01NDA vs NNN — what they actually cover
An NDA is a common-law confidentiality device built for two roughly equal parties exchanging information. The remedy it points at is an injunction.
In a China-factory scenario the factory rarely just leaks your drawing. More common patterns:
- Run an extra production batch and sell directly to your downstream customers (only Non-circumvention blocks this).
- Tweak your design and list a "house brand" on 1688 / Alibaba (only Non-use blocks this).
- Share the same production line with your competitor for a similar SKU (only Non-compete language blocks this).
Your standard US NDA does not address any of these. That is why factories happily sign it — it does not constrain them.
02What each of the three N’s blocks
Drawings, formulas, customer lists, pricing — none of it leaves the factory.
Factory cannot use your information to make or sell the same or a similar product to anyone else.
Factory cannot contact your downstream customers directly or through a related third party.
You need all three. The one most US importers forget is N3 (no circumvention) — the factory takes your customer list and quietly opens a back channel. That is the single biggest revenue leak for US brands sourcing from China.
03Venue & enforcement — why the NNN must name CIETAC
You win the case — now what? The award must be enforceable in a Chinese court where the factory has assets.
A US NDA saying "Governed by California law / disputes in San Francisco Superior Court" is functionally wallpaper in China. US judgments are almost never directly enforced in PRC courts.
A professional NNN uses a two-track venue clause:
- Arbitration: CIETAC (Shenzhen or Shanghai sub-commission). Awards are enforceable in China and abroad under the New York Convention.
- Reserved court track: For tooling seizure or emergency injunctions, reserve the right to file at the factory\u2019s local Intermediate People\u2019s Court.
04Drafting LD so it actually bites
Under Civil Code Article 585, a PRC court may reduce LD that is "manifestly higher than" actual loss. In practice the safe ceiling is around 130% of provable loss.
NNN LD numbers we use as starting points:
- Disclosure: USD 10,000 per disclosure event, USD 50,000 for a material customer-list leak.
- Circumvention: 3× the order value diverted, applied retroactively to the prior 24 months.
- Competitive use: 40% of total sales of the offending SKU since launch, or USD 100,000, whichever is higher.
Want to pressure-test your numbers? Run them through the LD sweet-spot calculator on the main page.
05Common NNN drafting mistakes (US importers)
- English-only: A PRC court reads the Chinese version. An English-only NNN is treated as a reference document, not the operative text.
- Vague "samples / drawings" language: Confidential Information must be defined down to SKU, drawing number, and tool number.
- No term: Use at least 5 years post-termination, 10 years for technical products.
- Signed by the wrong person: Must be the legal representative or an authorized director. A purchasing manager\u2019s signature is meaningless.
- No employee-liability clause: Factories love to argue "rogue employee, not us". The contract must hold the factory jointly liable for employee acts.
These clauses only bite when they sit inside a bilingual agreement a PRC court will actually enforce. We give you the 17-point risk self-check, the LD sweet-spot calculator, and the PI vulnerability scanner.
Try the three tools on the main pageFAQ
Q1. We already signed a US NDA. Do we still need an NNN?+
Yes. The US NDA is hard to enforce in PRC and lacks Non-use / Non-circumvention coverage. Add a bilingual NNN and state in it that the NNN supersedes any prior NDA on the same subject matter.
Q2. Can we use an off-the-shelf NNN template instead of counsel?+
Templates miss the PRC-court detail that decides the case — venue, LD formula, employee joint liability — and they do not tailor the Confidential Information definition to your SKUs. At minimum have a PRC-trade-aware advisor or counsel review.
Q3. Does signing an NNN actually scare the factory?+
The signature does not. What scares the factory is knowing that a USD 10,000 / event LD can be enforced in its own local court. The point is enforceability — not the signing ceremony.
Q4. What if the factory refuses to sign?+
Usually because the numbers are too aggressive. Run the LD calculator, come back with a defensible range, and try again. If the factory still refuses any NNN at all, that is a hard signal — they are protecting their right to copy or circumvent.
More in this series
You signed the PI and wired the deposit, but the factory can still walk. Here are 12 gaps you must move into a bilingual master agreement.
Once the tool sits in their plant, leverage flips. How to draft it right up front, and how to claw it back when the factory refuses to release it.
Write the LD too high and the judge cuts it down. Too low and you collect nothing. Here is the 0.30–0.50% per day sweet spot and how it is derived.