Asia desk

Your business will be impacted by a new set of draft measures recently introduced in China. These measures mandate that all companies processing personal information within China must undergo regular compliance audits to ensure adherence to the country’s regulations on personal information protection. These audits will determine whether companies are compliant with the protection requirements outlined in the China Personal Information Protection Law (PIPL) and other relevant measures and regulations. Under these draft rules, companies have the option to either establish an internal department or engage a third party to conduct these audits. The auditors will assess whether the companies are in compliance with the PIPL and other related regulations, including those concerning cross-border personal information transfers. The auditing organization must ensure adherence to the new draft measures. The draft measures outline that companies processing personal information of over one million individuals are obligated to undergo an annual compliance audit. Other companies processing personal information need to conduct a compliance audit at least once every two years. Furthermore, the national and local cybersecurity departments, in collaboration with public security entities and other relevant bodies within China’s cabinet (the State Council), will create a recommended catalog of professional institutions capable of conducting compliance audits for personal information protection. This catalog will be updated annually, and companies are encouraged to select an agency from this list to perform the audits. In conclusion, the new draft measures in China mandate regular compliance audits for companies processing personal information. These audits are meant to ensure compliance with the country’s Personal Information Protection Law and related regulations. It’s essential for our client to understand these requirements and consider their implications for their business operations in China. We will keep you updated on the newest regulations or measures regarding to this new set of draft. If you need further information, please do not hesitate to contact our Asia team: Joost Vrancken Peeters and Ye Yu. 

China has recently decided to join the Hague Convention of 5 October 1961, also known as the Apostille Convention. The Chinese ambassador to the Netherlands submitted the accession on March 8, 2023. The Convention will come into force in China on November 7, 2023. What does this mean for you? In the past, if you wanted to have an official document issued in the Netherlands that you needed to use/be acknowledged in China, you typically needed to go through a lengthy process of notarization and legalization. For instance, to set up a company in China, among others you needed to provide a notarized and legalized extract of the Chamber of Commerce to verify the investor’s identity. The following steps had to be taken. First, you will need to have the document notarized by a public notary in the Netherlands. This ensures that the document is authentic and can be relied upon in legal proceedings. Secondly, the notarization should be verified by the district court before sending it to be authenticated by the Ministry of Foreign Affairs in the Netherlands. Once you have obtained the authentication from the Ministry, you will then need to have the document authenticated by the Chinese Embassy in the Netherlands for double authentication. Finally, it will be recognized as valid in China and can be used for the purpose it was intended. The whole process is rather costly and time-consuming. Once China joins the Apostille Convention, this traditional legalization process of official documents will be replaced by a single formality: an authentication certificate issued by the appointed authority where the public document was executed. For instance, if a Dutch company wants to use its company extract in China, it will need to obtain an apostille on the document. This means that the extract needs to be certified by the designated authority in the Netherlands and issued with an apostille certificate. The apostille certificate will verify the authenticity of the extract and makes it recognized as a legal document in China without the need for additional legalization. However, the applicability of the Convention in China depends on the definition of “public documents” under China’s domestic law. Only those documents falling under this definition will be recognized under the Convention. Therefore, it remains to be seen how China will interpret and apply the definition of “public documents” under its law. In terms of setting up a company or litigation, it is essential for documents such as a power of attorney, legal representative statements, and company incorporation certificates to be considered as public documents under China’s domestic law. This would greatly benefit foreign businesses operating in China. We will keep you updated for further clarification in terms of application in China. Contact If you need further information, please do not hesitate to contact Ye Yu.  

If you are conducting foreign trade activities in China or seeking to get engaged, it is good to know that you are no longer required to prepare extensive registration materials to apply for import and export licenses. China lifted the registration requirements for foreign trade activities, according to the Ministry of Commerce. China’s Foreign Trade Law was amended on 30 December 2022 by the National People’s Congress. The Congress removed Article 9 from the Foreign Trade Law, which required foreign trade operators to complete record filing and registration. Lifting the registration requirements simplified the procedure of import and export. Before 30 December 2022, Article 9 required “foreign trade operators engaged in the import and export of goods or technology to complete record filing and registration”. After the amendment, foreign trade operators automatically get the right to import and export. No need to apply for import and export licenses, registration certificates, and other relevant documents any more. The simplified procedure will speed up the process and lower the barriers of conducting foreign trade activities in China. It will certainly shorten the waiting time for starting up the import and export business, thus reducing the costs for foreign trade operators. Considering that China removed the travel restrictions 8 days after lifting the registration requirements, it is not difficult to see that China is making an effort to reopen the border to the world and attract foreign investors. According to the ministry, lifting the registration requirements is one of China’s efforts to “promote trade liberalization” and “release the potential for foreign trade growth.” Contact If you need further information, please do not hesitate to contact our Asia team or Ye Yu.

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].