Our China lawyers are working on a case right now that should be of great relevance for any company that buys product from China or is doing business in China. Here are the facts (slightly changed because this is still a live matter). US company goes to China and meets with company there for manufacturing product. The two parties sign an agreement and US company sends over a large sum of money to build the tooling. Chinese company then says another large sum is needed to be ready to go as soon as the tooling is complete. Months pass. Nothing. More months pass. Nothing. It has now been a year and still nothing.
US Company contacts our law firm and wants to know about pursuing litigation against this Chinese manufacturer to recover the money paid. We determine US company has a very strong case, but suggest we first investigate the Chinese company to determine whether it has sufficient assets to pursue. We conduct a fast and cheap investigation and get a comprehensive report on the Chinese company. From this report we learn the following:
- Chinese company is not a manufacturer. It is a trader, with a tiny, rented office.
- Chinese company does not even have an export license. In other words, it gets its products from manufacturers and then has to bring on another company to ship them. It is just a middle-person.
- Its only asset is a small amount of inventory, which it may or may not own.
US company decides to order a comprehensive report on ALL of the Chinese companies with which it presently conducts business.
Perhaps you should too. China due diligence. Not optional.