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 or phone calls 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 we usually provide a quick general answer and, when it is easy to do so, a link or two to a blog post that provides some additional guidance. We figure we might as well post some of these on here as well, which we generally do on Fridays, like today.
A reporter last night asked me how my law firm’s practice has changed since the beginning of the US-China trade war. In response, I listed out the following:
- Our international manufacturing lawyers are writing way more contracts for Thailand, Vietnam, Malaysia, Indonesia, India, Pakistan, Sri Lanka, Cambodia, the Philippines, Taiwan, and Mexico than ever before. Clients that used to do all their manufacturing in China now seem to manufacture in not one country, but two to four.
- We have seen an uptick in licensing deals with China. As companies decide to leave China or not to go into China with a WFOE, they are not abandoning the possibility of profiting from their products in China; they are simply choosing to do so via licensing deals rather than going in directly.
- Strangely enough, we are seeing an increase in companies looking to set up WFOEs in China. These companies are very consciously choosing to double down in China to show their Chinese customers that they are serious about China for the long haul.
- Companies with China WFOEs are (with very few exceptions), staying in China. They are though scrambling to do whatever they can to make sure they are in compliance with all of China’s laws, especially its employment laws.
- We are seeing a large increase in disputes between foreign companies and Chinese companies. This is to be expected because big, negative changes always lead to disputes.
- We are seeing a massive increase in China manufacturing problems and disputes, especially for our U.S. clients. Many Chinese manufacturers view their U.S. buyers as having one foot out the door (because so many do) and they seem to be using this as an excuse to justify producing bad quality products, stealing IP, and calling in the Sinosure dogs.
- We are seeing a massive downturn in Chinese companies looking to buy or invest in foreign companies.
Yesterday, I got more emails involving bad quality Chinese products and Sinosure (by far) than any day ever. In response to the bad product emails, I found myself again and again having to explain why I am so skeptical about taking on their cases. The below is an amalgamation of those emails:
Thanks for writing. Your email was passed on to me because I handle issues relating to China supplier problems. We get so many emails like yours
It is impossible to say what sort of remedies you might have, without first knowing a lot more and and without our doing considerable research.
The first thing we would do is determine whether your supplier actually exists or not. Is it a registered Chinese company? From the name you gave me in your email, it looks as though it isn’t, but it is possible that it is and they just gave you a shortened English language version of it or you yourself have shortened it. But just the name looks highly suspicious to me. From there we would research its owners to see if and how we might get leverage against them. It will also be critical for us to review your contract with this company. Do you have a contract that made clear your equipment had to meet certain specs? I urge you to read this post and figure out how close you were to the ideal with this Chinese company.
Back to your issue. The odds are not good that there is anything we can do to get you your money back. I say this for the following reasons:
- I assume you did not use an experienced China contracts lawyer to help you with this purchase or you would be reaching out to that lawyer now, and not to Harris Bricken.
- It is not at all clear to me that you have a good legal case.
- It is not at all clear to me that you bought this from a real company or a real manufacturer. I urge you to read this article written by a very experienced China quality control/product sourcing person.
But sometimes companies in your situation do have good cases and there have definitely been times where our international litigators have been able recoup large sums. I just don’t want to charge you upfront money under the false belief that your odds are good here. Usually our advice to companies in your situation is to do xy and z going forward to prevent this same sort of thing from happening again and again.
Rarely do I hear back from these companies with product problems, but maybe one in five times someone writes back asking about costings. And maybe one in ten times, someone writes back to ask more about the “xy and z” they need to do going forward and what our manufacturing lawyers will charge for that. For what they should do going forward in buying products overseas, I usually refer them to this post, Protecting Your Product From China: The 101 and add that pretty much everything in it applies with equal force for every emerging market country in the world.