(Mar. 2, 2010) On January 11, 2010, China's State Council published the draft Implementation Regulations of the Government Procurement Law (Draft Regulations) on its website, in order to solicit public opinion on its provisions. The 116-article regulations will clarify the general provisions of the 88-article Government Procurement Law (the Law) and provide detailed measures for its implementation. (Guowuyuan Fazhiban jiu Zhonghua Renmin Gongheguo Zhengfu Caigoufa Shishi Tiaoli (Zhengqiu Yijian Gao) Gongkai Zhengqiu Yijian de Tongzhi [Notice of the State Council Legislative Affairs Office on Soliciting Public Opinions of the People's Republic of China Implementing Regulations of Government Procurement Law (Draft of Soliciting Opinions)] [in Chinese], Jan. 11, 2010, available at http://www.chinalaw.gov.cn/article/cazjgg/201001/20100100193904.shtml; Draft Regulations [full text], XINHUANET, Jan. 11, 2010, available at http://news.xinhuanet.com/legal/2010-01/11/content_12790900.htm.)
China's National People's Congress adopted the Law on June 29, 2002; it took effect on January 1, 2003. The Law is the first national law passed by China's top legislature to exclusively regulate government procurement activities. It is aimed at bringing fairness, transparency, and integrity to the government procurement process in China (art. 3, Government Procurement Law [in Chinese], ZHONGHUA RENMIN GONGHEGUO QUANGUO RENMIN DAIBIAO DAHUI CHANGWU WEIYUAN HUI GONGBAO [GAZETTE OF THE NPC STANDING COMMITTEE] 228-236 (2002); for an English translation, see 14 THE LAWS OF THE PEOPLE'S REPUBLIC OF CHINA(2002) 21-42 (2003)). Although China had begun to introduce regulations on a transparent and competitive government procurement system earlier, in the mid-1990s, the Law's passage was believed to be a major step in establishing a comprehensive government procurement regulation system by the government of China. (Immanuel Gebhardt & Matthias Mueller, China's New Government Procurement Law: A Major Step Towards Establishing a Comprehensive System?, CHINA LAW AND PRACTICE online subscription database (July/Aug. 2002).)
The Law authorizes the State Council to formulate regulations on the Law's implementation. Highlights of the newly publicized Draft Regulations include:
· Scope of Government Procurement
The Draft Regulations first specify the scope of government procurement. “Government procurement” is defined by the Law as the use of government funds by government authorities, institutions, and social organizations to procure goods, projects, and services that fall within the centralized procurement catalogue or that are above the purchase thresholds (the Law, art. 2). “Goods” under the Law refer to all types and categories of articles, including raw materials, fuel, equipment, and products. The Draft Regulations elaborate on this definition, stating that “goods” can be tangible or intangible and therefore include intellectual property (trademarks, copyrights, and patents) (Draft Regulations, art. 4). The Draft Regulations also specify that “services” may include professional services, information network development, financial and insurance services, and transportation (id.).
· Definition of “Domestic Goods”
The Law requires government procurements to be derived from domestic sources with prescribed exemptions. However, it does not define what domestic goods, projects, and services are. Rather, it authorizes the State Council to determine the definition. In the Draft Regulations, “domestic goods” are defined as goods manufactured within the territory of China, whose domestic manufacturing cost is “above a certain percentage.” “Domestic projects and services” are defined to be projects and services provided by Chinese citizens, legal persons, or other organizations (Draft Regulations, art. 10).
Under these definitions, it is still not clear whether goods produced in China by joint ventures established by foreign and Chinese partners would be considered to be domestic goods. On this issue, the Draft Regulations provide that more detailed standards for determining domestic goods, projects, and services are to be jointly formulated by relevant departments under the State Council and the State Council finance department (id.).
· National Security Exception
For emergency procurement due to serious natural disasters or other matters of force majeure, or for procurement involving national security or state secrets, the requirements set forth in the Law do not apply (the Law, art. 85). The Draft Regulations restrict this exception by requiring that procurement involving national security or state secrets be approved by national security organs at the same level as the purchasing office (Draft Regulations, art. 114).