Com­pli­ance with over­seas mar­kets

China's Foreign Trade (English) - - Law & Case - By zhang li

As Chi­nese en­ter­prises are in­vest­ing more into over­seas mar­kets, com­pli­ance with those mar­kets be­comes a great con­cern. It is im­por­tant for Chi­nese com­pa­nies to fol­low laws and reg­u­la­tions both at home and in for­eign coun­tries where they run busi­ness dur­ing the process of glob­al­iza­tion, and this has grad­u­ally be­come a fo­cus to those com­pa­nies.

On June 8, Wang Zhile, the vice chair­man of CCPIT Na­tional En­ter­prise Com­pli­ance Com­mit­tee and the direc­tor of Bei­jing New-cen­tury Academy on Transna­tional Cor­po­ra­tions pointed out at the Fort­nightly Busi­ness Com­pli­ance Fo­rum: on the In­ter­pre­ta­tion and Dis­cus­sion of GB/ T 357702017 Guide to Com­pli­ance Man­age­ment Sys­tems that Chi­nese en­ter­prises should con­sider how to be com­pli­ant and how to es­tab­lish an ef­fec­tive com­pli­ance man­age­ment sys­tem rather than won­der­ing they should be com­pli­ant or not.

It is said that stan­dards put for­ward in this guide drafted by China Na­tional In­sti­tute of Stan­dard­iza­tion will be of­fi­cially rat­i­fied and re­leased by the Gen­eral Ad­min­is­tra­tion of Qual­ity Su­per­vi­sion, In­spec­tion and Quar­an­tine of PRC as well as Stan­dard­iza­tion Ad­min­is­tra­tion of China and will be im­ple­mented on 1 Au­gust 2018. This will not only re­duce the risks of non­com­pli­ance for var­i­ous or­ga­ni­za­tions, en­hance their sense of so­cial re­spon­si­bil­i­ties, re­al­ize sus­tain­able de­vel­op­ment, but also it plays a vi­tal role in shap­ing a fair mar­ket as well as pro­mot­ing the con­struc­tion of a law­gov­erned coun­try.

China com­pli­ance stan­dards in line with in­ter­na­tional ones

Ac­cord­ing to the China Na­tional In­sti­tute of Stan­dard­iza­tion, the stan­dards, based on the prin­ci­ples of good gov­er­nance, pro­por­tion­al­ity, trans­parency and sus­tain­abil­ity, could pro­vide guid­ance and sug­ges­tions on all as­pects of com­pli­ance man­age­ment sys­tems and on how to es­tab­lish, im­ple­ment, eval­u­ate and im­prove those sys­tems.

Wang Yiyi, the direc­tor of the In­sti­tute of Stan­dard­iza­tion The­ory and Strat­egy af­fil­i­ated to China Na­tional In­sti­tute of Stan­dard­iza­tion said, “Those com­ing stan­dards are tech­ni­cally the same when com­pared to in­ter­na­tional ones. We in­tend to in­tro­duce the uni­ver­sally rec­og­nized sys­tem stan­dards to China and ex­plore how to in­no­vate based on what we have got. Those stan­dards are mainly con­cerned with the es­tab­lish­ment and im­prove­ment of our sys­tems and they stress a lot on con­tents in­clud­ing good gov­er­nance, reeval­u­a­tion of the com­pli­ance risks pe­ri­od­ic­ity.” Wang also pointed out, “com­pli­ance stan­dards are the new weapon to fight against the trade war and it en­sures a stan­dard­ized en­vi­ron­ment and brings cul­ture in­fil­tra­tion. We need to set our own rules and speak our voices out loud.”

