International law firm

I know nobody wants to hear this and I know this is going to get me hate mail from those whose livelihoods are tied to China’s boom, but I am seeing all sorts of bad news on the horizon with China’s economy.

A client meeting yesterday was the last straw. The client I met with is very sophisticated, very large, and, most importantly, very experienced. The client is a very large commodity seller who sells massive amounts to China. This company typically sells its product to Chinese private companies that use letters of credit. Prior to 2008, this client’s Chinese customers pretty much always paid. Then in 2008, they started contesting the letters of credit and seeking lower prices than the prices to which they had agreed. Soon after that, they started rejecting the shipments entirely. My client told me that in the last 3-4 weeks, nearly all of his non SOE (State Owned Entity) Chinese clients have contested the letters of credit and have sought prices to be lowered by around twenty percent. The Chinese companies seeking these discounts are confessing that they cannot get loans and without loans they cannot pay so much.

If it were just that, I might chalk it up to problems in one industry, but it is not just that. Chinese companies that are going out of business or believe they are going out of business have an annoying tendency to ship bad or fake or no product at all. In 2008, pretty our China lawyers would just about every week get calls from companies saying the product they had ordered was not coming. We handled one case where a company bought about a million dollars of fish and received containers of cheap bricks surrounded by fish. That fake shipment was the dying gasp of a company that had ceased to exist. We have started to get those same sort of calls in large numbers again. Internally, we call them “bricks for fish” deals.

We are also seeing it on the flip side with Chinese companies buying product from our U.S. clients or even trying to buy U.S. companies outright. The numbers are small, but we are seeing an increase in Chinese companies that paid a deposit simply walking away from their deals.

What are you seeing out there? Is it really this bad, because it sure feels like it?

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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.