The regulations (hereinafter "these Rules") are prescribed in accordance with the Paragraph 4 of Article 22 of the National Defense Law.

Paragraph (1)
The term "competent authority" as referred to in these Rules means the Ministry of National Defense.
Paragraph (2)
The term "authority-in-charge" as referred to in these Rules means the various authorities under direct supervision of the Ministry of National Defense.

The term "National Defense Technology Institute" as referred to in these Rules means organizations of various levels under the supervision of the Ministry of National Defense conducting the activities with respect to the research and development, manufacturing or maintenance and repair relating to the national defense technology industry.

The term "Private Entity" as referred to in these Rules means any corporation, partnership or sole proprietorship incorporated or established under the laws of the Republic of China (hereinafter "our country", "ROC" or "Taiwan", where appropriate) or any foreign country, or any other domestic and foreign legal entity, organization or government authority, that may conduct the sale of products of national defense technology.

Paragraph (1)
The term "products of national defense technology" as referred to in these Rules means any weapon, equipment, system, supply, technical information, books and periodicals resulting from the research and development, production and manufacture, or maintenance and repair conducted solely by the National Defense Technology Institute, or through cooperation or mutual commission with other legal entities, and other goods for military use or for common civilian and military use.
Paragraph (2)
The classification of the products of national defense technology and the powers and responsibilities [or procedure] for the approval on the sale of products of each category are as follows:
Subparagraph (1)
Class A: Special goods for military use. The sale of such products shall be submitted by competent authority to the Executive Yuan for the latter's approval.
Subparagraph (2)
Class B: Traditional goods for military use. The sale of such products shall be submitted to competent authority for the latter's approval.
Subparagraph (3)
Class C: General goods for both civilian and military use. The authority in charge shall approve the sale of such products and submit its approval to the competent authority for reference.
Paragraph (3)
The classification of the products of national defense technology set out in the preceding paragraph shall be prescribed by the competent authority.

Paragraph (1)
The term "sale" as referred to in these Rules means the non-gratuitous transferring of ownership of the products of national defense technology to any domestic or foreign third party.
Paragraph (2)
In the case the products are sold to a Taiwanese governmental organization, the National Defense Technology Institute may conduct the sale alone; the provisions concerning cooperative sale or commission sale in these Rules shall not apply.

Paragraph (1)
The term "cooperative sale" as referred to in these Rules means the sale conducted by the National Defense Technology Institute and the Private Entity on the products resulting from the cooperation between the National Defense Technology Institute and the Private Entity in research and development, production and manufacturing, or maintenance and repair.
Paragraph (2)
In case the Private Entity sells the products described in the preceding paragraph under its own brand name, these Rules shall not apply.

Paragraph (1)
The term "commission sale" as referred to in these Rules means a National Defense Technology Institute enters into contracts with a Private Entity for the latter to undertake acts of agency or the distribution of the products of national defense technology.
Paragraph (2)
The term "agency" or "distribution" as used in the preceding paragraph includes the drafting and execution of market survey, marketing and promotion relating to the sale of the products of national defense technology.

The competent authority may coordinate with the Ministry of Foreign Affairs and the Ministry of Economic Affairs in dealing with matters concerning the review and document verification of export countries or areas of the products of national defense technology and of special export cases, and concerning product promotion.

The competence and responsibilities of the authority in charge are as follows:
Subparagraph (1)
to draw up procedures for the sale of the products of national defense technology.
Subparagraph (2)
to verify, coordinate and forward cases of the sale of classes A and B products of national defense technology.
Subparagraph (3)
to approve the sale of class B products of national defense technology if authorized by the competent authority.
Subparagraph (4)
to approve the sale of class C products of national defense technology.
Subparagraph (5)
to approve a contract of national defense technology products sales or of after-sale logistic support.
Subparagraph (6)
to deal with applications for permit of export or import of national defense technology products.
Subparagraph (7)
to select the Private Entity for commission sale and to approve the relevant plan for the commission sale.
Subparagraph (8)
to produce statistical reports concerning the quantity, item and sales value of the products of national defense technology and report the same [to competent authority].
Subparagraph (9)
to supervise and review the sales performance of the National Defense Technology Institute.
Subparagraph (10)
other matters designated by the competent authority.

Paragraph (1)
In order to effectively integrat the strength of various circles so as to promote the work prescribed by these Rules and to accelerate the effort to achieve a stronger national defense system, the Executive Yuan may establish a steering committee to undertake the following tasks:
Subparagraph (1)
to draw up plans to promote the cooperation between the National Defense Technology Institute and Private Entities and the commission sales of national defense technology products.
Subparagraph (2)
to establish an information database about the cooperation of the National Defense Technology Institute and the Private Entity or about commission sales of the national defense technology products.
Subparagraph (3)
to coordinate other matters related to the sale of the products of national defense technology.
Paragraph (2)
The key points for establishing the steering committee as referred to in the preceding paragraph shall be prescribed by the Executive Yuan.

The Private Entity undertaking the sale of national defense technology products shall comply with relevant international norms and treaties and other international agreements signed by Taiwan.

Paragraph (1)
Upon conducting delegation agency or distribution of the products of the national defense technology and in order to select a Private Entity with the professional sale capacity and resource, priority shall be given to the selective invitation for bids measure under the Government Procurement Law where the criteria of the selective tenders are met; provided, however, that this restriction shall not apply to a procurement which may be handled by adopting the restricted invitation for bids measure.
Paragraph (2)
In the case the commissioned agency or distribution as described in the preceding paragraph does not fall within the scope of procurement under the Government Procurement Law, the Government Procurement Law may apply under the same conditions.

In order to effectively sell the products of national defense technology, the National Defense Technology Institute may entrust agency or distribution exclusively to a Private Entity with respect to a certain product or area.

These Rules shall be implemented from the date of implementation of the National Defense Law.

Prepared by J&J Attorneys at Law
October, 2003