Navigation Software And Post WTO Restrictions In The PRC

The article was first published in Asian-Counsel magazine,†issue March 2008†www.pbpress.com

Before and after its accession to the WTO the PRC has made tremendous efforts in opening its market for foreign investors in order to be WTO compliant. Somewhat surprisingly though, in the past year, some industries saw the implementation of new restrictions rather than relaxation of the existing regulations. While those restrictions may still be compliant with the WTO commitments, they nevertheless harm foreign investors that relied on the prior regulations.

To provide one example, last year a specialist sector in the industry of automotive suppliers, namely suppliers for car navigation systems, was severely hit by new regulations issued by the State Bureau of Surveying and Mapping ("SBSM"). Until recently, commercial surveying and mapping in the PRC was allowed under PRC law for foreign invested companies in the form of minority shareholding in equity joint ventures or cooperative joint ventures. This has changed as of 1 March 2007, when the SBSM issued regulations according to which "producing electronic navigation maps" is expressly prohibited to foreigners. Further restrictions were made as of 19 November 2007, when the SBSM promulgated the Circular on Relevant Regulations Concerning the Administration of Electronic Navigation Map (Guo Ce Tu Zi [2007] No. 7) ("Circular"). Clause 2 of the Circular defines that 'producing electronic navigation maps' includes without limitation the activities of compilation, processing, format conversion and the quality testing of electronic navigation maps. Subsequently, the amended PRC Guiding Catalogue for Foreign Investment (effective as of 1 December 2007) listed "producing of normal map-oriented electronic navigation maps" under the "prohibited category" to any form of foreign participation in the PRC.

On first sight, the abovementioned restrictions which the PRC government implemented appear to be not too surprising. After all, map data is, at least in part, considered a state military secret and foreign participation in the area of mapping could create a national security concern. However, one should keep in mind the business operations of car navigation system manufacturers. Simply put, car navigation systems are a combination of the actual hardware device, navigation software and mapping...

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