New Rules for Telecom Approvals in China

Leslie Bai

Recent Chinese regulatory reforms streamline the rules but create higher technical and documentary obstacles for marketers of telecom products.

Being a country relatively new to information technology (IT), China represents a huge potential market for IT manufacturers. This is particularly true in the area of telecommunications. Just five years ago, most areas of China had five-digit telephone numbers. Many cities today, however, have eight-digit numbers, and many of the country's 250 million city dwellers possess a pager, a cellular phone, or both.

The Chinese government has undertaken a massive effort to revise its laws and regulations in a manner consistent with World Trade Organization (WTO) rules. But substantial barriers do remain in place, having yet to be dismantled. Import barriers, an opaque and inconsistent legal system, and limitations on market access combine to create difficulties for foreign firms trying to compete in China. Although China's trade liberalization efforts represent a step forward, new regulations continue to be introduced.

Companies that are contemplating seeking Chinese approvals for telecom products will face some distinctly Chinese obstacles. Distance, language, an unfamiliar culture, and unsophisticated local commercial market conditions can make entry into China both difficult and expensive. A formidable maze of cultural idiosyncrasies, laws, and regulations confronts any company embarking on this venture.

The Chinese Ministry of Information Industry (MII) has been undergoing the largest reforms in its history since its new minister, Mr. Wang Xudong, recently took office. But back in 2002, months before Wang was officially named to head MII, the China State Council formed another organization called the Information Management Group (IMG), which answers directly to the prime minister's office. One of the major responsibilities of IMG is regulation of the Chinese telecom industry, including the granting of telecom approvals. A central focus of the telecommunications industry reforms taking place during Wang's tenure as minister has been approvals. Major telecom carriers have reorganized to meet the requirements of China's market economy.

This article summarizes the new Chinese telecom approval rules along with the national telecom reforms. The following major changes are highlighted:

• Telecom products are required to meet more-specific technical requirements.

• Domestic Chinese and foreign telecom manufacturers are required to meet the same requirements.

• One system of MII certification is applicable to both foreign and domestic companies.

• Two MII registration offices have been combined into one office handing all MII applications.

• The lists of telecom products for MII certification have been revised.

• Six of 12 major MII-designated laboratories are under reorganization to form two labs.

• MII certification processes were revised during 2003.

• New MII certification requirements were published with the MII reforms.

Network Access License

Many companies view approvals purely as an expensive hindrance to commerce, but the reasons behind them can be justified. In reality, approvals serve to prevent the supply of potentially dangerous and poor-quality products into the marketplace. It is necessary to ensure that telecommunications products operate correctly when connected to the national infrastructure, and that they do not constitute a risk to the safe and proper operation of the networks to which they are connected. China is no exception to this rule. The importation and supply of unapproved or gray-market products can lead to prosecution by authorities and forfeiture of equipment.

MII stipulates the telecom approval regulations, and the Telecommunications Administration Bureau (TAB) under MII takes charge of telecom product approvals granted in the form of a network access license (NAL). Each type of approved product is issued a network access identifier (NAI) with an MII certification number.

On June 25, 2001, MII announced the first three categories of telecom equipment, which cover a total of 28 types of products. All regulated products must be MII approved before entering the Chinese market. MII also assigned 10 laboratories to perform NAL testing. Each lab focuses on certain types of products.

An applicant for an NAL must be a legal entity located in mainland China. The application package is submitted to the MII certification center located in Beijing.

There are generally four types of applications: those for renewal, regular equipment, high-end equipment, and equipment modification. The NAL application process varies depending on the type.1 The major difference between an MII approval and European or FCC approvals is that MII includes quality assurance in the approval process. Manufacturers must have a satisfactory quality system in place. If a manufacturer is not ISO 9000 certified, MII will audit the company's quality system. From the MII point of view, the quality audit and technical audit are equally important.2-6

Typically, NAL testing must be performed by one of the MII-assigned labs in China. Testing may also be performed in the company's lab under special arrangement. Such testing must be performed and reported by an MII-assigned lab. MII does not accept any report not from an MII-assigned lab.

Most of the Chinese standards are similar to International Telecommunication Union standards but are written in Chinese. It is important that the manufacturer discuss fully with the assigned test lab the scope of the testing to be performed, the number of test samples required, test specifications and procedures, and the cost of testing.

The cost of testing is determined and charged by the test lab. Both the amount of the fees and the payment method are negotiable. It is highly recommended that manufacturers to employ an approvals expert to discuss these issues with the testing lab on their behalf. The MII approval center will itself charge fees to cover services such as expert-panel appraisal and certification. Those fees vary depending on the type of product. The whole process may take several months to complete, but some straightforward cases can be handled in as little as three weeks.

All equipment under MII and NAL regulation must be affixed with an MII approval sticker, which is the NAI. The NAI is produced by the MII certification center and issued with an MII certification number. The cost of an NAI sticker depends on the type of product, but typically ranges from 0.50 RMB ($0.06) for terminal equipment to 4.00 RMB ($0.50) for routers.

