On June 27, 2018, China’s Ministry of Public Security (“MPS”) released for public comment a draft of the Regulations on Cybersecurity Multi-level Protection Scheme (“the Draft Regulation”). The highly anticipated Draft Regulation sets out the details of an updated Multi-level Protection Scheme, whereby network operators (defined below) are required to comply with different levels of protections according to the level of risk involved with their networks. The comment period ends on July 27, 2018.

China’s Cybersecurity Law (“CSL”), which took effect on June 1, 2017, requires the government to implement a Multi-level Protection Scheme (“MLPS”) for cybersecurity (Article 21). The Draft Regulation, a binding regulation once finalized, echoes this requirement and provides guidance for network operators to comply with the Cybersecurity Law.

The Draft Regulation updates the existing MLPS, which is a framework dating back to 2007 that classifies information systems physically located in China according to their relative impact on national security, social order, and economic interests if the system is damaged or attacked. The classification levels range from one to five, one being the least critical and five being the most critical. Information systems that are classified (initially self-assessed and proposed by operators and then confirmed by MPS) at level 3 or above are subject to enhanced security requirements.

Obligations for network operators

The obligations set out apply to network operators, which Article 21 of the CSL broadly defines  to include all entities using a network (including the Internet) to operate or provide services.  Network operators will be subject to different cybersecurity requirements corresponding to their MLPS classification level.

  • Self-assessment of security level. All network operators are responsible for determining the appropriate security level for their networks at the design and planning stage, taking into account the functions of the network, scope and targets of service, and the types of data being processed.  When network functions, services scope and types of data processed are significantly changed, network operators are required to re-assess their classification level.In addition, operators of networks classified level 2 or above are required to arrange for “expert review” of the classification level and may also be required to obtain approval from industry regulators and the MPS.
  • Cybersecurity requirements.
    • All network operators. The Draft Regulation sets out requirements generally applicable to all network operators regardless of classification level, which largely track the requirements under Article 21 of the CSL. All network operators are required to conduct a self-review on their implementation of the cybersecurity MLPS system and the status of their cybersecurity at least once per year and should timely rectify identified risks and report such risks and remediation plans to MPS with which the operator is registered.
    • Operators of networks classified level 3 and above. Additional requirements apply for operators of networks classified level 3 and above—some of them are repetitive or overlap with general requirements above. New level 3 networks must be tested by MLPS testing agencies accredited by MPS (a list of accredited testing agencies available here) before they can come online. (By way of comparison, network operators of networks level 2 and below can test their own new network before it comes online.) Operators of networks classified level 3 and above are also required to formulate cybersecurity emergency plans and regularly carry out cybersecurity emergency response drills (e.g., table top exercises).
  • Security incident reporting. The Draft Regulation briefly mentions that network operators are required to report incidents within 24 hours to MPS. Although the Draft Regulation does not elaborate the reporting process or the information required for such notifications, this requirement imposes a new reporting timeline on network operators because the CSL, itself, does not have a specific time frame for reporting.

Additional requirements for operators of networks classified level 3 and above

Operators of networks classified level 3 and above are also subject to other requirements, including relating to procurement of products and services, technical maintenance performed overseas, and the use and testing of encryption measures.  In addition, the Draft Regulation restricts the ability of certain personnel to attend “offensive and defensive activities organized by foreign organizations” without authorization.

Enforcement and Liability

The Draft Regulation stipulates a wide array of investigative powers for MPS and sanctions for non-compliant companies, ranging from on-site inspection, investigation, and “summoning for consultation” to monetary fines and criminal liability.

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While the meanings of certain terms in these requirements are still not clear and may require further interpretation, multinational companies operating in China may wish to closely follow developments relating to the Draft Regulation and understand how recent developments may affect their business operations. Companies have until July 28 to provide feedback to the Chinese government on possible amendments.

For a more in-depth analysis of the Draft Regulation, please refer to our recent client alert here.

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Photo of Yan Luo Yan Luo

With over 10 years of experience in global technology regulations, Yan Luo specializes in the intersection of law and technology, focusing on regulatory compliance and risk mitigation for technology-driven business models. Her key strengths include data protection, cybersecurity, and international trade, with a

With over 10 years of experience in global technology regulations, Yan Luo specializes in the intersection of law and technology, focusing on regulatory compliance and risk mitigation for technology-driven business models. Her key strengths include data protection, cybersecurity, and international trade, with a particular emphasis on adapting to regulatory changes and ensuring compliance to support technology sector business strategies.

In recent years, Yan has guided leading multinational companies in sectors such as cloud computing, consumer brands, and financial services through the rapidly evolving cybersecurity and data privacy regulations in major Asian jurisdictions, including China. She has addressed challenges such as compliance with data localization mandates and regulatory audits. Yan’s work includes advising on high-stakes compliance issues like data localization and cross-border data transfers, navigating cybersecurity inspections for multinational companies, and providing data protection insights for strategic transactions. Additionally, Yan has counseled leading Chinese technology companies on global data governance and compliance challenges across major jurisdictions, including the EU and the US, focusing on specific regulations like GDPR and CCPA.

More recently, Yan has supported leading technology companies on geopolitical risk assessments, particularly concerning how geopolitical shifts impact sectors at the cutting edge, such as artificial intelligence and semiconductor technologies.

Yan was named as Global Data Review’s40 under 40” in 2018 and is frequently quoted by leading media outlets including the Wall Street Journal and the Financial Times.

Prior to joining the firm, Yan completed an internship with the Office of International Affairs of the U.S. Federal Trade Commission in Washington, DC. Her experiences in Brussels include representing major Chinese companies in trade, competition and public procurement matters before the European Commission and national authorities in EU Member States.

Photo of Ashden Fein Ashden Fein

Ashden Fein is a vice chair of the firm’s global Cybersecurity practice. He advises clients on cybersecurity and national security matters, including crisis management and incident response, risk management and governance, government and internal investigations, and regulatory compliance.

For cybersecurity matters, Ashden counsels clients…

Ashden Fein is a vice chair of the firm’s global Cybersecurity practice. He advises clients on cybersecurity and national security matters, including crisis management and incident response, risk management and governance, government and internal investigations, and regulatory compliance.

For cybersecurity matters, Ashden counsels clients on preparing for and responding to cyber-based attacks, assessing security controls and practices for the protection of data and systems, developing and implementing cybersecurity risk management and governance programs, and complying with federal and state regulatory requirements. Ashden frequently supports clients as the lead investigator and crisis manager for global cyber and data security incidents, including data breaches involving personal data, advanced persistent threats targeting intellectual property across industries, state-sponsored theft of sensitive U.S. government information, extortion and ransomware, and destructive attacks.

Additionally, Ashden assists clients from across industries with leading internal investigations and responding to government inquiries related to the U.S. national security and insider risks. He also advises aerospace, defense, and intelligence contractors on security compliance under U.S. national security laws and regulations including, among others, the National Industrial Security Program (NISPOM), U.S. government cybersecurity regulations, FedRAMP, and requirements related to supply chain security.

Before joining Covington, Ashden served on active duty in the U.S. Army as a Military Intelligence officer and prosecutor specializing in cybercrime and national security investigations and prosecutions — to include serving as the lead trial lawyer in the prosecution of Private Chelsea (Bradley) Manning for the unlawful disclosure of classified information to Wikileaks.

Ashden currently serves as a Judge Advocate in the
U.S. Army Reserve.