Two sets of new measures have been issued in June 2008 (namely Measures for the Administration of Prohibited and Restricted Technology Import and Measures for the Administration of Import and Export Contracts Registration) which are likely to have a material, practical affect upon technology licenses and transfers to and from China. The measures are a mix of devolution (i.e. the regulations delegate responsibility down to regional Bureaux of Commerce); increased regulation and supervision on the one hand but relaxation in other regards.
Conditions to be Considered – the regulations introduce factors for the authorities considerations such as whether an import will unfavorably influence the PRC domestic industry’s development, adverse affect upon public morality or environment.
Validity Period – the amended Article 9 states that the validity period for the Proposal for Technology Import License will be set within the range of one to three years. As the previous law did not set limits it is not clear what this restriction will mean in practice.
Procedural Changes – the new regulations require on-line registration with a MOFCOM website before an applicant can collect a Technology Import License. More importantly, contracts which include royalty payments require the technology importer/exporter to make a recordal within 30 days after the base figure for the royalty has been determined. This requirement appears to be an on-going requirement for subsequent years.
Requirements in respect of free technology transfers have been relaxed. Under current law the technology importer or exporter should re-register any amendment to a free technology import or export contract. The June 2008 amendments simplify this by requiring the technology importer or exporter to comply with an amendment recordal procedure rather than re-registering. However, the current practice of the vast majority of companies in China – i.e. doing nothing – is simpler still. However, a failure to follow up properly will make taking legal action against a breaching importer more difficult still.