What You Need to Know to Get a Chinese Direct Sales License

Obtaining a direct sales license in China requires navigating a complex regulatory framework designed to oversee direct selling activities. While direct selling is permitted, multi-level marketing (MLM) structures are strictly prohibited, and compensation based on recruitment is not allowed.

Given the stringent regulations and detailed application process, consulting legal experts or professional advisors specializing in Chinese commercial law is highly recommended to ensure compliance and a smooth application process.

Regulatory Framework

The key regulations governing direct sales in China include:

These regulations allow direct selling under strict conditions to prevent pyramid schemes and maintain market stability.

Eligibility Criteria

To qualify for a direct sales license, applicants must meet the following conditions:

Corporate Status: The applicant must be a legally established corporate entity. Foreign investors must set up a Foreign-Invested Enterprise (FIE) in the form of a Wholly Foreign-Owned Enterprise (WFOE) and obtain approval from the Ministry of Commerce (MOFCOM).
Capital Requirements: The paid-in registered capital must be at least RMB 80 million, fully deposited in a designated bank per regulatory requirements.
Reputation and Compliance: The applicant must have a strong business reputation with no significant legal violations in the last five years.
Manufacturing Requirements: Products intended for direct sales must be manufactured within China.
Service Network: A well-established service network must be in place to support direct selling operations.

Application Process

The steps to obtain a direct sales license include:

Preparation of Documentation: Gather required documents, such as corporate registration, financial statements, and proof of compliance with eligibility criteria.
Submission to Provincial Authorities: Submit the application to the provincial-level department of commerce where the business is registered.
Preliminary Review: The provincial department conducts an initial evaluation of the application materials.
Forwarding to MOFCOM: Upon passing the preliminary review, the application is sent to MOFCOM for further assessment.
Final Approval: MOFCOM conducts a thorough evaluation and, if all requirements are met, grants the direct sales license.

Operational Compliance

Licensed direct selling companies must adhere to specific operational guidelines:

Sales Representatives: Must be Chinese citizens aged 18 or older.
Training Programs: Companies must offer free training to sales representatives, conducted by full-time employees.
Compensation Structure: Sales personnel remuneration is capped at 30% of the product sales price.
Permitted Product Categories: Direct sales are allowed only for specific product categories, including cosmetics, health food products, sanitary products, healthcare equipment, small kitchen appliances, and household electronics.

By following these guidelines and maintaining strict regulatory compliance, businesses can successfully obtain and operate under a direct sales license in China.

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