China manufacturing lawyers

Like most lawyers, I am hyper logical. That’s our training and that is who we are. We like order and we like clear explanations for when there is disorder. Clear enough so that we know how to prevent future disorder.

China is not terribly orderly, but well over 95% of the time, the problems foreign companies face in and with China are neither new nor unpreventable. Put another way, when I look at what has gone wrong for foreign companies in China I can usually find a number of things the foreign company  should have done differently to have prevented the problem or to have ameliorated it or at least to have positioned itself to have had real recourse once it occurred. Note that positioning yourself to have “real recourse” is often the single best way to prevent a problem in the first place. See e.g., You Need an Enforceable China Contract No Matter How Much You are Feeling the Love and You Need an Enforceable China Contract No Matter How Much You are Feeling the Love, Part 2. Or on the flip side, check out A Lifetime Sentence for Operating in China Without a Lawyer, Well Sorta, where we discuss the case of someone who is not allowed to leave China and highlight all the things this person did wrong to cause his present situation.

So when someone calls one of my firm’s China lawyers with a China problem for which they are entirely blameless my world gets rocked, at least just a bit. I mean, if that were to happen all the time, there would be no need for people to pay for lawyers, right? The one area where our China attorneys most often see this is when a foreign company has had a great relationship with its China factory for ten or twenty years and then all of a sudden the factory just disappears. What was the foreign company supposed to do? Fly out and visit its factory every two weeks to make sure everything was still okay? Get real.

So I was delighted the when a fellow lawyer sent me the link to a blog post titled, 10 Red Flags Your China Supplier is Going Bankrupt, as this post succinctly lays out the following warning signs for spotting a China manufacturer in trouble:

  1. Excess capacity.
  2. Poor lead times.
  3. Layoffs before the Chinese New Year.
  4. Workers aren’t being paid.
  5. Turnover has been rising for weeks.
  6. New payment terms.
  7. Quality is slipping.
  8. Phone calls and emails go unanswered
  9. Factory abruptly changes location.
  10. High customer complaints.

All of these make sense but I particularly like the following for the following reasons:

##3, 4 and 5. Layoffs, turnover and workers not being paid. If the people with whom you regularly work at your China supplier are disappearing or you hear of workers complaining, ghosting very well is about to happen. Our China manufacturing lawyers have seen this before.

#6. New payment terms. Almost always a sign of a factory in rapid decline or a bank switch scam. Either way, beware.

Any additions to the above?

China employment discrimination lawyers

A few weeks ago, China’s Ministry of Human Resources and Social Security and its Ministry of Education (and seven other departments) released a notice regarding women’s employment. Here is a quick overview of this important notice.

The notice makes clear that gender discrimination during recruitment or in hiring is prohibited. Employers are generally prohibited from limiting the gender of candidates, giving preference to any gender, or refusing to hire women. Employers are also not allowed to engage in any of the following:

  1. Asking a job candidate her marital/childbirth status,
  2. Requiring a pregnancy test as part of an employee’s entry medical examination,
  3. Restricting childbearing as a condition of employment, or
  4. Applying a higher recruitment standard to female candidates.

If an employer is suspected of gender discrimination during the recruitment process (usually because someone has filed a complaint or reported it to the authorities), the authorities will interview/talk/meet with the employer and conduct what can be a large-scale employer investigation. Then if the gender discrimination allegations are confirmed, the employer will be ordered to take corrective measures.

An employer that refuses to talk or meet or otherwise communicate with the authorities or refuses to correct its violation after being ordered to do so, will have its information published and be “named and ashamed” via the media. Women who believe they are/were victims of gender discrimination may bring a lawsuit based on violations of their equal employment rights and if they are eligible they will receive legal aid and judicial assistance in bringing those claims.

Chinese employment authorities will “actively” audit the contents of employee recruitment information and issue orders to violators to correct job ads that contain gender-discriminatory content. If an employer publishes job postings with gender-discriminatory content, it will be ordered to make corrections according to law and if it refuses to do so, it will be fined “no less than RMB 10,000 but no more than RMB 50,000.” These violations and will go on the employer’s “human resources market integrity record” and can subject the employer to punishments for being a “serious dishonest employer.”

