EDI (Electronic Data Interchange) – B21 Online data processing and transaction processing services

Chinese Name: 增值电信业务经营许可证-在线数据处理与交易处理业务

Summary

The B21 license is a license under the VATS (Value-Added Telecommunications Services) licensing scheme authorizing a business to operate an e-commerce platform, B2B data exchange platform, or a platform for networking hardware in China. It is administered to businesses for operation within the scope of a province, autonomous region, or centrally-administered municipality in one of two forms:

• “Value-added Telecommunications Business License” (for operation within a locality, such as a province or municipality)
• “Cross-locality Value-added Telecommunications Business License” (for operations not limited by locality)

Foreign enterprises will almost always need the cross-locality license so that they can operate across China.

Laws

The B21 license is defined in Announcement of the Ministry of Industry and Information Technology on Promulgating the Classification Catalogue of Telecommunication Services (2015) as follows:

“Online data processing and transaction processing services refer to the services of online data processing and transaction/affair processing provided for users through public communication networks or the Internet, by utilizing various kinds of data and affair/transaction processing application platforms that are connected to public communication networks or the Internet. The services of online data processing and transaction processing include transaction processing services, electronic data exchange services and network/electronic equipment data processing services.”

Who needs one?

The B21 license is required for websites/platforms providing users with online data processing and transaction processing services, such as:

• transaction processing platforms (e-commerce, second-hand trading, online food ordering, ticket bookings, etc, that handle 3rd party platforms)
  Note: Only e-commerce platforms that involve third-party sellers require a B21 License. Companies with a website selling their own products merely need an ICP License for their website operating in China.
  
• electronic data interchange platforms for exchange of business info (B2B EDI platforms)
• network/electronic equipment data processing platforms (machine to machine communication platforms)

Requirements to apply for a B21 License

To apply for a B21 license, your company must fulfill these requirements:

• A 100% Chinese-owned company can obtain a B21 license for any of the above-listed business scopes; or a foreign-funded telecommunications enterprise established in China, operating within a province, autonomous region, or centrally located municipality. (Note: The foreign capital can be up to 100% for operating e-commerce business, but cannot exceed 50% for operating other businesses that require the B21 license.)
• The business operator is a company established pursuant to the law;
• Have the requisite funding and staff for its business activities;
• Have the reputation or capability to provide long-term services for the users;
• The minimum registered capital of an operator operating within a province, an autonomous region or centrally-administered municipality shall be RMB1 million; the minimum registered capital of an operator operating nationwide or across provinces, autonomous regions or centrally-administered municipalities shall be RMB10 million;
• Have the premises, facilities and technical plans;
• The company and its key investors and key management personnel cannot be included in the list of dishonest telecommunications business operators; and
• any other criteria stipulated by the State.

Special requirements for foreign-funded enterprises

As already stated above, according to the Special Administrative Measures (Negative List) for Foreign Investment Access (Edition 2020), since June 2020 there is no cap on foreign-owned percentage of investment for e-commerce services.

Each province, municipality, and enterprise zone has their own requirements for foreign vested enterprises. Here is an example from the Shanghai Free Trade Zone:

• The legal representative of the foreign invested enterprise must be a Chinese national.
• The business scope in the business registration must contain “operating in telecommunications business” or other similar descriptions.
• A physical server is required for EDI license application and shall be located at the same place where the company is located. For example, if the EDI application is submitted to authorities in Shanghai Free Trade Zone, the server should be placed in Shanghai Free Trade Zone.
• The social security payment records of at least three Chinese employees need to be submitted (at least for 1 month, and in special cases, it may be necessary to submit three consecutive months’ social security payment records).
• The newly established legal entity needs to have around 10 Chinese employees and specific roles/positions are necessary.
• The foreign investor or its subsidiary need to submit proof of their e-commerce experience (such as e-commerce website, App, screenshot, approval document, business contract, business transaction mode description, etc.).
• A cyber security department and supporting internal regulations are necessary.

What happens in actual practice, including fines/punishment, varies by region. Businesses registered in Hong Kong, Macau, or free-trade zones may enjoy additional advantages.

How do I apply for a B21 License?

File online with the local MIIT authorities. In the Shanghai Free Trade Zone, file with the Shanghai Communications Administration (SCA). All document and filing requirements vary by region. See Administrative Measures on Telecommunications Business Permits for a list of basic filing materials required.

Receiving the license generally takes three months or less.

Fines and Penalties

Operating these services without the B21 License may result in a fine of up to 3 to 5 times amount earned until that point, as well as the shutting down and blacklisting of that entity. You cannot carry out your business while applying, or both you and the approval agency will be punished. (article 69 of Telecommunications Regulations of the People’s Republic of China)

Validity Time

The B21 License must be renewed every 3 years.

Get your B21 license the easy way.

App and game publishers in China must adhere to a set of laws and regulations that can seem opaque and confusing to foreign developers and companies. AppInChina simplifies and demystifies this process for our clients.

AppInChina will analyze your app, determine which licenses are needed, and apply on your behalf. See this page for other licenses that may be required for features in specialized categories, such as video conferencing and education. Contact us today for a consultation.