China lifted the registration requirements for foreign trade activities

China maintained strict COVID-19 restrictions during the last three years. Due to the travel restrictions and quarantine requirements in China, doing business with corporations in China has been difficult, and visiting China from abroad was nearly impossible. If you have investments in China or you are contemplating cooperation with Chinese companies, the good news for you is that China announced its reopening as of 8 January 2023. Lifted travel bans From January 8th, 2023, COVID-19 will not be categorized as a Class A infectious disease in China. For travelers, it means that you can enter China without the long and expensive quarantine. Moreover, you don’t have to apply for a health code anymore. You are still required to take a PCR test within 48 hours before departure. For residents in China, the Chinese government resumed processing passport application by Chinese citizens, and traveling abroad finally becomes a possibility. The number of both inbound and outbound flights is increasing gradually. Conclusion China is lifting the travel restrictions and preparing to reopen its borders. International trades and foreign investments in China are expected to gradually increase as China focuses more on economic growth. However, China is experiencing a huge COVID outbreak now due to its sudden relaxation of covid restrictions, and travelers are suggested to keep it in mind that the risk of infection is high. Do you need advice on this topic? Please contact Joost Vrancken Peeters.

Known as the “world factory”, China still has a strong attraction to foreign investors. In daily life, you can easily find goods attached with tags, labels, and stickers on a variety of goods showing they are “Made in China”. With the benefits including low taxes and duties and low labor costs, China manufacturers still offer a very competitive value in the global manufacturing landscape. There’s a big chance that you are currently in cooperation with a Chinese manufacturer or seeking for a new one, in this case it’s important for you to conduct your business with an “NNN agreement” that protects your ideas and products in China. You may already be familiar with a European style Non Disclosure Agreement which focuses on protecting trade secrets. However, unfortunately, this is not working if you want to protect your IP in China. An NDA agreement focuses narrowly on preventing confidential information from being revealed to the public, but it doesn’t diminish the risk that the information might be  used to compete with you. What’s worse, only an NNN agreement is enforceable under Chinese law. So, in order to have a comprehensive protection for your relationship with Chinese counterparts, an NNN Agreement plays a key role. An NNN agreement is designed for individual property and confidentiality protection when cooperating with manufacturers in China. It consists of three “N”s and each of them represents a different type of contractual obligation: 1. Non-Use This section in the agreement gives a Chinese factory that you’re working with the obligation to not use your ideas, concepts or products in ways that will lead to competition with you. It is of great significance because the obligations are ensured by a written contract rather than Intellectual Property law, and your ideas or products would be considered as the subjects to contractual provisions, rather than IP concepts such as copyrights or trade secrets. Therefore, any violation of them would be directly seen as a breach of the contract and there’s no need to claim infringements of your Intellectual Property rights. This will bring much convenience for you because the contract would be the basis for your control over the Chinese factory and disputes resolution, so it saves your strengths from looking for safeguards of your confidential information from other legislations or waiting for the courts to decide. 2. Non-Disclosure As introduced above, the Non-use provisions prohibit a Chinese factory from using your confidential information, but that’s not enough for complete protection. There’s still a risk that the Chinese factories will disclose your information to the public, or in some cases, to someone of their group. The latter situation is more likely to take place in reality because the Chinese factory is able to claim that they did not violate the non-use provisions for not using the protected information directly. But eventually they will use the information somehow for their own benefits and cause harm to your profits. Those behaviors smartly avoid the non-use section and pose a substantive threat to your interest. Therefore, a non-disclosure section is also necessary to keep your information secret, and it is especially important to clearly state in the agreement that not only disclosure within the group is prohibited, but also any infringement caused by group members and third parties would lead to liabilities of the factory. 2. Non-Circumvention The non-circumvention section of the agreement obliges the Chinese manufacturer to not make products of your ideas and sell them to your potential customers at a lower price. It is always the case that you buy the products from China at a relatively low price and sell them to consumers of other countries after adding a margin to the prices to make profits. Aware of the price gap between the Chinese market and foreign markets, the Chinese manufacturer may be tempted to sell your products in other markets by themselves with a price lower than yours. Such behaviors can have a profound impact on you because, except for some certain service-oriented industries, consumers tend to choose the same products with less costs. In this case, you may have difficulty selling your own products and suffer a big loss caused. Therefore, non-circumventions provisions are of extreme value in prohibiting chinses factories from conducting circumvention behaviors. In conclusion, a Chinese NNN agreement is crucial for your cooperation with Chinese manufacturers. It includes non-use, non-disclosure and non-circumvention parts to provide an overall protection to your confidential information and products. An effective agreement is an essential part for your business to succeed. In our next article on this subject, we’ll elaborate on how to draft an effective NNN agreement. Do you need advice on this topic? Please contact Joost Vrancken Peeters on +31 620210657 or [email protected] or Shangjing Zhao on [email protected]