This notice should not change much for savvy foreign employers, but it should change everything for those not on top of their China hiring and employment game. What I mean by this is that companies that have always had their China employment lawyers monitor and audit their hiring practices and employment policies will likely not need to change much if anything. This notice will definitely bring changes, but smart employers were likely already avoiding most if not all of what will now lead to punishment, simply because discrimination on the basis of gender has never made sense and has always had its inherent risks.

But foreign companies that have ignored such things and failed to have a China employment lawyer audit and monitor their hiring documents (including their help wanted ads) and their treatment of female employees need to change things and fast. If you have employees in China or are seeking to hire employees in China you need to check NOW whether you are complying with all applicable laws. And if you are contemplating terminating a female employee who is pregnant, nursing or on maternity leave you had better be very careful in going down that path. As we wrote in Terminating China employees just got tougher the authorities are cracking down hard on employers that violate the laws on protecting female employees and — as is always the case — foreign employers are their favorite targets. If you are not positive that your China employment and hiring programs have been honed to perfection, you should get cracking now.

Thailand manufacturing lawyers Vietnam

Way back in October, 2018, we wrote a post, Would the Last Company Manufacturing in China Please Turn Off the Lights, with the following as its lead paragraph:

The title is an exaggeration, of course. But with my law firm’s international lawyers fielding a steady stream of client requests for help with leaving China for Vietnam, Thailand, Malaysia, Cambodia, India, The Philippines, Indonesia, India and Turkey (mostly), it does sometimes feel as though within three years nobody will be making widgets in China anymore.

It then noted how the international manufacturing lawyers at my law firm have been getting a steady stream of reporters asking us to connect them with our clients that are leaving or looking to leave China. We tell them that for various reasons, none of our clients will be willing to discuss their leaving China and then they usually tell us that they “understand.” See How To Terminate Your China Supplier: Very Carefully and How to Leave China AND Survive.

It then notes how when we write about China economic problems we get hit with invective claiming we are making this stuff up either because we hate China or because we are trying to generate business for ourselves. But guess what people

Also in October, 2018, in response to questions our international lawyers were getting I wrote the following:

I see a lot of foreign companies leaving China now and I see that exodus as continuing. It would hardly be an exaggeration to say that on at least one level, nearly all of our clients would — at least in theory — like to cease having their products made in China. Part of this is due to the hassles and the hard times they have gone through in China and part of this is due to the grass always being greener on the other side. But to a large extent, these (hurt) feelings are mostly irrelevant. What’s relevant is whether these companies can do their manufacturing in a country other than China and whether their company would be better off doing so. I think that in large part the answer to the second question will more often be yes than no but the answer to the first and more important part will more often be no than yes. Put simply, most of the companies currently having their products made in China have no choice. No country right now comes close to matching China for its combination of manufacturing sophistication and low cost and until this changes, the overwhelming bulk of companies having their products made in China will continue to do so.

Further proof of this trend comes from China’s most recent export numbers, which — as this blog has predicted would be the case — continue to rapidly decline. See China’s exports fall more than 20% in February (CNBC) and China February exports tumble the most in three years, spur fears of ‘trade recession. 

I see three big things keeping somewhat of a lid on a manufacturing exodus from China. One, capacity. Countries like Thailand and Vietnam are literally getting overrun by American and European companies seeking to move their manufacturing there and it has gotten to the point where if you do not use a sourcing agent with really good factory contacts in these countries you will likely find it difficult to impossible to find a factory willing to take on your product manufacturing. Two, capability. Countries like Thailand and Vietnam have for years been great at manufacturing certain things and not others. They are both rapidly improving in their capabilities, but they are not at China levels, at least not yet. Three, knowledge and soft infrastructure. Many foreign companies already know China and know how to get a widget made there. Far fewer know Thailand or Vietnam or Indonesia, etc. And even if you don’t know China, it can be amazingly easy to navigate on your own and there are countless people out there who are super knowledgeable (and many who most emphatically are not) to help you. See China Manufacturing: To Sourcing Agent or not to Sourcing Agent, That is the Question. Our clients were having so many problems finding good people to help them with Vietnam and Thailand that we brought in house our two most trusted Thailand and Vietnam people.

