China’s new data-transfer rules, enforced by the Cyberspace Administration of China (CAC) and governed by the Personal Information Protection Law (PIPL), have far-reaching implications for organizations using ERP systems. In this blog post, we will delve into the key aspects of these regulations and provide insights on how companies can adapt to ensure compliance.
Understanding the Landscape
- Cyberspace Administration of China (CAC):
The CAC, China’s national internet regulator, oversees the enforcement of regulations related to the handling and transfer of Chinese personal information.
Similar to regulatory bodies like the SEC in the US or Data Protection Authorities in Europe, the CAC plays a crucial role in shaping data protection policies.
- Personal Information Protection Law (PIPL):
The PIPL, China’s latest data privacy legislation, focuses on safeguarding personal information and addressing issues related to data breaches.
Applicable not only to entities processing personally identifiable information (PII) within China but also extending its jurisdiction to those handling Chinese citizens’ PII outside the country.
Compliance Timeline and Considerations
- Deadline Awareness:
The PIPL, introduced in 2021, mandates organizations to submit a security assessment to the CAC by 2023.
Many organizations are yet to complete this crucial step, making it imperative to understand the impact of PIPL on ERP data promptly.
- ERP Systems and Self-Assessment:
Companies running ERP systems, like SAP ERP, should undergo a rigorous self-assessment to understand the implications of PIPL compliance.
Given the evolving nature of data privacy regulations, staying proactive with assessments is vital.
Adapting Strategies for Compliance
- Data Localization Considerations:
Assess the feasibility and costs of localizing data processing within China to comply with the more stringent requirements of PIPL, DSL, and CSL.
Evaluate potential changes to application architecture, suppliers, facilities, and staffing.
- Strategic Questions for Leadership Teams:
Delve into strategic questions regarding market presence, operational models, and localization approaches.
Consider options such as joint ventures with local companies and aligning with a “China for China” operating model.
- Penalties for Noncompliance:
Understand the escalating enforcement landscape, with Chinese regulators imposing significant fines on noncompliant companies.
Be aware of potential consequences, including social credit score impacts, equipment seizures, digital service blocks, and even arrests.
Steps Towards Compliance
- Thorough Data Analysis:
Conduct a comprehensive analysis of data, identifying sources from China and determining business necessity.
Minimize data transfers or anonymize information to reduce the likelihood of inspection.
- Localization Planning:
Develop a risk-based plan for localizing Chinese data processing.
Prioritize obtaining approval for existing data transfers and prepare alternative plans if refusals occur.
- Monitoring Political and Business Environment:
Identify potential triggers in China’s political and business environment that may prompt a review of your market strategy.
Conclusion
In the ever-evolving landscape of data privacy regulations, understanding and adapting to China’s data-transfer rules is essential for organizations using ERP systems. Proactive measures, thorough assessments, and strategic planning are crucial to ensure compliance and minimize risks. As the regulatory landscape continues to evolve, staying informed and seeking expert guidance will be key to navigating the complexities of PIPL and related laws.
This process requires collaboration between IT, legal, and compliance teams. Engaging with local experts familiar with Chinese regulations is essential for a successful and compliant migration of Chinese data to servers within China.
What are the options migrating my data to China?
In practice, there are two main alternatives for migrating the Chinese part of your SAP system to China:
- Clone & Delete
- Clone & Migrate
Besides, if you’re still on SAP ECC, you might want to take advantage of the migration to combine with conversion to SAP S/4.
Contact us today to learn more about how we can help you migrating your SAP system to China or get you in contact with suitable law consultancies in China (e.g., to guide you in handling the mandatory self-assessment).