An NNN agreement (non-disclosure, non-use, non-circumvention) is a contract designed for dealing with Chinese factories and partners. It prohibits three things: disclosing your confidential information, using it for the counterparty's own benefit, and circumventing you to deal directly with your customers. A properly drafted NNN is governed by Chinese law, written in Chinese (or bilingual with Chinese controlling), and enforceable in Chinese courts.
Why it matters
The classic Western NDA fails in China for a structural reason: the real risk is rarely that a factory tells someone your secrets. It is that the factory uses your designs and tooling to launch a competing product, or quietly sells to your customers at a lower price. An NDA does not prohibit either. An NNN agreement covers all three behaviors and — critically — includes liquidated damages in a specific RMB amount, which gives a Chinese court a concrete number to enforce and supports asset freezes. An English-language NDA governed by, say, New York law against a supplier whose assets sit in Dongguan is in practice a letter, not a contract.
How it works in practice
Before sending CAD files to a shortlisted factory, an Australian consumer products company signs a bilingual NNN with liquidated damages of RMB 500,000 per breach, Chinese law as governing law, and jurisdiction at the defendant's local court. When the factory later lists a near-identical product on a B2B marketplace, the company obtains an asset freeze within weeks and settles. Pair the NNN with a full OEM agreement once production starts — see OEM vs ODM for why ownership of tooling and designs must be nailed down.
Common mistakes
- Recycling a US or EU NDA template and choosing foreign governing law
- No liquidated damages clause, leaving the court nothing concrete to award
- Signing with the wrong entity name or without the company chop
- Waiting until after quotes and samples have been exchanged to sign
- Forgetting non-circumvention, the clause that protects your customer list