China Stresses for Data Exit Security Evaluation of Firms Seeking to Trade User Data

On Friday, October 29th, 2021, the Cyberspace Administration of China (CAC) requested public comments on Data Exit Security Evaluation (Draft Measures).

The Draft Measures stress that data transfer firms must comply with China's Personal Information Protection Law, commonly referred to as PIPL, before sending user-related data outside China. The Draft Measures aim to expedite efforts on thwarting data security risks.

The Draft Measures concern companies with more than 1 million users in China to do an extensive security review before exporting Chinese individuals' user data to foreign entities. The aim is to regulate data exit activities and have standard operating procedures for companies seeking data exit under the PIPL, Data Security Law (DSL), and Cybersecurity Law (CSL).

Major Requirements Under the Draft Measures:

The Draft Measures require companies transferring data outside of China that meet one of the following circumstances must declare the Data Exit Security Assessment of the data to the National Network Information Department through the provincial CAC:

• Personal information and important data collected and generated by operators of critical information infrastructure;
• Providing the personal information of more than 100,000 people or sensitive personal information of more than 10,000 people outside of China;
• Outbound data contains essential data;
• Personal Information Processors who have processed the personal information of one million people provide personal data outside of China; or
• Other situations required by the CAC require Data Exit Security Assessment.

Organizations subject to a Data Exit Security Assessment would first need to conduct a Data Exit Risk Self Assessment. The details of this assessment are mentioned under Article 4 of the Draft Measures.

Organizations would also be required to submit the following materials for the Data Exit Security Assessment:

1. Declaration;
2. Data Exit Risk Self-Assessment report;
3. Contracts or other legally binding documents drawn up by the data processor and the overseas recipient;
4. Other materials required for security assessment.

These Draft Measures also require that companies that have already sent abroad, or intend to send overseas, the personal information of more than 100,000 users or "sensitive" personal information belonging to 10,000 users would also be bound by the requirement.

Please note that a successful security review would have a two-year validity period under these Draft Measures, but factors such as "changes in the country's legal environment or region where the overseas receiver is located" could prompt a new review.

According to Zuo Xiaodong, vice president of the China Information Security Research Institute, "the Draft Measures are a concrete implementation of data going abroad among three pillar-like acts in China. These Draft Measures are not only for data security or cybersecurity but also an indispensable step to ensure the safe development of cross-border business."

As Beijing reinforces its control on Chinese companies and the vast troves of data they control, it's imperative for companies operating in China to comply with China's Data Protection Laws and Cross-Border Data Transfers.

Failure to comply with China's broad laws regarding privacy, companies can and have faced grave consequences. China has recently passed PIPL (effective from November 1st, 2021). The law aims to protect the rights, interests and personal information processing activities of users. With PIPL enforced, companies should immediately strategise efforts and construct ways to comply with these Draft Measures requirements. Failure to comply could lead to hefty fines from the Chinese authorities.

You can read the Draft Measures available in Chinese and convert them to English for additional information and a detailed understanding of the cross border data transfers under PIPL, DSL and CSL. The Chinese regulator welcomes public comments to the proposed proceedings until November 28th, 2021.

With global data privacy laws such as the GDPR and CCPA already proving to be an increasing challenge for businesses, companies must stay ahead and refer to relevant resources for helpful information regarding security assessments, privacy laws etc.

Resources

Here's What 'China's GDPR' Means For International Businesses

10 major changes in China's finalized PIPL

What is China's Data Security Law?

Overview of Personal Information Protection Law

Compliance Checklist for China's CSL

The Ultimate Guide to China's Data Protection Laws

Employee Personal Data Protection in China

Compliance Checklist for China's PIPL

Compliance Checklist for China's Data Security Law (DSL)

How China’s PIPL Compares to EU GDPR

China’s Personal Information Protection Law (PIPL)