Because of this blog, our China lawyers get a fairly steady stream of China law questions from readers, mostly via emails but occasionally via blog comments as well. If we were to conduct research on all the questions we get asked and then comprehensively answer them, we would become overwhelmed. So what we usually do is provide a super fast general answer and, when it is easy to do so, a link or two to a blog post that may provide some additional guidance. We figure we might as well post some of these on here as well. On Fridays, like today.
Though China’s economy is — for the most part — doing well these days, competition among factories is intense and we are seeing the divisions between winners and losers accelerating. Well-run factories that actually appreciate good contracts are growing. Poorly run factories which make their razor thin margins by skimping on materials or with tax sleight of hand, seem to be crashing. These crashing companies are dangerous as they are desperate and that leads to frequent problems. This is my somewhat long-handed way of saying that our China lawyers are getting record numbers of emails from disgruntled foreign product buyers, usually asking us to help them recover money they are owed.
In nearly all cases, we have to tell them that we do not believe we can help them and that paying us even to try would be throwing good money after bad. At some point in our email conversations they often ask “what then should we do” and our response is usually the following:
Three things. One, if you are going to continue manufacturing in China, but with someone else, you should not let on that you have a problem with your existing factory. And if you have already told them of your concerns, start downplaying them, and fast. You do not want this factory to start taking measures to make it difficult for you to go to another factory. For more on this, I suggest you read Why Changing China Suppliers Can Be So Risky. Most importantly, if you have not already registered your trademarks in China (and maybe your design patents as well), do so immediately. You do not want your old factory to get those and they often do. See Make China Trademarks a Priority. Two, do NOT go to China to try to resolve your dispute with your existing supplier. For why this is so important, check out China Product Defects, Lawsuits, Hostage Taking and Exit Ban: Please, Please, Please Read This! Three, don’t buy again from China without first conducting at least basic due diligence on your supplier and getting China-specific manufacturing contracts in place. See China Manufacturing Contracts: Not So Simple.