China’s Hawaii to become free trade port with benefits for plant breeders

The Hainan Free Trade Port (“Hainan FTP”) is currently being planned and constructed in China’s southern island province of Hainan. The Hainan FTP will provide significant benefits for plant breeders, including importing material into China. If you are still unsure whether Hainan FTP can benefit your plant breeding business, here are five facts to consider.

In the November edition of FloraCulture International, FCI included an article written by Alanna Rennie and Andrew Sim who work for the international law firm Baker McKenzie in Sydney. They have experience in Intellectual Property and have advised on several PVP-related matters, and they were keen to share news about Hainan FTP and its attraction for plant breeders.

1 Aiming to become China’s Silicon Valley for the nation’s seed industry

China aims to achieve industrialisation, specialisation, intensification, marketisation, and internationalisation of the seed industry by 2030 in Hainan FTP. Seed broadly refers to both sexual and asexually reproduced crops.

The chartered Nanfan Science and Technology City (known as the “City”) will carry the vision of creating a “Silicon Valley” intelligence centre for the Chinese seed industry in Hainan FTP. The Chinese Academy of Sciences and other leading research institutions have already set up centres in the City. It has also attracted well-known seed companies, such as China Seed Group Co., Ltd. One of the objectives is to encourage co-operation with foreign countries in agricultural science and technology.

International seed companies may consider setting up a Wholly Foreign-Owned Enterprise (‘WFOE’) in the City to take advantage of the favourable policies for plant breeders in Hainan FTP once they are in place. Setting up a WFOE in the City would also enable international companies to establish a strong presence in China, facilitating relationships with domestic companies active in this space.

2 Straightforward importation

The Hainan FTP is establishing a Global Animal and Plant Germplasm Resources Introduction and Transfer Base. This landmark project seeks to facilitate the introduction of germplasm resources into China, including more straightforward importation procedures. The first batch of corn seeds was imported from Mexico in May 2021 after undergoing quarantine at Haikou Customs in Hainan and subsequent testing at the transfer base.

The transfer base is still in its early stages of development. We understand that the procedures for PVR applications, issuance of seed production and operation licences, and importation are currently the same in Hainan FTP as in other cities. However, they expect favourable policies to be implemented in the future as the transfer base continues to mature.

3 Plans to streamline PVR application

Several recent developments have confirmed China’s commitment to supporting the seed industry in the Hainan FTP, at both the central and local levels:
Streamlined PVR application: The Ministry of Agriculture and Rural Affairs established a molecular testing laboratory in Hainan in March 2021. It will also set up a new PVR examination centre in Hainan. These new facilities will enable the examination of PVR applications locally in Hainan and speed up the PVR registration process.

4 Enhanced PVR protection and more commercial opportunities

Hainan FTP boasts the fourth specialised IP court in China, which heard its first PVR infringement case in April 2021. The Supreme People’s Court and the local government have also issued opinions or draft regulations on strengthening PVR protection, specifically in the Hainan FTP.

Hainan FTP is also set to offer more commercial opportunities. For example, an international IP exchange was set in Hainan in December 2019, which provides opportunities for IP transfer, licensing, and so on. The first PVR deal was concluded in May 2021, and a license development contract was signed regarding a pear variety.

5 Financial incentives

Considerable financial incentives are on offer to attract breeders and seed companies to establish operations in the Hainan FTP, including the following benefits.
Enterprises registered in the Hainan FTP that conduct plant or animal breeding, commercialisation and seed production, processing and packaging as their primary business may enjoy.
• Reduced corporate income tax rate of 15%, and the income derived from a newly increased overseas direct investment before 2025 may be exempt from corporate income tax.
• Accelerated depreciation or amortisation of newly purchased fixed or intangible assets.
• Exemptions from import duties and taxes for production equipment, raw materials and supporting materials for WFOE’s self-use.
• Income tax exemptions for executive talent working in the Hainan Free Trade Zone.
There is a one-off financial award of up to RMB 1.5 million on offer to seed companies registered in the Hainan FTP within five years from the date of registration or moving in. The amount of the award is dependent on the amount of tax paid in the previous year.
Various subsidies and bonuses are also available for the introduction of germplasm resources and for breeding high-quality varieties.

For further information or to discuss what the New Provisions may mean to you as a plant breeder, please get in touch with the Baker McKenzie team.
Alanna Rennie –alanna.rennie@bakermckenzie.com
Andrew Sim – andrew.sim@bakermckenzie.com