McDermott Will & Emery has a strategic alliance with MWE China Law Offices, a separate law firm based in Shanghai. This China Law Alert was authored by MWE China Law Offices lawyers Kevin Qian and Molly Qin.
On 1 March 2009, the new Administrative Measures for the Registration of Technology Import and Export Contracts (New Measures) issued by China’s Ministry of Commerce (MOFCOM) on 1 February 2009 took effect.
The New Measures set the time limit for the registration of technology import and export contracts. The time limit for registration is classified into two categories based on the different modes of payment. For those contracts adopting royalty as the method of payment, the applicant shall conduct the contract registration within 60 days after the initial royalty standard threshold has been reached. For other contracts not adopting royalty as the payment mode, the time limit for the registration will be within 60 days after the contract has come into effect. Generally, the applicant must be the Chinese party to the contract.
However, the New Measures have not addressed what penalties or punitive measures would be imposed if the applicant fails to register the contract, or fails to register it in a timely manner. Furthermore, registration is not a pre-condition for the contract to come into force. However, this does not mean that no adverse legal consequences will be imposed on the technology importer/exporter. Under the regulations issued by the State Council on the Administration of Import and Export of Technologies, one must first register the contract and obtain a Technology Import/Export Contract Registration Certificate. Only after obtaining a certificate can the applicant deal with follow-up matters, such as foreign exchange, banking, tax and customs.
Given the above, if the applicant registers the contract after the expiration of the time limit, MOFCOM is entitled to refuse to register the contract. Without the registration certificate, the enforcement of the contract will be adversely affected. For example, the customs office may refuse to acknowledge the imported technology-related equipment, and importation of the equipment will be affected. Or, the importer may not be able to obtain the approval from the State Administration of Foreign Exchange to exchange renminbi into other foreign currency, and thus will not be able to remit payment to the technology exporter located outside of China.
In order to clarify the New Measures, MOFCOM at various levels is in charge of contract registration. The New Measures are applicable to contracts relating to the assignment of patent rights, assignment of rights to apply for patents, licensing of rights to implement patents, licensing of the use of technical know-how, technical service and other matters related to technology import and export.
Additionally, the New Measures provide for a detailed registration procedure. The applicant must first register on the website designated by MOFCOM and print out the application form. After the online registration, the applicant must submit the printed application form, a duplicate of the contract and other documents to the MOFCOM for registration. Within three business days after the receipt of these documents, MOFCOM will review the contents of the documents and issue the certificate. If the documents fail to meet the requirements, MOFCOM will direct the applicant to rectify them within the same time period. The applicant may resubmit the documents and expect to receive the certificate within three business days if all the requirements are met.