If you are going to up and leave China for another country, you will need the very same protections in whatever country you go as you need for China, but specifically tailored for whichever country to which you are going. This may include the following:

  1. An NNN Agreements before you reveal your product specifications or design or customers or any other trade secret.
  2. A Mold/Tooling Ownership Agreement if you will be bringing your molds or tooling from China to the new country or if you will be paying (either directly or indirectly) for new molds or tooling in the new country.
  3. Product Development Agreements if you will be working with your new manufacturer to modify an existing product or create a new one.
  4. Manufacturing Agreements with whomever new who will be making your product. Go hereherehere, and here for what that entails
  5. You will need to register your trademark to protect your brand name and your company name and your logo in whatever new country you will be going. This will likely be the most important thing you do.
  6. design patent or a utility patent
  7. copyright. Usually not needed, but when it is, it’s very important.

And for a good overall read on what your company should be doing NOW in light of China’s plunging economy, check out China’s Economic Slowdown and YOUR Business: The Times they are a Changin’ — which we wrote back in September when many (most?) were denying there was any slowdown at all.

What are you seeing out there?

 

 

China tourism law

Kimberly Kirkendall,  a CPA with a ton of China experience and the CFO of Cleveland’s China Chamber of Commerce — and just an overall China powerhouse  —  posted the following on Linkedin the other day:

I’m in Sanya – often called China’s Hawaii. Talking about the island’s development (they’re aiming for both resort and tech) got me thinking about competition in the region. Hainan is a major destination for Chinese – for holidays, for retirees and companies for retreats. But they don’t have the volume of foreign travelers you see in Thailand or Vietnam. Why? The answer foreigners give is “its still China” – what’s that mean? Thailand, to western ears their language is soft. The resort areas cater more to foreigners than Thai’s, and the culture seems gentle, more calm body language. It feels like a relaxing holiday. The visa requirements are simpler. But Vietnam doesn’t have those same “attractions” – visas are difficult, it’s a “hustle” culture like China, and the language sounds similar to western ears. But the resorts are mostly foreign owned with foreign visitors. So….is it fundamentally because foreign travelers want to feel at home, not too far out of their normal? The Chinese wealthy population has made Hainan its destination, does that keeps foreigners away? Mexico is similar, the biggest resort destinations are ones w/ mostly foreign (Cancun) more than local (Puerta Vallarta) guests. Me? I prefer local, PV is my destination. What do you think?

As soon as I saw it I knew I would need to post on it, so here goes.

I love visiting Vietnam with my family. It’s one of my favorite countries in the world. I love the “hustle” of Ho Chi Minh and the history of Hanoi and the beauty of Halong Bay and the food and the people and its beaches and….. Hoi An is one of my favorite places in the world and if I were capable of living in a place with less than 2 million people and less than 30 good sushi restaurants, Hoi An would probably be first on my list. I also love visiting Thailand with my family.  I love the hustle of Bangkok and the beauty of Chaing Mai and Chaing Rai and the food and the people. And my family and I obviously love Mexico because we go there all the time. To Mexico City, to Guanajuato, to San Miguel de Allende, to Merida, to Puerta Vallerta and to Cancun (where a very good friend of mine lives) and I can hardly wait to go to Oaxaca next month for ten days to eat and enjoy the amazing food and art. But China, sorry but no. My wife and youngest daughter once joined me there for a couple of weeks and they both enjoyed Beijing (the Forbidden City is amazing, of course) and Shanghai (who doesn’t love the Bund?) and Qingdao and Dalian, but nobody has mentioned going back.

My eldest daughter and her boyfriend (now husband) did a six month Asia trip after they graduated college. Two words about my daughter: Project Manager. That is her job and that is her. She is the world’s best planner, the world’s best researcher and the world’s most organized person. If you want to know what sheets to buy for your bed you should ask her because she will have thoroughly researched it. If you want to know where to scuba dive in Asia, ask her because she will have thoroughly researched it and done it. When her and her friends go anywhere, she plans the trip and assigns the tasks. Her six month trip included Vietnam, Taiwan, Indonesia, Malaysia, Singapore, Thailand (where I and my wife and my youngest daughter met up with them), Myanmar, and Japan. No China, even though she has never been there. I’ve never asked her why. I just assume her extensive research convinced her that all these other countries would be a better use of her limited time and money.

