Because of this blog, our China lawyers get a fairly steady stream of China law questions from readers, mostly via emails but occasionally via blog comments or phone calls as well. If we were to conduct research on all the questions we get asked and then comprehensively answer them, we would become overwhelmed. So what we usually do is provide a super fast general answer and, when it is easy to do so, a link or two to a blog post that provides some additional guidance. We figure we might as well post some of these on here as well. On Fridays, like today.
I got an email this week from someone I’ve known since forever, telling me that his company was looking to start selling its products to China and “what’s the one thing we should look out for.”
My response was that there are two key issues when selling to China. The first is one we have covered here again and again and that is to register your IP in China before you start doing business with China See China Trademarks: Register Yours BEFORE You Do ANYTHING Else. The second should be a lot more obvious, but too often it isn’t, and that is make sure you get paid. Getting paid is most definitely a key issue when doping business with China. If a foreign seller allows its China buyer to get behind on payment, the result is never good. To quote a Chinese attorney friend of mine, “Chinese buyers don’t do letters of credit. They instead seek to impose the payment risk on the eager foreign seller who is living the ‘one toothbrush to every PRC citizen’ dream. The problem is that if the foreign seller insists on protective payment terms, the Chinese company just moves on. There are so many suckers available, they don’t need to worry.”
What then can you as a company do if you are going to be selling your products or your services to a Chinese company? One, conduct due diligence on your potential buyers. See China Business Due Diligence. Two, don’t do the deal unless you get a substantial amount paid upfront. See Getting Money out of China: Part 6 (and read the previous five parts of this series as well) Three, have a contract that works. See China Contracts that Work.
Just be smart….
This article was written by Dan Harris and published on China Law Blog. Original Post: https://www.chinalawblog.com/2018/03/quick-question-friday-china-law-answers-part-59.html