On November 2, 2021, China’s Ministry of Commerce (MOFCOM) published a notice of an update to China’s Catalog of Technologies the Import of Which is Prohibited or Restricted (the “Catalog”). This is the first time the Catalog has been revised in 14 years, and the new Catalog is significantly shorter, as promised by MOFCOM in 2020 after its revision of China’s Catalog of Technologies the Export of Which is Prohibited or Restricted.
The shortening of the Catalog is the result of changes to the guiding principles for determining what technologies should be prohibited or restricted from being imported, with the overarching aim to simplify the Catalog as much as possible. For example, obsolete production technologies stipulated by China’s laws and regulations are no longer prohibited from being imported, not because the country is now encouraging their importation but because such technologies have fallen into such disuse that it is no longer necessary to include them in the Catalog. With respect to the technologies of which the import is restricted, the new Catalog removed several categories of technologies that may be considered protectionist, such as technologies considered “necessary” to establish or expedite the establishment of certain domestic industries or to safeguard China’s international financial status and balance of payments, or technologies inconsistent with China’s industrial policies.
INTRODUCTION TO CHINA’S TECHNOLOGY IMPORT REGULATIONS
Technology import into China is governed by China’s Technology Import and Export Regulations (TIER). The scope of technology import regulated by TIER is very broad, and includes all acts of technology transfer from outside China to within China, whether by way of trade, investment, or economic and technological cooperation. Specifically, TIER regulates inbound assignments of patents and patent applications, patent licenses, transfers of technological secrets, provision of technological services, and other forms of inbound cross-border technology transfers. TIER categorizes technology imports into three categories: technologies that may be “freely” imported (the “Free Technologies”), technologies the import of which is restricted (the “Restricted Technologies”), and technologies the import of which is prohibited (the “Prohibited Technologies”). The Catalog, promulgated by MOFCOM, includes the lists of the Restricted Technologies and the Prohibited Technologies. Under TIER, import of the Prohibited Technologies is prohibited, import of the Restricted Technologies is subject to MOFCOM’s prior approval, and the regulatory requirement for the import of the Free Technologies is the after-the-fact registration of the relevant technology import contract, which shall become effective according to its own terms and not conditioned on the registration.
MOFCOM’s approval of import of the Restricted Technologies can be a two-step or one-step process before MOFCOM, depending on the timing of the execution of the technology import contract vs. the application of the technology import license (the “Technology Import License”). The application for approval of the import of a Restricted Technology can be submitted to MOFCOM before or during the negotiation of the technology import contract, or after the technology import contract is signed, in which case, a copy of the executed technology import contract should be included in the application materials.
After receiving the application, MOFCOM will conduct a review of the Restricted Technology together with other applicable governmental agencies, e.g., China National Intellectual Property Administration, China’s Ministry of Science and Technology or Ministry of Agriculture and Rural Affairs, or the National Forestry and Grassland Administration, depending on the nature of the Restricted Technology. If the application does not include a copy of the executed technology import contract, …….