Why is China not a popular tourism destination for Westerners? The following 14 reasons immediately spring to mind:

  1. It’s really crowded.
  2. People push. I mean really push.
  3. People yell. I estimate I’ve seen more yelling matches in China than the rest of the world put together.
  4. People try to cheat you. Often.
  5. People don’t talk to you just to talk to you; they talk to you mostly just to “hustle” you.
  6. You will not be made to feel welcome, not even by hotel and restaurant staff.  See A Post In Which I Bitch (Yet Again) About China Hotels.
  7. It’s polluted. Like really polluted. Like incredibly polluted in some places.
  8. It has major food safety issues.
  9. Bathrooms. Need I say more?
  10. You need a visa before you go.
  11. So much of China’s physical history has been destroyed and what is left is often neither well presented for Westerners nor easily accessed.
  12. China is a difficult place for foreigners who do not speak Mandarin and who do not like group tours.
  13. China executes foreigners for drug offenses.
  14. Slow and blocked internet.

My law firm has offices in Barcelona, Spain (and we just opened an office in Madrid as well) and Beijing. Pretty much every week someone will longingly engage me in a conversation about Spain, wanting to tell me about their trip to Barcelona or to Seville or to Madrid or to San Sebastian or to Mallorca or to Valencia (where one of our lawyers will be going for his vacation next week). I don’t recall a single time anyone has done the same about China. Most of our lawyers have visited our Barcelona office, including those whose work has little to nothing to do with Spain. None of our lawyers outside our China law team have ever talked of going to Beijing.

Those of us who constantly go to China for business know both how to minimize and deal with the problems listed above, but can you not understand why most people prefer not to have to deal with these sorts of things on their two weeks off from work? Kimberly, would you really tell someone who has never been to China to go there? Do you dispute any of the above? And if even only 5-6 of the above are true — and with all the incredible places to go in the world — does it really make sense for people to spend their limited tourism time and money on China?

Is the tourism trouble/reward ratio far better than I’ve painted it above? Is China merely undiscovered and ready to go viral as a tourist destination once people realize how wonderful it really is? Or do you agree with the picture I’ve painted?

Let ‘er rip people.

Product sample contractIn Part 1 of this series, we wrote about how the product development stage is fraught with risk for foreign companies manufacturing overseas and yet frequently neglected. In Part 2, we wrote about how foreign companies \routinely use NNN agreements in the factory search stage and Manufacturing Agreements (ODM, CM and OEM) for the production stage, but rarely use Product Development Agreements during the product development phase because they often do not realize they are in that stage or because they believe their NNN Agreement will protect them. We then explained why this often is a big mistake, the results we often see from this “big mistake” and, most importantly, how to avoid it. In Part 3, we wrote about how when manufacturing overseas, the manufacturing contracts that make sense for you and your company are the manufacturing contracts that make sense for YOU and that is not usually going to be what you read on the internet nor what some other company tells you it did nor what you tell some law firm you need nor what some law firm wants to sell you.This part 4 is a riff on an interview I did for Global Sources the other day focused on getting a product sample before you buy. This interview is titled, Expert talk part 3, Dan Harris: Buy samples, cover all the bases and its preface notes how a “common thread” with my two previous interviewees was that “product samples can spell the difference between a successful sourcing journey and an importing disaster.” It then gives the following quotes from the two previous interviewees:
  • As John Niggl put it, “Buyers who skip the product sampling stage do so at their own peril. The benefit that comes from being able to “try before you buy”—review and approve a sample before committing to an order—is simply too great.”
  • Gary Huang, meanwhile, underscored the importance of product samples by comparing it to an audition where you can get a glimpse of quality and capability.

Well I’m here to tell you somewhat the opposite. Product samples are overrated. Sort of.