The NAL normally is valid for three years. It is important that manufacturers apply for renewal of the NAL at least three months prior to its expiration. If the renewal application is submitted after the NAL has expired, the manufacturer must repeat the entire process.

Telecom Approval Reforms

MII has been subject to significant reforms since 2002. The China Compulsory Certification (CCC) system is a prominent example.1 However, owing to established historical precedent, reform of the Chinese telecom approval system faced challenges from all interested organizations.
At one time, it was proposed that MII telecom approval be placed under the control of the China National Administration of Certification (CNCA), which administers CCC mark certification. This idea was strongly challenged. It will be difficult, if not impossible, to achieve this end in just a few years.

Table I. Approvals-related changes implemented by MII during 2003.

At the same time, under pressure from major players in the industry, MII initiated internal reforms designed to streamline its regulations pertaining to telecom approvals (see Table I). The new rules were officially published in August 2003. Their full implementation by the end of 2003 anticipated the expected completion date of April 2004.

The telecom certification centers and the MII-designated test laboratories were subjected to reorganization as part of the reform of MII. Where there had been two separate certification centers, under the organizational reform they became one approval agency with both centers under a single management. This change was completed on April 1, 2003.

In addition, several MII-designated test laboratories have been amalgamated into fewer labs. The major reorganization in this area was the creation of the China Telecom Technology Labs and China WLLC Data Communication Test Labs. Table II summarizes the consolidation of test and qualification facilities under the new organization of MII.

Table II. MII testing and qualification facilities before and after reorganization.

New Requirements for MII Approvals
The major changes implemented in the new rules for winning MII approvals are concentrated in the areas of testing, certification, and quality control.

The testing requirements have become stricter than ever. The new rules do not allow any of the provided samples to fail the test specifications, which now are more clearly defined. If any test sample fails to satisfy the major parameters, the manufacturer is required to submit as many as twice the number of normally required test samples for retesting one month later.
If any of the resubmitted samples fails, then a specially prescribed sampling procedure is to be followed. It requires the manufacturer to provide 20 sequential serial numbers for the equipment under test. From these 20 available pieces of equipment the test lab then randomly chooses two samples by number for retesting.

Figure 1.MII Network Access License application form (image 1 of 2, click on the image above to enlarge it).

The MII certification center no longer reviews product-related documentation. Such documents as product descriptions, circuit diagrams, and so on are now to be reviewed and approved by the test laboratories before submission to MII for approval. The certification center itself will focus exclusively on documentation relating to the manufacturer or its contractor. More-detailed information about the manufacturer is required than was the case before.

The quality assurance requirements also are stricter. An original ISO quality management certificate or a certified true copy of one is required for verification. A contract between the manufacturer and a subcontracting factory also must be provided.

If no original or certified copy of the ISO certificate is provided, MII will conduct factory auditing through its newly organized China TTL Certification Center, which was previously the Post-Telecom Quality Certification Center.

A sample MII application form is shown in Figure 1. The documents now required to be submitted are listed in Table III.
 

Figure 2. MII Network Access License application form (iamge 2 of 2, click on the image above to enlarge it).

Conclusion

With its entry into the WTO, China has become an open market that everybody has a chance to penetrate. However, to gain access to the Chinese marketplace, manufacturers must be prepared to negotiate a challenging cultural, legal, and regulatory maze.

The recent major reforms in MII's telecom approval process, including new documentation requirements, have, unfortunately, not lowered the bar for most telecom products that manufacturers want to get into the market in China. There are exceptions worth mentioning. Optical fiber has been deregulated, and optical cable is listed as a voluntary certification product.

This article has outlined the new rules for Chinese telecom approvals and noted the MII reforms that took place during 2003. MII has reorganized its testing, certification, and approval agencies. Test laboratories are undergoing reorganization and merger in order to offer efficiencies through streamlining.

The responsibilities of the MII test labs and certification center are now more clearly defined, and new documents have been published that more clearly explain requirements. New quality assurance and monitoring systems are being set up.

References

1. Leslie Bai, "China: The Final Frontier in Telecom Approvals," Compliance Engineering 20, no. 3 (2003): 119-125.

2. Xindianhan (Telecom Regulations from MII): MII Number 125, 2001.

3. Xindianhan (Telecom Network Access License Management Accordance--Testing Laboratories): MII Number 028, 2003.

4. Xindianhan (Telecom Network Access License Management Accordance--Certification Procedures): MII Number 027, 2003.

5. Xindianhan (Telecom Products Monitoring and Management Regulations): MII Number 189, 2003.

6. Xindianhan (Management of New Telecom Equipment for NAL Application): MII Number 214, 2003.

Note: Xindianhan is translated as "Ministry of Information Industry Announcement, Notification and Publication."

Leslie Bai, director of certification for and a founder of Siemic Inc. (Fremont, CA) and Siemic (China) Certification Services Ltd. (Zhong Guan Cun, China), has more than 15 years of experience in global regulatory compliance. The Siemic facilities perform compliance testing and certification, particularly for Asian approvals. Bai can be reached at lesliebai@siemic.com.