Disputes With Chinese Suppliers: Q&A (Volume 2)

In this volume we will address the concerns of importers who are using a Chinese OEM to add a logo to existing products that will then be sold abroad.

Question 1: How do I protect my business when working with a Chinese OEM?

We will work with an OEM to add a logo to an existing product type which will then be sold in Western markets, but we’re concerned about:

• Getting a reimbursement or replacement unit for defective products
• Ensuring that the highest possible quality is maintained
• Ensuring that the supplier does not subcontract production to unauthorised sub-suppliers
• Keeping lead times to no more than 1 week overdue

Answer

Buyers usually have the supplier sign an enforceable contract that addresses the above concerns.

You will simply need to get the supplier to sign it so that they become more likely to respect it.

Hopefully, as long as the supplier doesn’t need to be pushed hard, there will be no need to use that contract as leverage against them.

Read more about creating contract here: How To Create A Valid Manufacturing Contract In China To Protect Your IP

Question 2: Should this agreement be placed on our Alibaba order with the supplier?

Answer

No, it is totally outside of Alibaba.

Question 3: Should our material list and exact quality specifications be shown in detail?

Answer

Yes. This will always be a helpful step to take.
We can draft a Product Checklist for you (99 USD if the product is simple), and it should be added as an appendix to the contract.

Question 4: If we find that the product quality is unacceptable, but the goods could be resold at a lower price, would Chinese courts rule in favour of the supplier?

Answer

Once you have defined your quality standard in precise and objective terms, you don’t need to budge from it. If you simply request a rebate from the supplier, having the contract can only help, but this is usually settled by negotiating outside of court.

Question 5: How can we check if the supplier has used their own company’s stamp on the contract?

Answer

This is something a lawyer can assist you in checking. In most cases, if we ask for the signature of the legal representative (and we know this information if we conduct a Legal Record Check), the signature and the chop are fine, but it can’t be confirmed for sure without engaging a lawyer.

Question 6: Who will pay court & legal fees if the supplier breaks the contract terms and we end up in court in China?

Answer

You would have to pay a lawyer. If you prevail, the contract typically requests that the supplier pays you damages and also pays back any legal fees you incurred.

As with most situations in China when things go wrong, it is better to try to reach an agreement with the supplier without resorting to litigation.

Do you have any disputes with Chinese suppliers?

Please let us know by commenting or contacting us and we will provide you with advice on your situation if we can.

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