China Operations Q&A is a new CBR department in which US-China Business Council (USCBC) Business Advisory Services staff answer companies’ China-operations questions. For more information on USCBC’s services or becoming a USCBC member, see www.uschina.org/benefits.html.

Q:Our products have a China Compulsory Certification (CCC) mark in China, but we may merge with another company. Will we need to re-file to obtain new CCC marks for our products because of the merger? If so, is there an abbreviated process, or would we need to start from scratch? Also, should the transfer of a CCC mark occur before or after the merger?

A: Conformity assessment—the testing and certification of products for sale in the China market—represents an important part of China’s attempts to assure the quality, safety, and efficacy of products sold in China. China launched its largest conformity assessment regime, the CCC system, in 2001. The PRC government maintains a catalogue of products that must be tested and certified to bear the CCC mark.

As to your specific question, China has an abbreviated CCC mark process for mergers so that certifications can be transferred. Companies will need to follow different processes depending on the type of merger.

For example, if the acquired company will continue to use its current name after the merger, the original CCC certification remains valid. The buying company can apply for revised CCC certificates with the amended business licenses and use the agreement between the seller and buyer to prove that the buyer owns the seller and their products. In this case, products would not need to be retested to gain certification. The cost for this kind of CCC mark certification is reported to be low and the certificates should not take long to secure.

If the acquired company is dissolved after the merger, then all the original certificates will be deemed invalid. The buying company will need to start the application process from the beginning, and product testing will likely be required. Given those factors, the cost will be higher and the process will take longer.

Another consideration is that the time required to gain CCC mark certification differs for domestic-made products and foreign-made products. It takes about three months to process a CCC mark certification on domestic-made products. By contrast, it takes about six months for foreign-made products, largely because of requirements for overseas factory inspections.

If the product is made domestically in multiple facilities (for example, plants in Beijing and Shanghai both manufacture Type XYZ widget) and one facility has already gone through product type testing, the completed and approved tests of products from one facility can be reused when the other facility gets to that part of the process. Factory inspections, of course, will need to be conducted separately.

If a company needs to recertify hundreds of products of the same type (for example, hundreds of widgets in a given product series), the acquiring company may petition the relevant designated certification body (DCB), such as the China Quality Certification Center, at the national level for a mass approval rather than product by product. This is not standard procedure, however, and is only granted on a case-by-case basis. A company’s government affairs staff would likely need to contact the appropriate DCB to request this privilege.

The timing of when to start the CCC process during a merger depends on the type of merger the company will pursue. A valid business license is required for CCC mark certification. Thus, in cases where the acquired company exists but will be applying for a new business license, the company must wait to reapply for the CCC mark until after the new business license is issued. In cases where the acquired company no longer exists, the particular industry division head for the DCB will determine whether the acquiring company can begin to recertify products prior to the granting of a business license. Some industry divisions are flexible and will allow the acquiring company to begin recertification procedures (including product type testing) prior to the issuance of a business license; others may not be as flexible in this regard.

Because there are so many variables, companies should contact a representative from a DCB office that covers the necessary product scope—such as the China Quality Certification Center—to confirm how the process will work. (For information on local China Quality Certification Center offices, see www.cqc.com.cn.) In addition, the company may hire a professional third-party agent who specializes in processing these types of transfers on clients’ behalf.

The US-China Business Council (USCBC), publisher of the CBR, is the leading organization of US companies engaged in business with the People’s Republic of China. Founded in 1973, USCBC provides extensive China-focused information, advisory, and advocacy services, and events to nearly 240 US corporations operating in China and throughout Asia.

Posted by Joseph Luk