International manufacturing contract lawyers

Very interesting post by David Dayton over at Silk Road International, entitled, “Recent Chinese Negotiation Tactics: Translated!”

The post is on the responses (excuses?) Chinese companies give when their foreign product buyers complain to them about product quality. David handles sourcing and quality control for mostly Western companies doing business in Asia and his post focuses on dealing with these responses while still within a supplier/buyer relationship.

My law firm’s dispute resolution lawyers and international manufacturing lawyers have handled countless quality dispute cases and so we too have heard nearly all of the same excuses David lists.

Our lawyers are often brought in to threaten legal action in an effort to get the money back. We usually do this by first writing a demand letter to the foreign manufacturing company stating that our law firm has been brought in to get our client a full refund and if we do not have that full refund within ___ days, we will pursue litigation or arbitration in _______. When dealing with Chinese companies, we always write this letter in Chinese, both so the Chinese company fully understands our position and to let them know it will be no big deal for us to sue them in China (where these lawsuits usually need to occur) tomorrow. Our letters also usually explain the law just enough to convince the Chinese company resistance is futile. We do the same sort of thing for Vietnamese, Thai, Indian, Mexican, Polish, (etc.) manufacturing companies as well.

These letters, coupled usually with weeks of negotiations, usually lead to some payment by the at fault manufacturer. If the letter does not work, we analyze our client’s chance of prevailing were it to sue and the likely cost of such a lawsuit or arbitration action and then we recommend whether our client should litigate/arbitrate or not, and where..

The manufacturing companies — be they in China or elsewhere, but especially in China — usually claim the quality of product they provided our client was warranted by the amount my client paid for it. According to the typical Chinese company, if our client had wanted better quality, it would have had to pay more for it. Unfortunately, in China this is often a great defense and that is why it is absolutely critical that your contract dot as explicitly as humanly possible delineate exactly what your Chinese manufacturer is required to do. Chinese manufacturers are by far the worst in the world when it comes to product quality and, not surprisingly, the worst in the world (by far) in terms of stepping up and admitting to fault.

Put another way, if you want your Chinese manufacturer to make your product to a particular standard, you have to be unbelievably explicit in your manufacturing contracts with them about exactly how you want your product to be manufactured. For example, even if everyone in your industry uses at least 10% stainless steel for a particular product and you have told your Chinese manufacturer countless times that your product must be at least 10% stainless steel and if your Chinese manufacturer’s initial sample contained 11% stainless steel, you still must make sure your written contract (preferably in Chinese) with your manufacturer explicitly states all product must have at least 10% stainless steel content. If your contract with your Chinese manufacturer does not state that you are requiring at least 10% stainless steel content and you get product with 3% stainless steel content, I can virtually guarantee your Chinese supplier will claim you paid for product with only 3% stainless steel content and there is a very good chance a Chinese court or arbitration body will agree.

Bottom Line: You want something from your Chinese manufacturer, you put it in your written contract. Explicitly and in Chinese. You are also usually better off with your contract being in Chinese so that if there is a dispute, your Chinese counterpart is not well positioned to claim it failed to understand and if you do need to go to court in China, you have the contract ready to go for that purpose.

Or you can listen to a whole bunch of excuses….

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Photo of Dan Harris Dan Harris

Dan is a founder of Harris Bricken, an international law firm with lawyers in Los Angeles, Portland, San Francisco, Seattle, China and Spain.

He primarily represents companies doing business in emerging market countries, having spent years building and maintaining a global, professional network. 

Dan is a founder of Harris Bricken, an international law firm with lawyers in Los Angeles, Portland, San Francisco, Seattle, China and Spain.

He primarily represents companies doing business in emerging market countries, having spent years building and maintaining a global, professional network.  His work has been as varied as securing the release of two improperly held helicopters in Papua New Guinea, setting up a legal framework to move slag from Canada to Poland’s interior, overseeing hundreds of litigation and arbitration matters in Korea, helping someone avoid terrorism charges in Japan, and seizing fish product in China to collect on a debt.

He was named as one of only three Washington State Amazing Lawyers in International Law, is AV rated by Martindale-Hubbell Law Directory (its highest rating), is rated 10.0 by AVVO.com (also its highest rating), and is a recognized SuperLawyer.

Dan is a frequent writer and public speaker on doing business in Asia and constantly travels between the United States and Asia. He most commonly speaks on China law issues and is the lead writer of the award winning China Law Blog. Forbes Magazine, Fortune Magazine, the Wall Street Journal, Investors Business Daily, Business Week, The National Law Journal, The Washington Post, The ABA Journal, The Economist, Newsweek, NPR, The New York Times and Inside Counsel have all interviewed Dan regarding various aspects of his international law practice.

Dan is licensed in Washington, Illinois, and Alaska.

In tandem with the international law team at his firm, Dan focuses on setting up/registering companies overseas (via WFOEs, Rep Offices or Joint Ventures), drafting international contracts (NDAs, OEM Agreements, licensing, distribution, etc.), protecting IP (trademarks, trade secrets, copyrights and patents), and overseeing M&A transactions.