Quick Question Friday: China Law Answers, Part XXXIX

China AttorneysBecause 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 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 may provide some additional guidance. We figure we might as well post some of these on here as well. On Fridays, like today.

One of the most common questions we will get asked will be something like the following:

I paid my supplier in China X dollars for Y product and the quality is so bad I cannot even use it. Do I have a good case against them and what would you charge us to pursue it.

My response is usually something like the following:

Do you have a written contract with this Chinese supplier?

Is it in Chinese?

Is chopped/sealed by your Chinese manufacturer?

Does it provide for disputes to be resolved in China?

Does it clearly specify what you will be buying and its quality requirements?

Does it clearly provides that any failure to satisfy the product requirements will lead to you being entitled to specific monetary damages against the Chinese company?

If your existing contract provides for all of the above (or at least the first four), we can help and we’d be happy to do so. If you do not have at least the first four above, our chances of being able to help you are not so good and it probably will not make sense for you to hire us.

If you want to protect yourself in the future, I would urge you to use an appropriate Manufacturing Agreement (a/k/a OEM agreement or product supply agreement) the next time around. You can find out more about our Manufacturing Agreements hereherehere, and here.

I should also note that we have been dealing with a massive increase in companies that are losing their ability to have their products manufactured in China entirely because their suppliers there are registering their trade names and then preventing their products from leaving China. If you put your company or your brand name on your products (or on their packaging) you should immediately register your brand/product name and logo as a trademark in China, if you have not already done so. As we discuss here, this is true even if you will not be selling your product in China. I mention this because when foreign companies start having problems with their Chinese manufacturers (like what you are having) the Chinese manufacturer often will go off and register the foreign companies brand names as their own trademarks in China so as to gain leverage against the foreign company. Therefore — and I know this will probably surprise you — the one thing I would urge you to do immediately is to make sure your brand names are registered as trademarks in China and if they are not, to do so immediately.

 I hope the above proves helpful to you. If you have any additional questions, please don’t hesitate.

What are you seeing out there?

Dan Harris

Dan Harris is internationally regarded as a leading authority on legal matters related to doing business in China and in other emerging economies in Asia. Forbes Magazine, Business Week, Fortune Magazine, BBC News, The Wall Street Journal, The Washington Post, The Economist, CNBC, The New York Times, and many other major media players, have looked to him for his perspective on international law issues.