Nearly every week, a few clients come to us for help with various disputes with their Chinese suppliers.
We’ll share some of the broad strokes here (no identifying client information included) so you can avoid these issues, too, or at least have an idea about how to deal with them more effectively if you’re in a similar situation.
Question 1: Dispute about product specifications
The Chinese manufacturer claims that the products we have received were produced according to our specifications, but they were not. What can we do?
Your supplier appears not to be clear on your limits for acceptance and non-acceptance.
It would be useful to have the following in place before the supplier starts production if you don’t already:
- A clear product specification checklist
- Some approved samples to show the limit between acceptance and non-acceptance
In order to avoid receiving non-conforming products, conducting product inspections before the products leave the factory will also help you find errors and have the ability to discuss the issues with the manufacturer who could then put them right.
If you have already received products, unfortunately, it is typically unproductive to try to have the discussions about incorrect specifications after the fact.
This video explains these three preventive measures in more detail or you may enjoy this blog post on the topic:
Question 2: Supplier has moved the goalposts on component cost
Our supplier has raised the prices of some of the components by more than 20%, despite having contractually agreed to a lower cost. They claim that they made an error in the cost per ton in their quotation.
In addition, we are wondering if chat messages will be considered as legitimate grounds to change the terms of a PI or contract after the fact in China? We have messaged back and forth with the supplier and are worried something may have been taken out of context by them where they may say: “We thought when you said X, that you meant Y, and that’s why we changed it”.
Since they won’t honor the cost agreed in the contract, what are our options? Is litigation worthwhile?
This is a tricky situation. Working with a lawyer to sue them would be a huge distraction for all parties. Usually, it is better to find a short-term agreement to get the deals moving ahead and, in the meantime, find another supplier (this time with all very clearly documented and with a specific agreement in place) if needed.
Regarding chat messages, yes, these can be used against you in a Chinese court case.
Generally speaking, we advise you to get things well lined up from now on in order to reduce risks in future rather than focusing a lot of time & energy on threatening the supplier.
A law firm specialising in China business can advise better on how to handle litigation after things have gone wrong, whereas we are more focused on risk reduction, clarifying standards, and building a system that will prevent issues from occurring.
You may also like this blog post: 5 Tips For Dealing With An Unexpected Price Rise From Your Chinese Supplier.
Do you have any disputes with Chinese suppliers?
Please let us know by commenting or contacting us and we may confidentially feature your issue and answer it here to help you and the rest of our community.