I have certain articles I send clients and potential clients in response to their questions. One of my favorites (and the one I send when anyone asks a question relating to what it is like dealing with a Chinese factory) is Ok, so it doesn’t meet your standards….so what? This post is by David Dayton of the Silk Road International Blog and I like it because it is just so dead-on in describing the aggravations of dealing with Chinese factories.

Fortunately, we as lawyers rarely deal directly with factories over QC problems, but I hear these same sorts of things just about every week from companies that contact us wanting to sue their Chinese suppliers. I always politiely hear the foreign company out and then explain that my firm long ago decided that we have zero interest in pursuing such claims unless there is Chinese-language manufacturing contract that clearly and specifically sets out the quality standards for the product and that has the Chinese company’s seal on it. Though as pointed out in the JLMade post, “Sampling Strife,” if you list out 9,999 points of control, there is still a decent chance the Chinese factory will do something completely weird and unexpected with one you never even deemed possible:

The sticky thing about controlling orders in China is that you can give the factory a list of 9,999 things to do and not to do, but they will still find something that’s NOT ON THE LIST! 
You’ll see factories make decisions that, in a million years,  you would not have considered they would make.  Something random, such as change the color when no color change was ever discussed, mentioned or needed. 

Their response:  “Well if you didn’t want it that way, then you should have told us.  You should have given us 10,000 points of control instead of 9,999!” 

Dayton’s article starts out by quoting the response of the three Chinese factories when confronted about  their quality control problems:

  • “Sorry it is not the same as the sample. We hope that you’ll accept it anyway.”
  • “Your QC is too strict. No one can expect to be 100%.”
  • “This is still within tolerance levels.” (No tolerance levels were ever given.)

Dayton then notes how all three factories then “moved to the dreaded show-down level of negotiations: “We won’t make it again. You can accept this standard or cancel (part of) your order.”

In one case, the Chinese factory completely backed down when Dayton refused to do so. The factory blamed the QC problems on a manager who Dayton had never met but who had supposedly been in charge of the project and fired him. As Dayton puts it, the Chinese factory “saved face, we got our product (re)done correctly and the exchange was relatively pleasant and not too confrontational, all things considered. Of course they ended this round of negotiations with ‘OK, but next time the price has to go up'”

If you have never dealt with a Chinese factory, you no doubt are having a tough time believing this sort of thing goes on. But if you regularly deal with Chinese factories, this same sort of thing has no doubt happened to you countless times. I am not sure if I can remember a quality control problem that was not blamed on a non-existent person who was just fired or on an unidentified subcontractor that allegedly made the product. But as Dayton points out, the goal is to remedy the problem, not to make sure the Chinese company loses face. 

Dayton then discusses how he oh so logically handles the “we didn’t really believe you when you said you were going to be this strict” line: 

Whenever we hear this our questions are always the same, 1. If you can’t meet this standard in production, why did you sign a contract saying you could (and why did you repeatedly tell us you could)? 2. How come you can do it for a sample but not for production (and if it is a different process, why did you bid on one process but plan on using another).

Dayton concludes his post by noting how “few and far between are the factories that admit that they over-estimated their abilities and give you your money back”

What have you experienced? 

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Dan Harris

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

I mostly represent companies doing business in emerging market countries. It has taken me many years to build my network and it takes constant communication and travel to maintain it. My 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.

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

I am a frequent writer and public speaker on doing business in Asia and I constantly travel between the United States and Asia. I most commonly speak on China law issues and I am the lead writer of the award winning China Law Blog (www.chinalawblog.com). 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 me regarding various aspects of my international law practice.

I am licensed in Washington, Illinois, and Alaska.

In tandem with the international law team at my firm, I focus 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.