What is an NNN Agreement?
NNN Agreements are the Chinese equivalent to the western world’s Non-Disclosure Agreement(NDA). An effective NNN agreement is used to help protect your confidentiality when working with manufacturers directly in China. NNN agreements include non-disclosure, non-circumvention, and non-use clauses.
Learn what the NNN agreement clauses mean and how they compare to a Non Disclosure Agreement:
NNN Agreement Clauses & Protection
The non-use clause in an NNN agreement means that the company you sign the contract with can’t use the product for any purpose outside of what is agreed upon in the contract. It ensures that they won’t use your product or idea to compete with you. They can’t sell your product to your competitors or competition.
Non-circumvention keeps the company you are working with from undercutting you out from your customers. If you are marking the price of your product up, a company you are working with might try to sell your product directly to your customers at a much lower price. This clause prevents that from happening. The importance of this clause varies depending on the situation, but it is an essential safeguard to have in place.
In the NNN, non-disclosure is similar to the Non-disclosure you may see in its western counterpart.Its purpose is to stop trade secrets and proprietary information from being stolen or made public. The non-disclosure clause should clearly state who is allowed to view and use protected or confidential information within a group. If there is an infringement made by any member of the group, then the factory that made the disclosure should be made fully liable and it should be clearly stated in the NNN.
If a company you are considering to work with refuses to sign either an NDA or NNN agreement, that is a sign that they are not trustworthy and you shouldn’t pursue further business with them.
NNN vs NDA: How Do They Compare?
The clauses of an NDA can include the clauses of the NNN, but they don’t always include the same terms. Either way, you should carefully read any document thoroughly before signing it.
NNNs should be used when you are doing business directly with a Chinese company, they hold more legal authority and power in China. NDAs are perfect for when you are using sourcing companies or wholesalers that are based outside of China, but may have offices or partners in China they use to conduct their work.
Working With a Sourcing Company
NDAs are suitable because the sourcing companies that you work with should already have their own agreements and relationships established with reliable companies.
One option you should consider is to label all information you share with your contacts clearly with “Confidential”, so that there is no misunderstanding that everything you share should be protected and handled with care.
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