26 五月 2021 FDI: PRC Newly Released Export Control Compliance Program
I. FDI: PRC Newly Released Export Control Compliance Program
On April 28, 2021, the Ministry of Commerce (“MOFCOM”) rolled out a Guide on the Building of Internal Compliance Program for Export Control by Dual-use Item Export Operators (the “Guide") which has taken effect on April 28, 2021.
On December 1, 2020, PRC Export Control Law took effect1 and this legislation has been understood as a counteraction against export control laws in other jurisdictions, especially U.S Export Control Act and Export Control Regulations which possess extra-territory jurisdiction and increase the trade compliance risks for PRC companies.
In the context of PRC companies face unprecedented challenge from export control compliance and in the need of structuring internal compliance program, MOFCOM released the Guide to help PRC companies to build a well-organized program to minimize the violation risks for exporting dual-use items (items possessing civil and military applications) under multi-jurisdictions.
The Guide sets out:
• 3 main principles (the principle of legality; the principle of independence; the principle of effectiveness)
• 9 key elements for effective internal compliance program;
• Promoting measures taken by MOFCOM (general, without explicit implementation).
Manufacturing company with cross-border operations shall pay lots of attentions on export control compliance. For example, a Foreign Invested Enterprise (the “FIE”), a subsidiary of French company, designs, manufactures, and exports dual-use items, it may need apply for license from MOFCOM under PRC Export Control Law. Without an efficient screening program, the FIE may neglect its obligation and violate the law.
The Guide advises 9-element compliance program:
1. Issuing a commitment statement
An exporter may issue a written commitment statement2 signed by its top manager or main principal, affirming that it will strictly comply with relevant PRC export control laws and regulations.
2. Establishing an internal compliance committee
An exporter may set up an internal compliance committee which is granted to sufficient authority, such as banning any suspected illegal export activity.
3. Conducting overall risk assessment
An exporter may conduct comprehensive risk assessment on the violation of export control law in any jurisdiction. Matters assessed mainly include: items traded, customers, technology and research and development (R&D), exporting countries and regions, internal operation, third-party partners (such as agency of freight, delivery, customs, declaration, e-commerce trading platform), and risk prevention measures, among others.
4. Establishing a review procedure
Key points to be reviewed: whether the items under operation are subjected to national export control lists;3 whether the operating activity complies with export control laws and regulations; whether the country where an end user is located is subjected to sanctions by the United Nations or among other sensitive countries; whether there is a risk in any end user or end use; whether the end uses are justified; whether a customer’s payment method complies with general business practices; and whether the export transport routes are reasonable.
5. Developing emergency response measures
An exporter shall take emergency remedial measures and report to government where any suspected illegal export activities are going to occur.
6. Training and Educating
An exporter may train its employees on export control laws and regulations by various means.
7. Improving compliance audit
An exporter may audit the rationality, feasibility and effectiveness of its internal compliance program regularly.
8. Retaining data files
An exporter shall properly retain export control-related documents, including export records, information on communications with government departments, customer information and correspondence, license application documents, license approval documents, information on the implementation of export projects, and other exchanges.
9. Preparing a management manual
An exporter may prepare a manual on the management of its internal compliance program for export control.
FIEs shall be cautious about whether and how the export control compliance obligation shapes their business, not only dual-use items, but also technology. Here are two of enlightening scenarios:
• Scenario One: In a FIE, a Chinese employee transfers technology (one type of controlled item) to a French employee in daily work, export control compliance obligation might be triggered because such action can be captured by PRC export control laws as deemed export.
• Scenario Two: A foreign R&D center develops technology for its Chinese affiliate and transfer the ownership to it under a contract, export control compliance obligation might be triggered because technology transfer occurs here.
II. IP: China to Further Shorten Administrative Processing Period for Trademarks
On May 10, 2021, China National Intellectual Property Administration (“CNIPA”) issued a notice to further shorten administrative processing period for trademark in order to improve processing efficiency. According to which, by the end of 2021, the processing period for the following trademark activities will be shortened to4:
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1. Please kindly see our previous LU at
2. The Guide has provided a sample of commitment statement.
3. On September 19, 2020, MOFCOM released Unreliable Entities List.
4. According to article 28 of PRC Trademark Law, for a trademark applied for registration, the Trademark Office shall, within nine months upon receipt of application documents for trademark registration, complete the examination. Where the provisions of the Law have been complied with, the Trademark Office shall make an announcement on preliminary examination and determination.
According to Article 34 of PRC Trademark Law, the Trademark Office shall notify the applicant in writing of the trademark that has been rejected and has not been published. The applicant who is dissatisfied with the decision may apply to the Trademark Review and Adjudication Board for a review within 15 days from receipt of the notice. The Trademark Review and Adjudication Board shall make a ruling within nine months from receipt of the application, and notify the applicant in writing. In case of prolonging such period for certain special situations, it may be prolonged for three months after the approval of the administrative department for industry and commerce under the State Council. In the event that the party concerned is dissatisfied with the ruling of the Trademark Review and Adjudication Board, it may appeal to the People’s Court within 30 days from receipt of the notice.
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