I am not going to deny that product samples are valuable and I am not going to tell you not to get product samples. No. Product samples are valuable and you should get them. But, from a legal perspective, they can be both highly risky in terms of your IP and worthless in terms of protecting you from bad quality.

Let me explain via the interview, with the interview questions in italics and my answers in normal font (modified slightly to enhance your reading pleasure)

Global Sources: What’s your take on buying product samples from overseas? What are the challenges?

Dan Harris: As a lawyer, three things always scare me about foreign companies having a sample made by an overseas factory:

First, does the foreign company have an enforceable agreement that will stop the overseas factory from copying the foreign company’s product and selling it around the world?

Second, did the foreign company apply for a trademark in the manufacturer’s country (China, Vietnam, Thailand, Indonesia, etc.) before it revealed its brand name to its manufacturer? This is critical because the first to apply for a trademark in most countries gets it, regardless of whether the foreign company previously registered its trademark in its home country. See e.g., China Trademarks: Register Yours BEFORE You Do ANYTHING Else.

Third, many foreign companies just assume that if they get a good sample the products will match the sample and if they do not, they will be legally protected. Neither of these are true, though.

Global Sources: Do you have a story of sample orders gone wrong?

Dan Harris: Our manufacturing team have definitely seen nightmare scenarios. The most common is when a foreign company has an overseas factory make the molds and make the sample and then learns that the overseas factory is using the molds for itself and selling the product either to competitors of the foreign company or direct to consumers.

Often when this happens (surprise, surprise), the overseas factory is also supplying bad quality products to the foreign company. This way the overseas company can not only sell the foreign company’s own products, it can sell better quality products than the foreign company.

Global Sources: Despite these challenges, what benefit do buyers get out of product samples?

Dan Harris: You can use samples to determine whether the factory is capable of meeting your quality standards. The problem is that one factory might have another factory make your sample and then pass it off as its own. This is particularly common in China where factories are so often clustered by product. Foreign company buyers should be certain to protect their IP by using an enforceable NNN Agreement and by seeking to register their company name, brand name and logos in the country in which their manufacturer is located and they should do this before they reveal any of those to anyone overseas. See e.g., China Contracts: Make Them Enforceable Or Don’t Bother. And if you are going to legally obligate your overseas factory to make your products to the specifications of your initial sample, you need an enforceable written contract mandating that it do so.

Global Sources: A buyer gets samples from three or more manufacturers. All samples meet his requirements and he’s satisfied with quality? Which manufacturer does he work with?

Dan Harris: I am a big believer in having the client visit the factory and meet with the people in person. This usually tells you a lot. See Overseas Product Sourcing: Being There.

Global Sources: How can Harris Bricken [my law firm] help buyers with the sample order stage?

Dan Harris: We help with the contracts and the IP registrations. I have to note that the biggest change we have been seeing from our clients in terms of buying products from overseas is that they very much want to start buying from countries in Asia beyond China (such as Vietnam and Thailand and Indonesia and the Philipines) and from Eastern Europe and Latin America.

Bottom Line: Product Samples can be great for determining whether an overseas factory has the capability to make your product at the quality you want, so long as the product sample you are given actually comes from the particular overseas factory with which you are dealing. But just getting the sample has its IP and other risks against which you should be protected early.

International trade lawyersOn March 6, 2019, The American Kitchen Cabinet Alliance, consisting of 27 United States domestic producers, (Petitioner), filed antidumping (AD) and countervailing duty (CVD) petitions against Wooden Cabinets and Vanities (“Wood Cabinets”) from China. A copy of that petition can be found here.

Under U.S. trade laws, a domestic industry can petition the U.S. Department of Commerce (“DOC”) and U.S. International Trade Commission (“ITC”) to investigate whether the named subject imports are being sold to the United States at less than fair value (“dumping”) or benefit from unfair government subsidies. For AD/CVD duties to be imposed, the U.S. government must determine not only that dumping or subsidization is occurring, but also that the subject imports are causing “material injury” or “threat of material injury” to the domestic industry.

