Foreign Trade Law Amended to Comply with China's WTO Commitments

In order to comply with its WTO commitments, China amended its Foreign Trade Law on April 7, 2004. The amended law will replace the current Foreign Trade Law (1994) and take effect on July 1, 2004.

The amendments primarily cover three areas: 1) conforming to WTO Requirements, such as lifting prior prohibitions against individuals engaging in foreign trade, lifting some administrative approvals previously required, etc.; 2) providing regulations regarding the implementation rules and procedures to ensure China's WTO membership rights, e.g. to specify the detailed rules for initiating investigation, to further regulate regulations of trade remedies, etc.; 3) Amending the existing law to regulate new situations and promote foreign trade development. A new chapter entitled "Foreign Trade Related Intellectual Property Rights" is added to the law and strengthens IP protection in foreign trade activities. The amended law has a total of 11 chapters and 70 articles as compared with 8 chapters and 44 articles of the current law.

New Regulations on Drug Import Took Effect on January 1, 2004

The State Food and Drug Administration promulgated the Regulations on Drug Import, which replaced the 1999 Regulations and took effect on January 1, 2004. The new regulations primarily entail import recordation, import inspection and general supervision and administration. Drug registration was removed from the regulations, and is now regulated by the Rules on Pharmaceutical Registration. Starting from January 1, 2004, pharmaceuticals may only be imported through 18 designated ports, whose customs bureaus handle drug import recordation and inspection.

China Further Opens Up to Foreign Investment in Distribution Services

MOFCOM promulgated the Regulations of Administration on Foreign Investment in Distribution Services in China on April 16, 2004. The Regulations will replace the Trial Rules on Foreign Investment in Distribution Services and will take effect on June 1, 2004. The new Regulations will conclude the trial period for foreign investment in wholesale, retail, franchising and commission agents' services in China and officially open these fields to foreign investment in accordance with the Schedule of Specific Commitments on Services of the WTO agreements. Under the new Regulations, foreign investors will no longer be subject to the stringent qualifications, ownership restrictions and geographical limitations previously imposed. Distribution services for books, gasoline, pharmaceuticals, and automobiles will be subject to separate regulations.

According to recent reports, a total of over 270 foreign invested distribution companies and over 2,200 stores have been set up in China during the trial period. The total amount of foreign investment in this area has exceeded US$3 billion.

MOFCOM Amended the Regulations on Establishment of Investing Companies by Foreign Investors

China's Ministry of Commerce (MOFCOM) made further amendments to the revised Regulations on Establishment of Investing Companies by Foreign Investors promulgated last June. The further amended regulations were promulgated on February 13, 2004 and took effect on March 13, 2004. The amended regulations eased some stringent requirements for qualifications of a foreign investor and expanded the business scope of qualified foreign invested companies. The amended regulations also provide specific requirements and procedures for verification of a foreign invested investing company as a regional headquarters.

Rules Promulgated to Govern Establishment of Foreign Invested Conference Exhibition Companies in China

In order to promote the development of China's exhibition services industry, the Ministry of Commerce enacted the Provisional Regulations on Establishment of Foreign Invested Conference Exhibition Companies, which became effective as of February 13, 2004. According to the Regulations, foreign investors may establish wholly foreign-owned, equity joint venture or contractual joint venture exhibition companies in China. The Regulations provide detailed application procedures and documents.

Foreign Investment in China's Domestic Financial Institutions

The Regulations on Foreign Financial Institutions' Investments in Domestic Financial Institutions was approved by the State Council and took effect on December 31, 2003. The Regulations apply to both international financial institutions and foreign financial institutions' investments in domestic commercial banks, finance corporations and other domestic financial institutions. The international financial institutions and foreign financial institutions must meet minimum asset requirements to qualify. Each foreign investor in a domestic financial institution is subject to maximum ownership restrictions. Investments in domestic auto finance corporations are not covered by these regulations, but are subject to the Regulations on Administration of Auto Finance Corporations.

Changes Made to Regulate Representative Offices of Foreign Insurance Institutions in China

The China Insurance Regulatory Commission (CIRC) issued Regulations on Administration of Foreign Insurance Institutions' Representative Offices in China. The Regulations replaced the 1999 Regulations and took effect on March 1, 2004. The CIRC revised the old Regulations to make them consistent with China's commitments under the WTO agreement as well as with the Regulations on Administration of Foreign Invested Insurance Companies. The new regulations also specify that CIRC local authorities are responsible for supervising the daily activities of the representative offices, and also establish a time limit for authorities to issue a decision on applications. The new Regulations provide more detailed application procedures and also penalties for failure to compliance with the Regulations.

China's Customs Service Strengthens Intellectual Property Protection

The new Customs Intellectual Property Protection Act was passed by the State Council and became effective on March 1, 2004, replacing the 1995 Act. The new law strengthens customs' right to investigate infringing goods and importers or exporters suspected of dealing in infringing goods is required to submit evidence of authorization. Under the new Act, protection is no longer limited to those IP owners who have recorded their IP rights with Customs. Furthermore, IP owners may inspect the suspected goods upon approval by Customs. The new Act also reduces hurdles to posting a bond for the value of the seized goods pending investigation. In addition, the Customs Registration may receive an extended term of protection, and resolving certain conflicts among different authorities in dealing with infringement.

Since the implementation of the 1995 Act, China's Customs has taken more than 7,000 actions to protect intellectual property rights, and investigated and handled more than 3,300 cases of infringing goods. With the new Act it is expected that Customs will play a more important role in protecting intellectual property rights.

The Supreme Court Revises Its Interpretations on Trial of Internet Copyright Disputes in China

The Supreme Court revised its Interpretation on Trials of Internet Copyright Disputes issued in 2000. The Interpretation deletes the 2000 opinions inconsistent with the Copyright Law amendments of 2001 and adds new provisions to punish online copyright infringement. The revised Interpretations took effect on January 7, 2004. Under the revised Interpretation, Internet Service Providers are subject to civil liabilities if they provide methods or equipment for bypassing or destroying others' copy protection technology. The Interpretation also states that copyright owners can apply for preliminary injunctions in accordance with the Copyright Law.

 
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