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, the review by MOFCOM (or together with the other governmental agencies, as the case may be) may take up to 30 business days before an approval or disapproval decision can be made. The approval is not the final approval of the technology import, but will be a Provisional License for Technology Import (the “Provisional License”). The technology import applicant may sign the technology import contract after the issuance of the Provisional License. After the technology import contract is signed, the applicant must apply for the final Technology Import License by submitting to MOFCOM a copy of the executed technology import contract and relevant supporting documentation. MOFCOM will conduct an authenticity review of the technology import contract, and will make a decision on whether to approve the technology import within 10 business days after receiving the required documents. The approval decision will be in the form of a Technology Import License.
If the initial application to MOFCOM includes a copy of the executed technology import contract, MOFCOM may take up to 40 business days to review the entire application package (including the authenticity review of the technology import contract) before deciding whether to grant the Technology Import License or not.
It is worth noting that, regardless of any effective date set forth in a technology import contract, with respect to any Restricted Technology, the contract is effective only upon the issuance of the Technology Import License. In the event of any material amendment to a technology import contract after obtaining the Technology Import License, the technology importer is required under TIER to apply for a new Technology Import License. The termination of a technology import contract shall also be recorded with MOFCOM.
Expansion of the Scope of Certain Restricted Technologies
The apparent simplification or shortening of the Catalog can easily be misconstrued as a reduction of the scope of the Restricted Technologies across the board. As is always, however, the devil is in the details. The expansion of the scope of certain Restricted Technologies can be found in certain Life Sciences technologies. For example, “agricultural genetically modified organism application technology” remains a Restricted Technology in the Catalog, but the scope has been expanded from the technologies themselves to products of the application of the technologies, namely, genetically engineered plant seeds and seedlings, animal breeds, aquatic fries and microbial species modified by modern biotechnology. This is a significant expansion and has far-reaching implications because the importation of GMOs are now regulated not only by goods import regulations but also by technology import regulations as a form of Restricted Technology subject to MOFCOM approval and requiring a Technology Import License.
Newly Added Restricted Technologies
The new Catalog also includes certain Restricted Technologies that were not in the previous Catalog. For example, “fruit and vegetable preservation technology,” specifically, sterilization technology for fruits and vegetables using carbendazim, has now become a Restricted Technology.
An important addition to the Catalog as a Restricted Technology is “highly pathogenic microorganisms.” These include those pathogenic microorganisms that cause the diseases listed in the List of Quarantine Diseases for the Animals Imported to the People’s Republic of China, promulgated jointly by the Ministry of Agriculture and Rural Affairs and China’s General Administration of Customs in 2020 (a total of 170 diseases), those in the List of Pathogenic Microorganisms Transmitted from Person to Person as Categories I or II pathogenic microorganisms, promulgated by the then Ministry of Health in 2006 (a total of 99 microorganisms), and the pathogenic microorganisms that are yet to be discovered or have been declared eliminated in China.
The only Restricted Technologies in the software and information technology services industry in the Catalog (deepfake technology and data encryption technology) are newly added to the Catalog. Obviously, they would not have been included in the prior Catalog given the timing of their advent.
This article has provided a high-level summary of China’s technology import regulations and the latest Catalog. For updated information on China’s technology export regulations, please refer to the author’s article here.