NNN agreements are the Chinese equivalent of the non-disclosure agreement (NDA) of the western world. This agreement is crucial for direct cooperation in China. An effective NNN agreement is used to protect your confidentiality when working directly with manufacturers in China. Each “N” in the title refers to a different type of contractual obligation. NNN agreements contain confidentiality, non-circumvention and non-use clauses.
NNN contract clauses and protections
Non-use: The non-use clause in an NNN agreement means that the company you are contracting with cannot use the product for any purpose other than those agreed in the contract. It ensures that they don’t use your product or idea to compete with you. You cannot sell your product to your competitors or competitors.
Non-circumvention: The non-circumvention prevents the company you are working with from undercutting you by their customers. If you increase the price of your product, a company you work with might try to sell your product directly to your customers at a much lower price. In other words, this is a commitment not to use similar products that are made cheaper to sell your product to your potential customers. This clause prevents this. The meaning of this clause varies depending on the situation, but it is an essential safety precaution.
Non-disclosure: In the NNN, secrecy is similar to the secrecy you can see in its western counterpart. Its purpose is to prevent trade secrets and proprietary information from being stolen or disclosed. The non-disclosure clause should clearly state who can view and use protected or confidential information within a group. If any member of the group has committed a breach, the factory that made the disclosure should be held fully liable and this should be clearly stated in the NNN.
NNN vs NDA: How Do They Compare?
The clauses of an NDA may contain the clauses of the NNN, but they do not always contain the same terms. In any case, you should read each document carefully before signing it.
NNNs should be used when doing business with a Chinese company directly as they have more legal authority and power in China. An NNN agreement protects you throughout your relationship with a Chinese company.
NDAs are perfect if you use sourcing companies or wholesalers based outside of China but may have offices or partners in China to do their work through.
Cooperation with a sourcing company?
NDAs are suitable for working with sourcing companies as they already have their own agreements and relationships with reliable companies.
One way to consider is to clearly mark all information you share with your contacts as “Confidential” so that there is no misunderstanding that everything you share should be protected and handled carefully.
Global Trade Specialists supports your direct purchasing from reliable manufacturing companies in China. With over 30 years of experience sourcing and manufacturing products from China, our experts can guide you to the right solution. We source Chinese products from our factories and help mass-produce new prototypes. Finding a suitable and honest manufacturing company in China that can be trusted to deliver high-quality products, while treating information confidentially in all correctness, is the basis for sustainable success.