Last year, domestic kitchen cabinet producers unsuccessfully argued that certain wooden cabinets were covered under the AD/CVD orders on Hardwood Plywood from China that were issued in January 2018. Because DOC rejected their scope ruling request and ruled that certain wooden cabinets were not covered by the Hardwood Plywood AD/CVD orders, the domestic producers have filed these petitions to start new AD/CVD investigations to try to get new AD/CVD orders to cover Chinese wooden cabinets.

In 2018, the total U.S. imports of wooden cabinets from China was about $4 billion.

Scope

The proposed scope definition in the petition identifies the merchandise to be covered by this AD/CVD investigation as follows:

The merchandise subject to these investigations consists of wooden cabinets and vanities that are designed for permanent installation (including floor mounted,  wall mounted, ceiling hung or by attachment of plumbing), and wooden components thereof. Wooden cabinets and vanities and wooden components are made substantially of wood products, including solid wood and engineered wood products (including those made from wood particles, fibers, or other wooden materials such as plywood, strand board, block board, particle board, or fiberboard), or bamboo. Wooden cabinets and vanities consist of a cabinet box (which typically includes a top, bottom, sides, back, base blockers, ends/end panels, stretcher rails, toe kicks, and/or shelves) and may or may not include a frame, door, drawers and/or shelves. Subject merchandise includes wooden cabinets and vanities with or without wood veneers, wood, paper or  other overlays, or laminates, with or without non-wood components or trim such as metal, marble, glass, plastic, or other resins, whether or not surface finished or unfinished, and whether or not assembled or completed.

Wooden cabinets and vanities are covered by the investigation whether or not  they are imported attached to, or in conjunction with, faucets, metal plumbing, sinks and/or sink bowls, or countertops. If wooden cabinets or vanities are imported attached to, or in conjunction with, such merchandise, only the wooden cabinet or vanity is covered by the scope.

Subject merchandise includes the following wooden component parts of cabinets and vanities: (1) wooden cabinet and vanity frames (2) wooden cabinet and vanity boxes (which typically include a·top, bottom, sides, back, base blockers, ends/end panels, stretcher rails, toe kicks, and/or shelves), (3) wooden cabinet or vanity doors, (4) wooden cabinet or vanity drawers and drawer components (which typically include sides, backs, bottoms, and faces), (5) back panels and end  panels, (6) and desks, shelves, and tables that are attached to or incorporated in  the subject merchandise.

Subject merchandise includes all unassembled, assembled and/or “ready to assemble” (RTA) wooden cabinets and vanities, also commonly known as “flat packs,” except to the extent such merchandise is already covered by the scope of antidumping and countervailing duty orders on Hardwood Plywood from the People’s Republic of China. See Certain Hardwood Plywood Products from the People’s Republic of China, 83 Fed. Reg. 504 (Dep’t Commerce Jan. 4, 2018) (amended final deter. of sales at less than fair value, & antidumping duty order); Certain Hardwood Plywood Products from the People’s Republic of China, 83 Fed. Reg. 513 (Dep’t Commerce Jan. 4, 2018) (countervailing duty order). RTA wooden cabinets and vanities are defined as cabinets or vanities packaged so that at the time of importation they may include: (1) wooden components required to assemble a cabinet or vanity (including drawer faces and doors); and (2) parts (e.g., screws, washers, dowels, nails, handles, knobs, adhesive glues) required to assemble a cabinet or vanity. RTAs may enter the United States in one or in multiple packages.

Subject merchandise also includes wooden cabinets and vanities and in-scope components that have been further processed in a third country, including but not limited to one or more of the following: trimming, cutting, notching, punching, drilling, painting, staining, finishing, assembly, or any other processing that  would not otherwise remove the merchandise from the scope of the investigation if performed in the country of manufacture of the in-scope product.

Excluded from the scope of these investigations, if entered separate from a wooden cabinet or vanity are:

Aftermarket accessory items which may be added to or installed into an interior of a cabinet and which are not considered a structural or core component of a wooden cabinet or vanity. Aftermarket accessory items may be made of wood, metal, plastic, composite material, or a combination thereof that can be inserted into a cabinet and which are utilized in the function of organization/accessibility on the interior of a cabinet; and include:

Inserts or dividers which are placed into drawer boxes with the purpose of organizing or dividing the internal portion of the drawer into multiple areas for the purpose of containing smaller items such as cutlery, utensils, bathroom essentials, etc.

