China Quality Control

I have always thought it a mistake for a company not to have a quality control inspection done of its China products before shipping.

The Quality Inspection Blog has a post, How much does an inspection in China cost? that puts the need for a QC inspection into proper focus. The post starts out talking about the two kinds of reactions the author usually gets when he quotes his company’s USD $295 daily fee for China product quality inspections:

Some purchasers get to talk about their project for some time, see where we would help them, and finally (nearly as an afterthought) ask for the price. I tell them 295 USD per day of work, and I can nearly hear them thinking “wow these guys are cheap”.

They compare this fee to the costs of professional services in their country, or maybe to the total amount of the order, or to the cost of their best alternative (taking a flight to China). So it sounds really low.

With other buyers, it’s the exact opposite. To them, even our basic “no frills, internet booking” service, at 170 USD per product type, seems like a rip off.

They compare it to the salary of most English-speaking staff in China (5,000 rmb), they divide it by 30 days, and they think we make an insane margin. Forget about the main costs of a company that has set up a network in the main regions (training/supervisory/internal control overhead, travel expenses, client communication, taxes in China, etc.).

The post goes on to discuss the second type and their unwillingness to pay the minimal fee for protection:

I learned that the second category of buyers, unless they absolutely have to, will never accept to pay the market price for quality control inspections. They prefer to pay a cheap “agent” who will not do a professional job (if he does any QC job at all), or to simply roll the dice and let the factory ship out. It is not rational because in the end they are probably worse off — it is psychological.

Because my law firm charges thousands of dollars to draft China manufacturing agreements (in Chinese and in English) the companies for whom we draft these agreements typically think nothing of paying a bit more to ensure their China-manufactured products meet their quality standards. This combination of a China-specific OEM manufacturing contract and good quality control monitoring means our regular clients virtually never call us for legal assistance relating to quality problems. The same companies that pay for a good manufacturing contract and good quality control monitoring tend to be the same companies that conduct due diligence on their potential Chinese suppliers before they enter into any agreement with them, and it is these three things together that truly reduce the likelihood of China product quality problems. See The Five Keys for Reducing Your China Manufacturing Risks.

The phone calls our international manufacturing lawyers get regarding Chinese product problems almost always come from potential clients, not existing ones. Most of the time, the amount at stake for these companies is so little we advise they simply be more careful the next time.  Every few months though we get a call from someone out $500,000 or more and we are usually unremitting in our questions to them.

The following is a typical exchange:

Manufacturing Lawyer:  Do you have a contract with this Chinese factory that you can send me.

Them:  No, because I have a purchase order.

Manufacturing Lawyer: Does the purchase order set forth the quality standards required?

Them: No.  I didn’t think that was necessary.  Everyone knows what is required to have a good quality _________.

Manufacturing Lawyer:  Without a written document setting forth the specifics on quality, your case will be much tougher. Did you have someone inspect the goods before they were shipped?

Them:  No.

Manufacturing Lawyer:  Why not?

Them:  Because the whole point in going to China is to save money and if I pay for QC inspections I won’t be saving as much. (Long Pause) Guess I would have saved more by having paid for the inspection though.

I do not know what percent of product comes back bad for those companies that do not use QC inspections nor do I know what percent of product comes back bad for those that do. But I have seen enough to become absolutely convinced (as is pretty much everybody I know who works in or around international manufacturing) that QC inspections are pretty much always worth the money.

What do you think? To QC inspect or not to QC inspect?

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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.