China Law Blog

It has been awhile since we have written on China product quality issues. As regular readers of this blog know, we are of the view that companies outsourcing to China must focus on 1) choosing the right partner, 2) using a good OEM contract, and 3) constantly engaging in quality control monitoring. Renaud Anjoran's always excellent Quality Inspection Blog (if you are directly or indirectly engaged in manufacturing in China you absolutely should make this blog a regular read) did a post, entitled, "Four Simple Steps for Starting to do Quality Control", focusing on our third requirement.

1. "Establish clear expectations." Renaud talks of how choosing a sample, negotiating a price, and then waiting for delivery is rarely good enough to ensure a quality product. In addition to the sample, you should have an agreed-to specification list. I completely agree, not only because such a list is important for quality control reasons, but because it can be critical for legal reasons as well. Without clearly enumerated specifications, it is difficult to impossible to prevail in a product quality lawsuit against a Chinese company. Chinese law typically will not find an implied reasonable quality standard anything near to what a Western company would typical expect and the reason for that is simple. What constitutes reasonable product quality in China is very different from what constitutes reasonable quality in the United States.

2. "Don’t focus on final inspections." Renaud notes how final random inspections are a good tool for approving all aspects of production (total quantity, product specs, aesthetics, packaging…), but if problems are found, they are too late to fix. Inspections during production are better:

The risks for a factory that gets caught are pretty high: re-work of the goods, re-production, penalties, air freight, order cancellation… Instead of sending inspectors at the end (i.e. using them as policemen), try to send them when the goods are in process. Issues can get caught and corrected early: this is not only an extra safety for the buyer, but also a helping hand for the factory. This is how you should frame the discussion when you tell your suppliers about your QC intentions.

Early inspections (during production) have several positive side effects. They are a way to ensure that production is taking place in the right factory. Samples can be picked up randomly for lab testing. And it can prevent long shipment delays if the factory corrects course immediately after quality issues are noticed.

3. "Inspections are not an option. Renaud calls for the following:

You should write “Quality inspection required prior to shipment” on your P/Os. If you pay by letter of credit, you can require a passed inspection report from your nominated QC provider. When you develop new products, ask extra samples for the inspector’s use. Keep track of the final inspection date and the shipment date, not just the shipment date. All this is quite standard, and thousands of importers follow these tips.

You still have the freedom not to book an inspection for a given shipment, or to do skip-lot inspections for the most reliable suppliers. But you are the one to take this decision, not your suppliers. They should see inspectors as an extension of your organization. On the other hand, you should make sure you work with professionals who will be respected by factories.

4. "Find the right balance between helping and arm-twisting." Anaud discusses how large buyers have the leverage to play it "tough," but smaller buyers have to be more creative. True.

For more on enforcing quality control in China manufacturing, check out the following:

-- "Why you MUST Have a China OEM Agreement"
-- "China OEM Agreements. Why Ours Are In Chinese. Flat Out"
-- "Let Me Tell You About China Due Diligence"
-- "China Products: Forget Trust, Just Verify"