NNN agreement China: what it covers and how to protect your designs with suppliers

SATURDAY, 14 NOVEMBER 2026

Before sending drawings and prototypes to a Chinese factory you need a non-disclosure, non-use and non-circumvention agreement: Chinese language, law and court, the company seal, the penalty and the 30% rule, and a trademark filed in China.

NNN agreement China: it is the contract you sign with a Chinese supplier before showing it drawings, prototypes or specifications, and it covers three commitments: no disclosure, no use and no circumvention. It only works if it is written in Chinese, governed by Chinese law, stamped by the right company and backed by a penalty that a Chinese judge can apply.

Anyone who develops their own product, a custom promotional item or a component made to drawing and has it manufactured in China hands the most valuable part of the work to the factory. This guide explains what an NNN agreement covers, why an ordinary confidentiality agreement is not enough, which clauses matter, how a penalty is enforced, why the trademark should be registered in China before ordering and what the agreement does not solve. At the end there is an example with numbers and a checklist.

NNN agreement China: what the three Ns mean

NNN stands for non-disclosure, non-use and non-circumvention. The three parts protect different things:

• non-disclosure: the factory cannot pass drawings, samples, price lists and project information to third parties;
• non-use: the factory cannot use that information for itself, for example to make and sell the same item under another brand;
• non-circumvention: the factory cannot go around the client by dealing directly with the customers, distributors or suppliers it met through the project.

The agreement is signed before sharing anything important: technical drawings, prototypes, samples, and also requests for quotation built on the drawings. For the first supplier screening, use generic information that does not reveal the product. If a factory refuses to sign before seeing the project, it is worth asking why.

Why a confidentiality agreement is not enough

A European-style confidentiality agreement (NDA) mainly prohibits revealing information to third parties. With a factory the main risk is a different one: that it uses the project on its own account. To do that it does not need to tell anyone anything; it just has to make the same item, or a slightly modified version, and sell it to another client or in markets the buyer has not reached yet.

This is why law firms working with China consider non-use and non-circumvention more important than non-disclosure. An NDA translated into Chinese covers only part of the problem. There is also a drafting limit: if the ban only covers identical copies, changing one dimension or detail is enough to claim it is a different product. The description of what is protected must therefore be drafted carefully, without putting the secrets themselves into the text of the agreement.

Law, language and court: where it is enforced

A contract is useful if it can be enforced where the other party has its assets, and a Chinese factory has its plants, bank accounts and warehouses in China. Advisers in this field agree on three points:

• language: the agreement is prepared in Chinese and in Italian or English, but only one version prevails, usually the Chinese one, because a Chinese judge would work from that text anyway;
• law: Chinese law, so the judge does not have to apply a foreign law;
• forum: a Chinese court with jurisdiction over the factory's seat, or an arbitration agreed in advance.

An Italian judgment, by contrast, would first have to be recognised in China through a separate proceeding with an uncertain outcome. Arbitration is an often faster alternative. China has applied the New York Convention on the recognition of foreign arbitral awards since 22 April 1987, with two reservations: it covers awards made in another contracting state and disputes that Chinese law considers commercial.

Who signs: Chinese name and company seal

In China a contract signed by an individual without the company's official seal (the chop) can cause serious problems when you try to enforce it. The seal alone is not enough, though: the contracting party must be the right company, identified by its registered name in Chinese characters and its address, and the signatory must have the power to sign.

The typical case is the sales agent or trading company acting as an intermediary: an agreement signed with them does not bind the factory that actually produces. Before signing it is therefore worth checking which company will really manufacture, and making sure the name on the seal matches the contracting party.

The penalty: how much you can ask for

Proving how much you lost because a factory sold your product to others is difficult. This is why an NNN agreement sets a penalty, that is an amount or a calculation method agreed in advance. The Chinese Civil Code allows this in Article 585, but it also provides that, if the penalty is excessively higher than the loss, the court or arbitrator may reduce it at the request of a party.

The threshold was clarified by the Supreme People's Court in its interpretation of the general part of contract law published in December 2023 (Fa Shi 2023 No. 13). Under Article 65, a penalty that exceeds the loss caused by more than 30% can generally be considered excessive. It is not an automatic cap: the judge also weighs how the contract was performed and the fault of the parties, and the same rule treats bad-faith breach separately. A disproportionate figure weakens the clause instead of strengthening it, while a figure that is too low becomes a mere cost of doing business for the factory.

Register the trademark in China before ordering

The NNN agreement protects information, not the trademark. In China trademarks follow the first-to-file principle: the right generally goes to whoever files first, and a registration in Italy or the European Union gives no rights in China. The risk also exists for companies that manufacture in China without selling there: a third party registering the mark can cause problems for production and outbound shipments, and the filer is sometimes a person linked to the factory.

Some useful figures for planning:

• registration term: 10 years, renewable;
• timing: for an application without oppositions, usually a year or a little more;
• new trademark law: in force from 1 January 2027, it cuts the opposition period after publication from three to two months;
• classes: the Chinese office divides the 45 international classes into subgroups, so the application must be built around the actual products.

If the brand will also be used in Chinese characters, that version must be registered as well. The NNN agreement should also provide that any filing made by the factory on the buyer's trademarks, designs or patents is transferred to the buyer.

What the NNN agreement does not solve

An NNN agreement is the first step, not the whole contract. It does not establish who owns the moulds and tooling paid for by the client, nor how they are stored, used or returned: those rules belong in the manufacturing contract or in a tooling agreement. It does not set quality, delivery times or acceptance tests. It has no standard duration: the term is chosen according to the life of the product, how quickly the technology ages and the expected length of the relationship, bearing in mind that much information stays confidential after supply ends.

As a rule the agreement is not mutual: it protects whoever brings the project. If the factory also contributes its own technical development, a product development agreement is needed to state who owns the result. For initial guidance, European small and medium-sized companies can turn to the European Commission's China IP SME Helpdesk, which offers free and confidential advice and, according to its website, replies within 3 working days.

An example with numbers

The example is hypothetical. An Italian company designs a thermal bottle with a patentable cap and wants to have it made in China. Before sending the drawings it signs with the factory an NNN agreement in Chinese, governed by Chinese law, with jurisdiction at the court of the city where the factory is based and the seal of the company that will produce. The penalty is set at 300,000 yuan per breach.

A year later the same bottle appears in the factory's catalogue under another brand. The company takes action in China and claims the penalty. If the factory proves that the actual loss was 200,000 yuan, the 30% threshold brings the figure to 260,000 yuan: the agreed 300,000 exceeds it and the judge may reduce the amount, also considering whether the breach was in bad faith. Without an agreement, the company would have had to prove the loss and the breach from scratch, holding a contract that is hard to enforce.

Checklist before sending the drawings

• screen suppliers with generic information, without drawings;
• verify the Chinese registered name of the company that will really manufacture;
• sign the NNN agreement before sending any drawings, samples or detailed requests for quotation;
• Chinese text prevailing, Chinese law, court or arbitration specified;
• penalty proportionate to the possible loss;
• clause transferring any filings by the factory on trademarks and designs;
• trademark filed in China, also in Chinese characters if needed;
• separate manufacturing contract and tooling agreement.

With La Merce, a custom product project starts with an NNN agreement stamped by the factory that will actually make it, in Chinese and with the penalty set, before drawings and samples leave Italy.

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