August 31, 2014

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August 29, 2014

China's First-Ever National Standard on Data Privacy - Best Practices for Companies in China on Managing Data Privacy

Companies doing business in China should take careful notice that China is now paying more attention to personal data privacy collection. This would be an opportune time for private companies to internally review existing data collection and management practices, as well as determine whether these fall within the new guidelines, and where necessary, develop and incorporate new internal data privacy practices.

The Information Security Technology-Guide for Personal Information Protection within Public and Commercial Systems (“Guidelines”), China’s first-ever national standard for personal data privacy protection, came into effect on February 1, 2013. The Guidelines, while not legally binding, are just what they purport to be – guidelines – some commentators view these as technical guidelines. However, the Guidelines should not be taken lightly as this may be a pre-cursor of new legislation ahead. China is not quite ready to issue new binding legislation, but there are indications it seeks to develop consistency with other internationally accepted practices, especially following recent data legislation enacted in the region by neighboring Hong Kong and other Asian countries.

What should companies look for when examining existing data privacy and collection policy and practices? As the Guidelines provide for rules on collecting, handling, transferring and deleting personal information, these areas of a company’s current policies should be reviewed.

“Personal Information”

What personal information is subject to the Guidelines? The Guidelines define “personal information” as “computer data that may be processed by an information system, relevant to a certain natural person, and that may be used solely or along with other information to identify such natural person.”

“General” and “Sensitive” Personal Information

The Guidelines makes a distinction on handling “general” as opposed to “sensitive” personal information. Sensitive personal information is defined as “information the leakage of which will cause adverse consequences to the subject individual” e.g. information such as an individual’s identity card, religious views or fingerprints.

Consent Required

If an individual’s personal information is being collected, that individual should be informed as to the purpose and the scope of the data being collected; tacit consent must be obtained- the individual does not object after being well informed. With “sensitive” personal information being collected, a higher level of consent must be obtained prior to collection and use; the individual must provide express consent and such evidence be retained.

Notice

Best practices dictate a well-informed notice be given the individual prior to collection of any personal information. The notice should clearly spell out, among other items, what information is being collected, the purpose for which the information will be used, the method of collection, party to whom the personal information will be disclosed and retention period.

Cross Border Transfer

The Guidelines further limit the transfer of personal information to any organization outside of P.R. China except where the individual provides consent, the government authorizes the transfer or the transfer is required by law. It is unclear as to which law applies where transfer is “required by law”- PRC law or law of any other country.

Notification of Breach

There is a notification requirement. The individual must be notified if personal information is lost, altered or divulged. If the breach incident is material, then the “personal information protection administration authority.” The Guidelines, however, do not define or make clear this administration authority is here.

Retention and Deletion

Best practices for a company is to minimize the amount of personal information collected. Personal information once used to achieve their intended purpose should not be stored and maintained, but immediately deleted.

The Guidelines may not be binding authority, but at a minimum sets certain standards for the collection, transfer and management of personal information. Especially for companies operating in China, the Guidelines is a call to action, and for implementation of best practices relating to data privacy. Companies should take this opportunity to assess their data privacy and security policies, review and revise customer information intake procedures and documentation, and develop and implement clear, company-wide internal data privacy policies and methods.

Copyright © 2014, Sheppard Mullin Richter & Hampton LLP.

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