RULES FOR THE IMPLEMENTATION OF THE REGULATIONS ON ADMINISTRATION OF TECHNOLOGY-INTRODUCTION CONTRACTS

    Article 1  These Rules are formulated in accordance with the provisions of
Article 12 of the Regulations of the People’s Republic of China on
Administration of Technology-Introduction Contracts (hereinafter referred to as
the “Regulations”).

    Article 2  Regardless of the country or region of the supplier, or of the
source of funds and modes of payment of the recipient, the recipient and the
supplier as specified in Article 2 of the Regulations shall apply for
examination and approval to the examining and approving authorities in
accordance with the Regulations and these Rules when they are to conclude any
of the technology-introduction contracts listed below:

    1. Contracts for assignment or licensing of industrial property rights.
Contracts for assignment or licensing of industrial property rights refer to
those for assignment or licensing of rights relating to invention patents, new
utility model patents, exterior design patents as well as trademarks, excluding
those merely for assignment of rights of trademarks.

    2. Contracts for licensing of proprietary technology. Contracts for
licensing of proprietary technology reler to those for supply or impartment of
technical know-how which is not yet publicized nor under legal protection as
industrial property, for manufacturing a product or applying a technology as
well as for product designs, technological processes, formulae, quality control
and management, etc.

    3. Contracts for technical services. Contracts for technical services refer
to those for offering services or consultancy to the recipient by the supplier
with its technology for achieving a specific goal, including contracts for
feasibility study or engineering design undertaken by the supplier upon the
entrustment of the recipient or by the recipient in cooperation with the
supplier, contracts for providing technical services by foreign geological
exploration or engineering teams that are employed and contracts for providing
services or consultancy by the supplier upon the entrustment of the recipient
for technical transformation of an enterprise, improvement of production
technology or product design and quality control as well as enterprise
management (excluding contracts for employing foreigners in China’s
enterprises).

    4. Contracts for co-production and co-design which involve any one of such
items as assignment or licensing of industrial property rights, licensing of
know-how or technical services.

    5. Contracts for importing complete set of equipment, production line or
key equipment which involve any one of such items as assignment or licensing of industrial property rights, licensing of know-how
or technical services.

    6. Other technology-introduction contracts which, according to the
examining and approving authorities, must go through the procedure for
examination and approval.

    Article 3  When companies, enterprises, institutions or individuals with no
rights to engage in foreign technology-introduction business are to introduce
technology from abroad, they shall, with letters of commission, entrust those
companies and enterprises with such rights to conclude technology-introduction
contracts.

    Article 4  Technology-introduction contracts concluded by Chinese-foreign
equity joint ventures, Chinese-foreign contractual joint ventures and foreign
capital enterprises (hereinafter referred to as enterprises with foreign
investment) established in the territory of the People’s Republic of China for
acquiring technology from suppliers shall comply with the procedures of
examination and approval as stipulated in these Rules.

    If foreign investors in enterprises with foreign investment use industrial
property rights or technical know-how as equity shares, the case shall be dealt
with in accordance with the relevant laws and regulations of the State for
enterprises with foreign investment.

    Article 5  The examining and approving authorities for examining and
approving technology-introduction contracts are the Ministry of Foreign
Economic Relations and Trade (hereinafter referred to as MOFERT) and its
authorized departments, commissions, bureaux of foreign economic relations and
trade and other administrative organs of provinces, autonomous regions,
municipalities directly under the Central Government, coastal open cities,
special economic zones and cities under separate planning (hereinafter referred
to as the “authorized examining and approving authorities”).

    Article 6  Technology-introduction contracts shall be examined and approved
at different levels in accordance with the following stipulations:

    1. Technology-introduction contracts for projects with feasibility study
reports approved by the ministries/commissions of and agencies directly under
the State Council shall be examined and approved by MOFERT.

    2. Technology-introduction contracts for projects with feasibility study
reports approved by people’s governments or their authorized competent organs
of provinces, autonomous rigions, municipalities directly under the Central
Government, coastal open cities, special economic zones and cities under
separate planning shall be examined and approved by the authorized examining
and approving authorities at the same level; if the technology-introduction
contracts are concluded by other transregional companies with parties abroad
through entrustment, they may be examined and approved by the authorized
examining and approving authorities of the locality where the conclusion takes
place with the consent of the authorized examining and approving authorities of the locality where the entruster is located. After
approval, the authorized
examining and approving authorities of the locality where the contract is
concluded shall send a copy of the Approval Certificate to the authorized
examining and approving authorities of the locality where the entruster is
located for the record. Neverthless, technology-introduction contracts
concluded with parties abroad by companies located in Beijing pursuant to
transregional entrustment (excluding those companies directly under Beijing
municipality) shall be examined and approved by MOFERT.

