I experienced no strategy what I was heading to write about this morning, but thanks to one particular of our China legal professionals updating me regarding the subsequent e-mail exchange, I have a ready-produced put up.
The e-mail exchange started out with the subsequent e-mail (modified to hide any identifiers) from a U.S. business possessing issues with its China company:
What do you suggest when a provider is holding goods hostage on a PO to try to get us to position larger upcoming orders at inflated costs.
Our China attorney responded as follows:
That you are crafting us (and not your standard attorney) will make me assume you have almost no grounds on which to stand. I say this because 99.99 % of the time this is accurate of individuals who write us with producing issues. You are possibly too late to remedy this trouble with this company because the only excellent resolve of which I am aware is a producing agreement (in Chinese, sealed by your Chinese company, and with a China court docket jurisdiction provision) that explicitly stops this. POs are really worthless. Unless you have a agreement (in Chinese) that clearly lists out this and that, there is possibly tiny to practically nothing you can do. See China Contracts that Work. A excellent China producing agreement really should also consist of a liquidated damages provision, a mildew safety provision (so that the manufacturing facility does not continue to keep your molds if there is a dispute, see Product Molds And Tooling In China: A few Factors You Will have to Do to Cling on to Yours), be thoroughly chopped/sealed (see Signing And Chopping A China Contract. It’s Difficult). It is also crucial that your agreement is with the ideal Chinese business as Chinese firms are notorious for signing agreements with an basically vacant shell business, typically centered in Hong Kong. And as you have learned right here, it also will have to include pricing and solution supply provisions.
If someone were to speak to us with all (or at minimum most) of the over in line, we would be happy to help them in dealing with their China company. But — and right here is the kicker — no person at any time has, and there are 3 easy reasons for that. Just one, if they experienced a agreement that contained all of these issues they very likely would by no means have experienced the trouble in the first position. Two, if they experienced a agreement that contained all of these issues and they did have a trouble, they would be in a placement of sufficient power that they possibly could get their Chinese company to capitulate with no the have to have for an attorney. And 3, if they experienced a agreement that contained all of these issues, they would simply go back to the law firm that drafted it (and not to a new law firm) for assistance.
There is generally an even larger issue that we generally issue out when someone comes to us with a producing trouble like the over. Every time someone has any trouble with their company, one particular of the first inquiries we question them is whether or not they have registered their trade names and logos as China trademarks. We question this because many moments (like effectively more than 50 percent) when international firms start possessing issues with their Chinese company, their Chinese company has presently gone off (utilizing an seemingly unrelated 3rd social gathering) and registered the trade names and the logos of the Western business with which it established the dispute. Chinese manufacturers do this to obtain leverage and this genuinely is effective because your Chinese company can use “your” trademarks to stop you from possessing your goods manufactured in China or shipped out of China with your individual manufacturers and logos on them. See When to Sign-up your China Trademark. Request Tesla and China: Do Just Just one Issue, Emblems. Or, as is typically the situation, it will use “your” model identify and brand to provide your goods in nations the place you do not have trademark safety. So if you have not presently registered your model names and logos in China, you really should do this Promptly (you very effectively could presently be too late) and you really should do so in advance of you complain any a lot more to any person there. And you also really should sign up your model names and logos in what ever nations in which you provide (or will provide) your goods as effectively.
China producing safety is attainable, but just sending out POs and pondering you have it is just completely wrong. Sorry.