NEW REGULATIONS ON TECHNOLOGY IMPORT AND EXPORT EFFECTIVE AS OF JANUARY 1 2002

A set of new government regulations on technology import and export (namely, Regulations on Administration of Technology Import and Export) was issued by the State Council on December 10, 2001 and became effective as of January 1, 2002.

Comparing with the previous regulations and rules, significant changes have been made in the new regulations.

1. According to the new Regulations, technologies are classified into three categories, namely:
   1. technologies prohibited from importing and exporting;
   2. technologies restricted for import and export; and
   3. technologies allowed to be traded freely. Import contracts for technologies that are restricted for import are subject to MOFTEC approval. For technologies allowed to be traded freely, no MOFTEC approval is required and recordation of contracts with MOFTEC will be enough.
2. For the technology importation, transferors' obligations on the so-called guaranty of legitimacy, guaranty of non-infringement and guaranty of performance under previous regulations and rules remain basically unchanged.
3. Comparing with the previous rules, the prohibition of the following restrictive clauses are lifted:
   1. prohibition on continued use of the licensed subject matter after expiration or termination of the contracts;
   2. unequal exchange of improvements; and
   3. restriction on transferee's export destinations.
4. Under the previous regulations, the term of a technology import contract was generally not allowed to exceed 10 years. While in the new regulations, there is no such kind of regulatory contract term restriction.
5. Unlike the previous regulations, the new regulations stipulate that the use of transferred technology by the transferee after the expiration of the contract is subject to negotiations between the transferor and the transferee.
6. There are similar stipulations in the new regulations regarding the classification of technologies, the export permit and contract approval relating to the export of technologies that are restricted for export, and recordation of contracts for technologies that can be traded freely.
7. In the new regulations, there are no stipulations regarding the obligations on the part of transferors, the term and the confidentiality of contracts, prohibited clauses etc. for technology export contracts that are comparable to the stipulations for technology import contracts.

As the result of the implementation of the new regulations, the previous regulations and rules, namely Regulations on Administration of Technology-Introduction Contracts (Promulgated by the State Council on May 24, 1985), and the Rules for the Implementation of the Regulations on Administration of Technology-Introduction Contracts (Approved by the State Council on December 30, 1987) were abolished as of the same day.