    3. Technology-introduction contracts concluded by enterprises with foreign
investment for acquiring technology from suppliers shall be examined and
approved by MOFERT if the enterprises concerned were established with the
approval of ministries/commissions of and angencies directly under the State
Council; or shall be examined and approved by the relevant authorized examing
and approving authorities if the enterprises concerned were otherwise
established.

    Article 7  A technology-introduction contract shall specify the following
items:

    1. name of the contract;

    2. contents, scope and requirements of the target technology to be
introduced;

    3. criteria, timelimits and measures for quality rectification of the
introduced technology and liabilities for risks;

    4. obligation to preserve the secrets of the introduced technology,
ownership and sharing of the improved technology;

    5. price or remuneration in total, prices of separate items and modes of
payment;

    6. calculations for compensation in case of violation of the contract;

    7. settlement of disputes; and

    8. definitions of terms and phrases.

    Annex and data relating to implementation of the contract may constitute an
integral part of the technology-introduction contract in accordance with the
agreement of the contracting parties.

    Article 8  With respect to techmology-introduction contracts involving
assignment or licensing of patent or trademark rights obtained in China,
relevant patent numbers or patent application numbers, trademark registration
numbers together with trademark design shall be expressly specified. Contracts
for assignment of patent rights shall be recorded with the Patent Office in
accordance with provisions of the Patent Law of the People’s Republic of China,
and those for licensing of the trademarks shall be recorded with the Trademark
Office in accordance with the provisions of the Trademark Law of the People’s
Republic of China.

    Article 9  The supplier shall ensure that the technology or data documents
provided are complete, accurate, effective and capable of attaining the
technology target specified in the contract. The time for the delivery of
technology documents shall correspond with the progress of the engineering
programme of the recipient.

    Article 10  If the recipient requires the supplier to provide raw
materials, spare parts or equipment for the introduced technology, the prices
shall not be higher than those of the like products on international market.

    Article 11  The supplier shall ensure that it is the lawful owner of the
technology provided or that it has the right to assign or license the
technology. If the recipient, in producing or selling products with the
assigned or licensed technology, is accused of infringement by a third party,
the supplier shall respond to the lawsuit. If the infringement charged by the
third party is proved, all economic losses the recipient may suffer shall be
compensated for by the supplier.

    Article 12  Within the term of validity of the contract, the ownership of
the improved technology including the right to apply for patents belongs to the
party that has made the improvements. Where the recipient provides the
supplier with an improved technology, the terms shall be the same as those when
the supplier provides the recipient with an improved technology.

    Article 13  The recipient shall undertake the obligation to preserve the
secrets of the proprietary technology and relevant data provided or imparted by
the supplier in accordance with the scope and duration as agreed in the
contract. The duration for preserving secrets shall not generally exceed the
term of validity of the contract. If special circumstances require that the
duration exceed the term of contract, it shall be expressly specified in the
contract, and reasons shall be stated when applying for examination and
approval.

    Within the duration in which the recipient undertakes the obligation to
preserve secrets, if the technology is made public owing to reasons for which
the recipient is not responsible, the obligation undertaken in this regard by
the recipient shall immediately terminate. If it is specified in the contract
that the supplier shall also supply its developed and improved technology to
the recipient within the term of validity of the contract, the recipient may
continue to undertake the obligation of secret-preservation after expiration of the contract. In that case, the new duration shall
begin from the date when
the supplier provides the technology but shall not exceed the duration
originally specified in the contract.

    Article 14  No provisions of restrictions on exportation of products
manufactured by the recipient with the introduced technology may be included in
the contract without the approval of the examining and approving authorities,
however, either of the following cases shall be excepted:

    1. in countries and regions where exclusive license contracts have been
concluded by the supplier;

    2. in countries and regions where sole agent contracts have been concluded
by the supplier.

    Article 15  No provisions of prohibiting the continued use of the
introduced technology by the recipient after the expiration of the contract
shall be included in the contract without the approval of the examining and
approving authorities. Where the duration of the patent relating to the
introduced technology has not expired at the expiry of the contract, the
relevant stipulations of the Patent Law of the People’s Republic of China shall
govern.

    Article 16  The supplier shall pay taxes in accordance with the provisions
of the tax laws of the People’s Republic of China.