China has a very potential market for your medical devices mainly due to a large population. Moreover, especially for the innovative high-end devices, China still relies on import. The export of your medical devices to China is one of the market entry modes. It allows for faster market entry and requires relatively lower capital investment. As in Europe, China imposes rather strict rules on medical devices than on other products as those are human health-related and risks involved. Medical devices in China are mainly regulated by the National Medical Products Administration (NMPA), which has been recently revised and has taken effect as of June 1, 2021. Prior to commercializing your medical devices in China, you need to register your devices, or namely obtaining certain approvals from the NMPA according to the NMPA regulation. The revised regulation to a certain degree simplifies the procedure. Generally speaking, the following steps need to be taken for the registration of your medical devices at the NMPA. 1. Determine the classification of your medical device in China. The medical device can be classified as class I, II and, III based on the different risk levels involved. For class I (low risks), such as biological microscope, bandage, record filing at the municipality level is sufficient. Record filings undergo only a completeness check upon submission. Medical equipment such as ultra-sound equipment should be categorized as class II (moderate risks), lung ventilator equipment is categorized as class III (high risks). For those relatively higher risk classes, stricter rules apply. You must submit more extensive documentation to the provincial level or state council. The authorities will perform comprehensive technical reviews. 2. Appoint an Agent located in China who will coordinate your NMPA device registration. For this you can engage a third-party local agent or your own subsidiary in China can also represent you to communicate with the NMPA and be responsible for the maintenance of the certificate after approval etc. 3. Prepare and submit supporting documents. Please note that all documents should be submitted in Chinese. 1) document which can demonstrate proof of home country approval. Such as CE mark (Conformité Européenne). Under the new regulation, innovative imported medical devices can get an exemption. Those innovative medical devices not previously marketed overseas do not have to submit home country approval. 2) prepare product technical requirement document. 3) prepare a testing report. Before, for classes II and III, you had to send devices to China for testing to be carried out by an authorized test center. But under the new regulation, this may be exempted, the applicant may submit the report made by himself. 4) prepare clinic evaluation, where applicable. 5) prepare labeling sample, product specification etc. Where there is no Chinese instruction or label, or the instruction or label does not conform to the provisions of the regulation, the medical device can not be imported. Following a successful review, the authority will issue certain certificates to you and publish it online, which enables the commercialization of your products in China. Supplemental rules and guidelines with regard to medical devices will be gradually released, and details might vary in different regions and provinces. Please consult with us if you want to register your medical devices in China. More information If you need further information, please do not hesitate to contact our Asia team: Joost Vrancken Peeters at +31620210657 or [email protected], or Ye Yu at +31639267995 or [email protected].

From March 2020, China has been enforcing extensive entry bans for foreigners to prevent the spread of the COVID-19. Foreigners’ visa were halted to issue for almost a year except for urgency. The bans are temporally being eased to some extent since March 2021. The Chinese Ministry of Foreign Affairs and some Chinese embassies abroad announced that from 15 March 2021, people vaccinated with vaccines produced in China will be able to apply for a visa to China, including those having received two doses of Chinese-made vaccines with the stipulated gap in between, or having received a single-dose Chinese-made vaccine at least 14 days prior to the application) and obtained the vaccination certificate. Thus, proof of a negative COVID-19 nucleic acid test result and the Health and Travel Record Declaration Form for Visa Application is no longer required. Besides, we understand China requires two to three weeks of quarantine upon arrival. Some regions might mandate a longer quarantine period either in the hotel or at home. After quarantine, traveling between regions is generally allowed but with minor restrictions. We will keep you up to date if the Embassy of the PRC in the Kingdom of the Netherlands releases exact details in terms of Visa for foreigners. Please note that the regulations can change very quickly.  