Round or oblong inserts that rotate internally in a cabinet for the purpose of accessibility to foodstuffs, dishware, general supplies, etc.

Carved wooden accessories including corbels and rosettes, which serve the primary purpose of decoration and personalization.

Non-wooden cabinet hardware components including metal hinges, brackets, catches, locks, drawer slides, fasteners (nails, screws, tacks, staples), handles, and knobs.

Also excluded from the scope of these investigations are:

All products covered by the scope of the antidumping duty order on Wooden Bedroom Furniture from the People’s Republic of China (Inv. No. A-570- 890). See Wooden Bedroom Furniture From the People’s Republic of China, 70 Fed. Reg. 329 (Dep’t Commerce Jan. 4, 2005) (notice of amended final deter. of sales at less than fair value & antidumping duty order).

All products covered by the scope of the antidumping and countervailing duty orders on Hardwood Plywood from the People’s Republic of China (Inv. No. A-570-051 and Inv. No. C-570-052). See Certain Hardwood Plywood Products from the People’s Republic of China, 83 Fed. Reg. 504 (Dep’t Commerce Jan. 4, 2018) (amended final deter. of sales at less than fair value, & antidumping duty order) (Certain Hardwood Plywood Products from the People’s Republic of China, 83 Fed. Reg. 513 (Dep’t Commerce Jan. 4, 2018) (countervailing duty order).

Imports of subject merchandise are classified under Harmonized Tariff Schedule of the United States (HTSUS) statistical numbers 9403.40.9060 and 9403.60.8081. The subject component parts of wooden cabinets and vanities may be entered into the United States under HTSUS statistical number 9403.90.7080. Although the HTSUS subheadings are provided for convenience and customs purposes, the written description of the scope of these investigations is dispositive.

Alleged AD Margins

Petitioner calculated estimated dumping margins for China that range from 175.50% to 259.99%, with an average margin of 216.04%.

Although Petitioner alleged numerous government subsidy programs that benefitted the Chinese wood cabinet industries, Petitioner did not allege a specific subsidy rates.

Named Exporters/ Producers

Petitioner included a list of companies it believes are producers and exporters of the subject merchandise.  See the producer and exporter list here.

Named U.S. Importers

Petitioner included a list of companies that it believes are U.S. importers of the subject merchandise.  See the named United States importers list here.

Estimated Investigation Schedule 

March 6, 2019 – Petitions filed

March 26, 2019 – DOC initiates investigation

Mar 27, 2019 – ITC Staff Conference

April 20, 2019 – ITC preliminary determination

August 3, 2019 – DOC CVD preliminary determination (assuming extended deadline)

October 2, 2019 – DOC AD preliminary determination (assuming extended deadline)

February 14, 2020 – DOC final determination (extended and AD/CVD aligned)

March 30, 2020 – ITC final determination (extended)

April 6, 2020 – DOC AD/CVD orders issued (extended)

For those of you who have not been keeping track, there has been an onset of trade actions brought by U.S. companies against incoming product from China. With all the trade issues involving China and bipartisan anti-China sentiment prevalent in the United States right now, the view is that now is a great time to bring such actions. This specific case was no surprise to U.S. trade lawyers and we fully expect (many?) more to drop in the next few months. If you are importing products from China, now is the time to know the trade risks of your imports.

China lawyersPotential clients often ask our China lawyers, “what’s the worst thing that can happen if I don’t do ________.” My usual response is I don’t know or you get sued or you get arrested or you will never be allowed to leave China.” See Doing Business in China with Deportation or Worse Hanging Over Your Head. Whenever I mention prison or getting stuck in China forever I can “hear” the eyes roll on the other end of the computer or the phone because few take this risk seriously.

Guess what people. Get over your First World rule of law biases and start dealing with the real world, or as a friend of mine who regularly deals with China hostage situations is always saying, “this is China.”

