the government accuses a company or individual with violating the FCPA, the burden is on the defendant to prove one of the following exceptions or affirmative defenses apply. Continue reading this entry

Cybersecurity Workforce Measures Present Business Opportunities

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As part of the federal government’s efforts to address cybersecurity needs in our age of state-sponsored hacking and other high-profile data breaches, the Department of Homeland Security (DHS) will soon undertake a Congressionally-mandated review of cybersecurity resources. In just two months, the Secretary of DHS will be required to conduct the first assessment of the Department’s cybersecurity workforce and evaluate its readiness and capacity to meet the agency’s cybersecurity mission. The assessment of the DHS workforce necessary to defend and protect against ongoing cyber threats will be an important component of a DHS mission to develop a comprehensive cybersecurity strategy. Part of the assessment requires DHS first to identify cybersecurity workforce vacancies, and by the end of the year to devise a well-conceived strategy to recruit cybersecurity professionals. More granular information on the primary work functions of each workforce position by cybersecurity category and specialty area also will be provided. The development of the comprehensive strategy and resulting federal recruitment efforts present opportunities for cybersecurity vendors and individual professionals to address skills gaps in the current federal workforce. Continue reading this entry