China’s cybersecurity authority has officially adopted a set of measures that clarify the “standard contract” procedure for companies to transfer personal information overseas as required under the Personal Information Protection Law. These measures will greatly facilitate cross-border data transfer for foreign companies and multinationals handling small amounts of data. We explain the contract requirements for China data transfer. 

On February 22, China’s top cybersecurity department, the Cyberspace Administration of China (CAC), released the final version of the measures stipulating the requirements for using a “standard contract” to conduct cross-border data transfer (CBDT). The Standard Contract Measures will come into effect on June 1, 2023. 

The new measures, titled the Standard Contract Measures for the Export of Personal Information (“Standard Contract Measures”) clarify how companies can transfer personal information (PI) outside of China by signing a “Standard Contract” with the overseas recipient of the data – a much simpler procedure that does not require an external audit. The Standard Contract Measures were released in draft form in June 2022 and have been further revised and updated upon feedback from the public. 

Under China’s Personal Information Protection Law (PIPL), which came into effect on November 1, 2021, companies are required to undergo certain procedures in order to transfer certain types of data and certain volumes of PI outside of China. The Standard Contract is one of a few different PIPL-compliant mechanisms for CBDT.  

The Standard Contract Measures are the final piece in the puzzle, explaining in detail which companies are eligible for this mechanism, the requirements for additional procedures – such as self-assessments, and the requisite contents of the contract itself. 

This article is part of our series on the different methods for legally exporting data out of China. Reference our ongoing coverage via the below articles: 

The three sets of data export security measures released in late 2021 and 2022 concern themselves with clarifying Article 38 of the PIPL, which stipulates that companies must undergo a series of requirements in order to transfer data overseas.  

Specifically, companies must meet one of the following criteria in order to transfer PI over a certain scale overseas:  

Article 38 also states that companies must adopt necessary measures to guarantee that the overseas recipient of the PI also complies with the requirements and regulations for processing and protecting PI stipulated in the PIPL.

“PI” is defined very broadly in the PIPL and is described as “various kinds of information related to identified or identifiable natural persons recorded by electronic or other means, excluding the information processed anonymously”. 

This means PI can include any data points or information that can be used to identify an individual, such as names, phone numbers, and IP addresses. Separately, the PIPL also defines “sensitive” PI, which is subject to stricter protection requirements. Sensitive PI includes (but is not limited to):  

The definition of sensitive PI is further expounded upon in the Personal information security specification [GB/T 35273-2020].

However, it does not include data that has been anonymized or abstract data that doesn’t contain any specific PI on individuals, such as aggregated information. Meanwhile, the “processing” of PI is defined as “the collection, storage, use, processing, transmission, provision, publication, and erasure of PI”.

Note that if overseas employees remotely access and process the PI of Chinese users stored in China, then it is also considered cross-border processing and is subject to the same requirements as if the company was transferring the PI to overseas facilities.  

The Security Assessment Measures and Technical Specifications released in October 2021 and April 2022 clarify requirements for the first two clauses of Article 38 (clauses (1) and (2)), respectively. The new Standard Contract Measures, meanwhile, concern the third clause (Clause (3)), thus almost completing the implementation guidelines for CBDT requirements stipulated in the PIPL. 

The Standard Contract is arguably the simplest route to receiving approval to conduct CBDT, as it does not require an audit by either the CAC or an accredited third-party agency. However, companies going this route will be required to carry out a Personal Information Protection Impact Assessment (PIPIA), as we will see below. 

Due to the simplified procedure, the Standard Contract only applies to relatively small data operators and companies that don’t handle data that is deemed to be of concern to national security and interests.  

Companies that meet all of the following criteria are eligible to use the Standard Contract:  

The final version of the measures has also added a clause stating that PI processors cannot use means such as splitting up the PI that ought to undergo a security review into smaller batches in order to be eligible for the Standard Contract procedure. Under the PIPL, PI operators that exceed the above thresholds for data volume or handle sensitive PI are required to submit to a security review by the CAC before they can transfer it overseas. 

Before transferring PI overseas using the Standard Contract method, companies must conduct a PIPIA. According to the Standard Contract Measures, the PIPIA must assess the following matters:  

The Standard Contract that is signed with the overseas recipient must strictly adhere to the template that has been provided along with the Standard Contract Measures. However, the CAC may sometimes adjust this template slightly according to the actual situation. The full template can be found along with the Standard Contract Measures on the CAC website. 

The PI processors can agree on other terms with overseas recipients, but these cannot conflict with the requirements of the Standard Contract template. The export of PI can only be carried out after the Standard Contract takes effect. 

The information that is required to be included in the Standard Contract per the CAC template includes (but is not limited to): 

The Standard Contract template contains nine articles in total and includes clauses on matters such as the obligations of the PI processor and the overseas recipient, the impact that PI protection policies and regulations in the country or region where the overseas recipient is located may have on the fulfillment of the contract, and the rights and interests of the PI subjects. 

Within 10 days of the contract taking effect, the PI processor must file the Standard Contract and the PIPIA report with the local provincial-level cybersecurity office. The PI processor can begin CBDT activities after the contract takes effect. 

In certain circumstances, the PI processor may have to redo the PIPIA, re-sign and re-file the Standard Contract, and complete other relevant filing procedures before the contract has expired. These circumstances are:  

Violations of the Standard Contract Measures will be punishable in accordance with the PIPL and other relevant regulations. 

The Standard Contract Measures provide a much clearer picture for China-based companies on how to handle CBDT activities, which has been one of the major concerns for foreign investors and MNCs. The contract template is also especially helpful as it clears any doubt surrounding the information that each party must provide and the obligations that they are liable to. 

Current limitations to the Standard Contract Measures mostly stem from the lack of clear definitions of various terms introduced in other legislation and regulations.

For instance, the definition of a CIIO is still somewhat unclear. CIIOs are subject to significantly stricter data and cybersecurity requirements and a higher level of government oversight.

In the Regulations on the Security and Protection of Critical Information Infrastructure released in August 2021, the scope of CIIOs includes industries such as energy, transport, water, and national defense, among others. But the regulations also stipulate that they could include “any other important network facilities or information systems that may seriously harm national security, the national economy and people’s livelihoods, or public interest in the event of incapacitation, damage, or data leaks.” 

For companies in some sectors, the definition is clear-cut. For others, less so, as the “any other” category could be interpreted to include major online service companies, such as Tencent’s WeChat or ride-hailing platform Didi. However, in many of these cases, these companies would not be eligible for the Standard Contract as their scope of operations likely exceeds the PI quantity limits stipulated in the Standard Contract Measures. 

Regardless of the potential outliers, the Standard Contract Measures more than anything signal to companies that they must make serious considerations when evaluating compliance risks and actions to mitigate these risks.

Businesses that are planning on engaging in the overseas transfer of PI are advised to begin assessing the scope of PI that they are handling to understand whether they are eligible to use the Standard Contract method to transfer PI overseas before the measures come into effect. In addition, it is important for companies to review their current PI protection and risk assessment mechanisms to ensure that all processes are compliant with the PIPL and the Standard Contract Measures, as well as any other relevant regulations.

This article was originally published on July 4, 2022, and last updated on March 3, 2023.

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