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. In November 2007, the Ministry of Commerce updated the Category of Prohibited and Restricted Technology Import.
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.
By Mark Schaub, Partner Shanghai Office of King & Wood，FDI
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 – restricted technologies will first need approval. Parties will only be entitled to sign an import contract after the Proposal for Technology Import License has been issued. 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 – technology licenses should complete on-line registration with a MOFCOM website before an applicant can collect a Technology Import License. Such on-line registration must be finished within 30 days after the execution of the technology import agreement. If the technology license foresees a payment then such 30 day on-line registration will not be used for the calculation. The contract will need to be filed again within 30 days after the first year total turnover basis has been calculated, i.e. one year later. From that point on, the registration shall be renewed as the actual turnover may vary year from year.
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.