Wang Zhile stated that the stan­dard would help Chi­nese com­pa­nies to set up and run the com­pli­ance man­age­ment sys­tem, as well as iden­tify, an­a­lyze and eval­u­ate com­pli­ance risks, pro­mote the man­age­ment pro­ce­dure and pro­vide guid­ance and sug­ges­tions on how to con­trol com­pli­ance risks. Once such a sys­tem is es­tab­lished in a busi­ness, it does not only en­hance com­pet­i­tive­ness, but also can re­shape the orig­i­nal man­age­ment sys­tem and its com­pli­ance cul­ture. To es­tab­lish a com­pli­ance man­age­ment sys­tem, we need an ap­pro­pri­ate method­ol­ogy and to en­sure that it can sus­tain test­ing and op­er­ate as soon as pos­si­ble, the whole process should be con­ducted un­der the guid­ance of widely ac­cepted sys­tems.

A lack of com­pli­ance stan­dards lead­ing to pas­sive per­for­mance in global competition

When doing the re­search for the

Guid­ance, China Na­tional In­sti­tute of Stan­dard­iza­tion found that in­ter­na­tional or­ga­ni­za­tions like the UN and quite a few de­vel­oped coun­tries have set reg­u­la­tions for strength­en­ing com­pli­ant oper­a­tion as eco­nomic glob­al­iza­tion deep­ens since 1970s. Or­ga­ni­za­tions are be­com­ing more con­cerned about com­pli­ance risks and have car­ried out a lot of re­search in this re­spect. Years of prac­tice has taught us that only by es­tab­lish­ing such a sys­tem can we suc­cess­fully con­trol and pre­vent risks and main­tain the rep­u­ta­tion of our brand. Early in the year of 2006, Aus­tralia has is­sued its na­tional stan­dards in a doc­u­ment called Com­pli­ance Pro­gram, and many world­known transna­tional cor­po­ra­tions like Siemens and Mi­crosoft fol­lowed suit.

Be­fore ISO/ PC 271 came into be­ing, ex­perts from China Na­tional Nor­mal­iza­tion in­sti­tute have no­ticed that since 2007 many in­dus­tries such as fi­nance, bond and in­sur­ance had car­ried out com­pli­ance man­age­ment un­der the global wave of strength­en­ing com­pli­ance man­age­ment. Many reg­u­la­tory doc­u­ments were re­leased such as Com­pli­ance Risk of In­sur­ance Cor­po­ra­tion, Trial Reg­u­la­tions of Com­pli­ance Man­age­ment of Se­cu­ri­ties Com­pany, and Ba­sic Stan­dard for En­ter­prise In­ter­nal Con­trol. Many Chi­nese transna­tional en­ter­prises avoided le­gal dis­putes over over­seas oper­a­tions and be­came very com­pet­i­tive in aglobal mar­ket while those who haven’t car­ried out com­pli­ance man­age­ment are banned from ac­cess to pro­grams spon­sored by the World Bank, thus stuck in a pas­sive sit­u­a­tion. There­fore, it can be con­cluded that it is nec­es­sary for China to set our own na­tional stan­dards on com­pli­ance man­age­ment.

Ac­cord­ing to Wang Yiyi, it is the worst not to es­tab­lish a com­pli­ance man­age­ment sys­tem or not to im­ple­ment the sys­tem. Even though such sys­tems can’t com­pletely erad­i­cate non-com­pli­ance, it works well to re­duce the prob­a­bil­ity of com­pli­ance risks. In many coun­tries and re­gions all over the world, many or­ga­ni­za­tions and or­ga­niz­ers will use this sys­tem as an ex­cuse to mit­i­gate or try to ex­empt their ad­min­is­tra­tive, pe­nal and civil re­spon­si­bil­i­ties and that could even be ac­cepted by ad­min­is­tra­tive, law en­force­ment or ju­di­cial or­gans. It has be­come a com­mon prac­tice for for­eign en­ti­ties to re­duce com­pli­ance risks by set­ting up, im­ple­ment­ing and main­tain­ing a com­pli­ance man­age­ment sys­tem.

Com­pli­ance bring­ing rep­u­ta­tion to busi­nesses

In re­cent years, in­ter­na­tional com­mu­nity and all gov­ern­ments are ded­i­cated to build­ing and main­tain­ing an open, trans­par­ent and fair so­cial en­vi­ron­ment. At the same time, China is com­pre­hen­sively ad­vanc­ing its law­based gov­er­nance, so in such con­text Chi­nese en­ter­prises both at home and abroad should be com­pli­ant when con­duct­ing busi­ness.