Apart from the human tragedy, the Coronavirus will also have negative economic consequences. Among which, it is estimated that lots of contracts can not be performed as expected. So, whether Corona can be deemed as Force Majeure to get an exemption of liabilities for breach of contract, is a question that we would like to figure out. Another question is whether delayed performance or termination of contract is allowed. Force Majeure in Chinese Law An example: an auto parts manufacturing company in China cannot deliver a steering gear unit to an African factory of a car manufacturer as stated in the contract. Is this Force Majeure? Of course this depends on the law applicable to the contract. In case Chinese law is applicable, article 117 of the Contract Law of the PRC, and Article 180 of General Rules of the Civil Law of the PRC stipulates that a party who is unable to perform a contract due to force majeure is exempted from liability in part or in whole in light of the impact of the event of force majeure, except otherwise provided by law. Where an event of force majeure occurs after the party’s delay in performance, it is not exempted from such liability. Article 94 of the Contract Law stipulates the parties may terminate the contract under the circumstance of force majeure. For purposes of this Law, force majeure means any objective circumstances which are unforeseeable, unavoidable and insurmountable. Covid-19 Obviously, the Covid-19 (Corona) outbreak is an unforeseeable incident, neither experts could have predicted it, let alone the ordinary public. As of now, there are no curable vaccines or effective medicines available. So, it is non-disputable that the Coronavirus is unforeseeable and unavoidable. The only doubt goes to whether it is insurmountable. From a legal perspective, the Coronavirus shares many similarities with SARs. Let’s refer to the cases that happened during the SARs period, to see how force majeure cases were dealt with by the multiple layers of courts of the PRC. Comparison to SARS On June 11, 2003, the Supreme People’s Court issued a guideline to its subordinate courts, stating how to handle trial and enforcement properly according to the Law with respect to SARS. The Supreme court stated the following: “Cases in which parties of the contract can not perform because of SARS can be dealt with according to Article 117 and Article 118 of the Contract Law of the PRC, which is force majeure. In short, the non-performance of contract due to SARS can be recognized as force majeure. However, also in some “SARS” cases, some courts did not support the application of force majeure, because the government’s acts were deemed to have only partially affected the business activities of the breaching parties and did not directly or radically trigger the non-fulfillment. So, whether force majeure can be a reason for the exemption of contractual liability should be judged case by case. General judgment rules are: whether the force majeure is the direct cause that one party cannot perform the contract. On 30 January 2020 the China Council for the Promotion of International Trade stepped in to help companies announcing to offer force majeure certificates to help companies deal with disputes with foreign trading partners. While applying companies must provide legitimate documents such as proof of delays or cancellation of transportation to the council. If contracts state that to rely on force majeure one needs such a certificate by a relevant authority, these certificates may help. Even if the contract does not require such a certificate and these certificates are not necessarily binding on the courts, these are a major help in proving force majeure. More information If you need further information please do not hesitate to contact our Asia team Joost Vrancken Peeters at +31620210657 or [email protected] or Ye Yu at +31639267995 or [email protected].

The new China’s Export Control Law (“CECL”) was passed on 17 October 2020 by the National People’s Congress Standing Committee. It unifies the several regulations and has come into effect as of 1 December 2020. CECL aims to fulfill international obligations, safeguard national security and national interests, and enhance export control by introducing restrictions on the export of specific items. It will regulate the export of technologies and sensitive materials from China to overseas countries. It obliges foreign customers and Chinese exporters to comply with this law or be liable and get penalized. The monitoring will be more strict than under the previous regulations and is more far reaching since extends the jurisdiction of China outside its national borders. The CECL is also applicable to importers, end-users and in general organizations outside China. The CECL is divided into five chapters namely, general provisions, control policies, control lists and control measures, regulations, legal liabilities, and supplementary provisions. Who is affected by the CECL? Not only exporters located in China, but also end-users and importers may have specific duties under CECL and may be subject to heavy restrictions. Before a license to export is granted, the exporter has to submit forms certifying the end-users and end-use of the items. According to the CECL, end-users are not allowed to change the submitted end-use, nor assign them to a third party without the prior approval of the State Council and the Central Military Commission/State Export Control Administrative Departments (“SECADs”). Moreover, and exporter or importer should report any possible change of end-use immediately to the SECADs as soon as it becomes aware of such change. Under the CECL the SECADs have to issue a restricted list mentioning the importers and end-users that in short violate the CECL. The SECADs can either prohibit or restrict deals regarding the export of the controlled items, suspend the export of such items, and withhold export licensing facilitation measures to anyone who is on the list. The CECL also forbids exporters to deal with parties in the list, unless they apply to SECADs in case of a true need. Importers and end-users can apply to SECADs to be removed from the list. Outside of China The CECL not only applies to organizations or individuals in China, but also outside of China. It also clearly states that “if any country or region abuses export control measures to endanger the national security and national interests of the People’s Republic of China, the People’s Republic of China may, based on the actual situation, take reciprocal measures against that country or region. What items fall under CECL? For items that fall under CECL exporters have to apply for a license from SECADs. Controlled Items The items covered by the CECL are called “controlled items” and also include the technical information and data related to such items. Controlled items include among others dual-use items, military items, nuclear items, technologies, services and items related to the maintenance of national security and national interests and to the performance of anti-proliferation. This is not an exhaustive list since SECADs will issue lists and update these lists and they can also temporarily control certain good or technologies etc. Unlisted items There is another category of items that fall under the CECL restrictions: goods, technologies, or services that may endanger the national security or national interests, be used for designing, developing, producing, or using weapons of mass destruction or be used for terrorism purposes. The penalties imposed by CECL Under the CECL the SECADs have far reaching powers to investigate such as on-site inspections, interviews, confiscation and seizure of items, inspecting means of transport used for export, duplicating documents and bank-account examinations. The export operator who refuses or obstructs any regulatory inspection, can receive a warning, but can be also punished with a fine ranging from RMB 100,000 (about US$ 15.109) to RMB 300,000 (about US$ 45.328). In case of violations of the export controls, penalties may consist of amongst others warnings, confiscation, business suspension, revocation of export business qualification and fines of up to RMB 5 million (about US$ 755.857) or 10 times the gains made from the illegal activities. At last export control violation constitutes a crime, so criminal penalties also apply. Conclusion CECL clearly is China’s answer to also stricter controls from the US and the EU. Every exporter or importer of items covered by CECL should take notice of this new law and take proper measures to ensure compliance with the law.