How NNN and OEM agreements could prove to be the most effective tool to carry on seamless business operations in China.

Patent Prosecution Highway

China has become the world’s leading manufacturing base, it is quite obvious that businesses from all over the world want to make the most of it. NNN and OEM agreements could prove to be the most effective tool in order to carry on seamless business operations in China.

The highly advanced product manufacturing sector and quality control make China the go-to place for industrial and consumer components and products. Often businesses come up with the idea or design of the product but they do not have the capital to manufacture the product on a wide scale. Most of the time they lack the resources required to produce the items. This is where the value of NNN and OEM agreements comes into the picture.

 

NNN Agreement in China

Instead of drafting a pure NDA agreement, foreign companies should be opting for a Non-Disclosure, Non-Use, and Non-Circumvention agreement (NNN) that includes the normal protections of an NDA including non-disclosure and non-use provisions but in addition to those, also non-circumvention protection. China NNN agreement prevents your Chinese manufacturer the distributing of your IP to 3rd parties. It stops Chinese suppliers from using your IP for any purpose other than manufacturing the product in question for you and prohibits a supplier from selling direct to your clients.

 

Must have Provisions in a China NNN Agreement

  • NNN agreement should be written to be enforceable in a Chinese court with jurisdiction over the Chinese defendant.
  • It will need to be written in English and Chinese and we will need to be able to make slight edits (such as changing the supplier’s name in English and Chinese) so you can re-use the document (for the same product) but for different suppliers.
  • An NNN agreement must include a sum of certain contract damage provisions that a Chinese court can and will enforce by ordering the seizure of the defendant’s assets.

 

 

OEM Agreement

The abbreviation “OEM” stands for an original equipment manufacturer. The OEM definition can be misleading, as an OEM manufacturing does produce the product or components but they are created based on the design specifications produced by the original company. So if you have given your product’s technology and signed an OEM contract with the Chinese manufacturer, you can be sure that you will get the product according to your product specification.

 

The Following is a Checklist of OEM Agreement:

  • Materials– The kind of material the CM is going to use must be clearly mentioned in the contract. Be sure the contract manufacturer you’re considering has adopted quality standards – such as the ISO 9001:2008 – which provide guidelines to ensure the contract manufacturer’s products and services are consistently meeting customer requirements.
  • Manufacturing– Review consignment terms, contract, and Standard Operating Procedures (SOP)
  • Price– Request to know the provider’s pricing formula and activity or service rates with current your product.
  • Order placement– How are orders to be placed? Purchase order or by forecast? Also, be sure and state the liability where necessary. The agreement must also define the list of products, performance criteria, tooling list and purchase order.
  • Quality control and quality assurance- Foreign companies need to have the right, after a 24-hour notice, to inspect, audit or examine the manufacturer’s operation, record, system, and facilities to ensure compliance with the OEM agreement.
  • Term– The parties will determine an appropriate term for their contract, and may make the agreement renewable on request by the buyer.

 

NNN and OEM agreements could prove to be the most effective tools in order to carry on seamless business operations in China. It is important that the right China supplier is selected at the very beginning to make sure you are getting the best product without the fear of losing your IP.

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In the Year 2021, A New Window of Hope is Opening in the US-China Relationship

A change in the presidency and the arrival of Joe Biden as the US president are indicating a strong bilateral tie. The new US administration is aiming to create a new type of relationship with China that is closer to the demands of the 21st century.

Sino-American ties plunged to historic lows under the administration of President Donald Trump, with the two clashing over trade, tech, and Beijing’s increasing assertiveness in the South and East China seas and over self-ruled Taiwan. The new US administration is aiming to create “a new type of relationship with China that is closer to the demands of the 21st century.”

In spite of the Huawei incident, it is quite unlikely that China will go after every foreign firm. There is no incident reported that suggests even a single US or European company has been told to close down their operations from China. The former US President Donald Trump wanted to lower the trade deficit by imposing tariffs, making Chinese imports expensive.

 

But the change in the presidency and the arrival of Biden as the US president are indicating a strong bilateral tie. Biden said partnering with other democracies on China would “more than double” the US economic leverage over the country.

 

On any issue that matters to the US-China relationship, Biden said, “We are stronger and more effective when we are flanked by nations that share our vision for the future of our world.”

 

“Biden’s policies will be about returning to multilateralism, returning to international organizations, and returning to the status of fighting without splitting,” Chen Wenling, chief economist at the China Centre for International Economic Exchange.

 

Chinese Foreign Minister Wang Yi has previously suggested Beijing would be open to restarting its relationship with the US following November’s election, declaring the two countries to be at a “critical historical juncture” after a year of escalating tensions.

 

The way to maintain an equilibrium in relations, both seem to agree, is to balance competition and cooperation. According to Bloomberg Opinion- “to have any chance of managing such frictions, the U.S. and China first need to set the boundaries of their competition and build realistic expectations for cooperation. That’ll require both Biden and Xi to take some political risks.”

 

“China-US relations have come to a new crossroads, and a new window of hope is opening,” said Wang, who is also a State Councilor, told the state-run Xinhua news agency in an interview.

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