What does com­pli­ance mean? And what should we be com­pli­ant to? Wang Yiyi ex­plained that the word com­pli­ance mainly con­tains two meanings: firstly, it means that we must obey some manda­tory re­quire­ments such as those laws and reg­u­la­tions; sec­ondly, it means that we need to be com­pli­ant to in­dus­try stan­dards, core val­ues of dif­fer­ent or­ga­ni­za­tions, ethics and code of con­duct, poli­cies ap­pli­ca­ble at dif­fer­ent lev­els. Be­sides, be­hav­iors such as of­fer­ing or ac­cept­ing bribes as well as tak­ing kick­backs are against busi­ness ethics and pub­lic or­der and cus­tom; thus they will be re­strained by com­pli­ance man­age­ment sys­tem.

Nowa­days, com­pli­ance is not lim­ited to mean anti-bribery as it used to be, it is ap­plied as a more ab­so­lute term. Com­pli­ance cov­ers four ar­eas in­clud­ing sanc­tion, penalty, pol­i­tics and competition. Prob­lems oc­cur­ring in com­pli­ance man­age­ment are mainly re­lated to the eval­u­a­tion and iden­ti­fi­ca­tion of com­pli­ance risks: the eas­ier it is to reg­u­late, the tougher it is to do so; the more dif­fi­cult, the looser.

Chen Li­tong, the se­nior part­ner lawyer of Bei­jing Den­tons Law Firm said, “We can never go to ex­tremes when con­trol­ling busi­ness risks. Ef­fec­tive con­trol doesn’t mean erad­i­cat­ing risks, and we should take many as­pects such as eco­nomic oper­a­tion into con­sid­er­a­tion and be pre­pared for achiev­ing co­or­di­nated de­vel­op­ment in both com­pli­ance stan­dards and in­ner qual­ity stan­dards. Com­pli­ance has be­come a key fac­tor in bring­ing rep­u­ta­tion to busi­nesses.”

Wang Zhile be­lieved that for en­ter­prises to suc­ceed in the global mar­ket, they should have a good un­der­stand­ing of dif­fer­ent pol­i­tics, eco­nomic sit­u­a­tions, laws and cul­tures of dif­fer­ent coun­tries. And they should be clear about how to make fur­ther progress on the path to ac­com­plish com­pli­ance con­struc­tion. “Chi­nese en­ter­prises, es­pe­cially SOES, are fac­ing com­pletely new competition modes and rules when they are go­ing global. Only when they grasp and un­der­stand those modes and rules can our na­tional com­pa­nies re­al­ize leapfrog de­vel­op­ment and have new ex­pe­ri­ences about firm growth in de­vel­op­ing coun­tries,” said Wang.

He sug­gested en­ter­prises to pro­mote com­pli­ance con­struc­tion from the top level and the per­spec­tive of cor­po­rate cul­ture. All com­pli­ance de­part­ments should be in­de­pen­dent de­spite their po­si­tions in dif­fer­ent cor­po­ra­tions and the com­pli­ance depart­ment has the right to re­port to se­nior man­age­ment lev­els, es­pe­cially to the Board of Di­rec­tors or its af­fil­i­ated com­mit­tees. To en­sure the es­tab­lish­ment of the com­pli­ance man­age­ment sys­tem, it is vi­tal to en­force the im­ple­men­ta­tion of con­trol mea­sures. Be­sides, gov­ern­ments should help. In re­cent years, the United Na­tions Global Com­pact, the World Bank, the In­ter­na­tional Or­ga­ni­za­tion for Stan­dard­iza­tion and other in­ter­na­tional or­ga­ni­za­tions and the United States, Bri­tain and other de­vel­oped coun­tries are pro­mot­ing cor­po­rate in­tegrity and com­pli­ance oper­a­tion.

Nowa­days, com­pli­ance is not lim­ited to mean an­tib­ribery as it used to be, it is ap­plied as a more ab­so­lute term.

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