    Article 17  The recipient of a technology-introduction contract or the
company or enterprise acting as its agent to conclude the contract shall, in
accordance with the provisions of Article 6 of these Rules, submit to the
examining and approving authorities, within 30 days from the date of
conclusion, the following official documents:

    1. a written application for approval of the contract. The contents of the
application shall include the name of the contract, the country of the supplier
and the name of the firm, the contents and scope of the target technology to
be introduced, the organ that has approved the feasibility study report of the
project and its approval number, etc.;

    2. copies of the contract (with a Chinese translation attached, if it is in
a foreign language);

    3. copies for each of the documents certifying the legal status of the
contracting parties;

    4. the approved feasibility study report and statement on funds available.

    To facilitate the examination and approval, the recipient or the company or
enterprise acting as its agent may solicit opinions or request for a
pre-examination from the examining and approving authorities as to the main
contents or certain clauses of the contract either before or during
negotiations.

    Article 18  In case the technology-introduction contracts and other
documents submitted to the examining and approving authorities in accordance
with the provisions of Article 17 of these Rules fall under any one of the
following cases, the examining and approving authorities shall require the
parties concerned to make due amendments within a prescribed time limit, and
the approval shall be denied in case of failure to make amendments:

    1. where they contravene the current laws and regulations of the State and
impair social and public interests;

    2. where they impair national sovereignty;

    3. where the contents of the contract are inconsistent with the approved
feasibility study report of the project;

    4. where the basic clauses and contents of the contract are imperfect;

    5. where the contract contains no explicit and rational stipulations
concerning the responsibilities about and solutions to possible disputes over
property rights arising from the assigned or licensed technology or other
disputes that may occur in the course of implementation of the contract;

    6. where the contract contains no rational stipulations on the technical
level and economic benefits to be attained by the assigned or licensed
technology, including the quality warranty for the products manufactured with
tbe said technology;

    7. where the price or modes of payment for the introduced technology are
unreasonable;

    8. where the stipulations on rights. responsibilities and obligations of
the contracting parties are not sufficiently clear, reciprocal or rational;

    9. where the contract contains preferential tax commitment without the
consent of the state tax authorities.

    Article 19  The examining and approving authorities shall decide to approve
or disapprove the contract within 60 days from the date when the application
is received. If the examining and approving authorities require amendments in
accordance with the provisions of Article 18, the duration needed for
examination and approval shall be counted from the date when the amended
contract or an instrument of amendment is received.

    If the examing and approving authorities make no response at the expiry of
the specified period, the contract shall be deemed to have been approved.

    Article 20  The contract shall come into force as of the date of approval
and the examining and approving authorities shall issue a unified Approval
Certificate for a Technology-Introduction Contract printed and serial-numbered
by MOFERT.

    Article 21  If the term of validity of a technology-introduction contract
exceeds the period of 10 years as stipulated in Article 8 or includes the
restrictive provisions as listed in Article 9 of the Regulations, the recipient
shall submit an application with detailed explanations to the examining and
approving authorities when going through the procedure for examination and
approval in accordance with the stipulations of these Rules.

    Article 22  Any modifications of the clauses relating to the target
technology content, price, duration and secret-preserving time limit of an
approved technology-introduction contract shall be made by consultations
between the contracting parties upon a written consent of the examining and
approving authonties. If the modifications are inconsistent with the approved
content of the target technology or require an amount of foreign exchange
exceeding the approved amount, the procedure for reexamination and reapproval
shall be gone through in accordance with the provisions of Article 4 and
Article 11 of the Regulations and Article 6 of these Rules.

    Article 23  The relevant authorized examining and approving authorities
shall submit a copy of the Approval Certificate for a Technology-Introduction
Contract and other relevant data to MOFERT for the record within 10 days from
the date of the approval of a technology-introduction contract.

    Article 24  In the course of the implementation of a contract, the Approval
Certificate for a Technology-Introduction Contract or its copy must be
presented to the organs concerned in accordance with the relevant stipulations
while handling such matters as bank guarantee, letter of credit, payment,
foreign exchange settlement, Customs declaration and tax payment, etc. Banks,
Customs or tax authorities are enpost_titled to refuse to handle such matters if no
Approval Certificate or its copy is presented.

    Article 25  The authority to interpret and revise these Rules resides in
MOFERT.

    Article 26  These Rules shall enter into force as of the date of
promulgation. The Measures for Examination and Approval of
Technology-Introduction Contracts promulgated on September 18, 1985 by MOFERT
shall be abrogated as of the same date.?