The “this” about China hit me hard today via our China Law Blog Facebook page (go here to check that out where, purely coincidentally, my most recent post is how the portion of my Chinese TV interview from yesterday where I discussed hostages in China was completely deleted). Anyway, here is today’s story and it is filled with absolutely critical lessons for anyone doing business in China AND for anyone doing business with China who has any intention of ever going to China.

So I wake up this morning with a Facebook message from someone in trouble in China asking us to publicize his situation on our blog to help in a fundraising campaign. The fundraising campaign is here and it is titled, Being wrongfully sued and not allowed to leave China and rather than have me tell the story, I will pull it word for word from this campaign (see below) and then “unpack” it. Just as an aside, I visited the Getty museum in Los Angeles about a week ago and our tour guide used that word (unpack) before analyzing each and every painting and sculpture. The first time she used it I loved it but by the tenth or so time I hated it. This being your first time….

In 2013/2014, we started a personal training fitness gym in Shenzhen, China with 3 foreign partners. The initial agreement and plan between the partners was to grow the gym, however 2 years into operation, due to a variety of factors beyond our control, we could no longer afford to operate the business at the standard that we wanted. We had to pay high costs and find a way to close the business while respecting the staff and community.

The attempted transfer and closing process took many months while we interviewed potential investors and people who wanted to take it over. It ultimately came down to a young Chinese man who had spent many months in the gym, wanted to own his own gym and was getting to know the operations and the members. Unfortunately for us, this man’s intentions were not honest, and he manipulated the situation to his favour. Since we are foreigners in China, we were not knowledgable about certain legal processes and trusted him in this transfer. He devised a way to take over the business by paying the business’s then upcoming bills due, and some debts owed – amounting to RMB 217,000 (approx US$ 32,000). He then wrote up a pre-agreed contract stating that the RMB217k was a loan and that the business and equipment would serve as collateral should the loan not be paid back. Since we wanted to simply move on from the business, and were not able to handle the expensive monthly overhead, we agreed to this process, meaning we received nothing in the end for a business we had spent 3 years building, but would be free of the business liability.

This Chinese man is a loan shark, and once we had parted ways with him, believing everything was agreed to and wrapped up, we moved on with our lives.

Fast-forward two years, and unbeknownst to us, this man had filed a lawsuit, claiming that the business owed him the RMB 217k. The case was filed, and was ruled in his favor, since we had no knowledge of the case and thus never showed up to court to contest this man’s false version of events. It wasn’t until John tried to leave the country that we came to find out about its conclusion as he was told that he would not be allowed to leave China. In China the legal system greatly favours Chinese, and the entire case was processed and closed without our knowledge and thus no response from us, and as it stands now we are being ordered to pay a whopping RMB 250k ($40K).

We want to chance to set the record straight and show the court the documentation which shows the agreement we had and how this man has committed fraud. We want to re-open the case, and respond to the verdict that was passed without our knowledge. In order to fight the case we need to hire a lawyer and pay court costs and so are asking our family, friends and any citizens of the world who can support our cause and pursuit for the truth.

Initially we are trying to raise RMB 55K ($8K) to cover the legal and court fees, so we can do everything possible to clear our good name and release the government hold on John’s passport. This will be a long, difficult battle but we will keep you updated every step of the way and maintain full transparency throughout this process.

Thank you so much for taking the time to read this, and for your support, whether financial or just by sending positive energy and thoughts our way.

Now for the legal unpacking (that’s only by second time with that word) and an analysis of what likely went wrong and what probably should be done to try to solve it. The quotes from above are in normal font and our analysis is in italics.

  1. “He then wrote up a pre-agreed contract stating that the RMB217k was a loan and that the business and equipment would serve as collateral should the loan not be paid back. Since we wanted to simply move on from the business, and were not able to handle the expensive monthly overhead, we agreed to this process, meaning we received nothing in the end for a business we had spent 3 years building, but would be free of the business liability.”  Mistakes: Not using a lawyer with this contract. Based on the above, it very much appears that this was a loan contract for RMB217k and this person(s) did not fully realize that. Any competent lawyer could have told them that. I am guessing the contract was in Chinese — why wouldn’t it be as it was a Chinese transaction —  and that may also explain why it was not fully understood. Or maybe it was a situation where eagerness took precedence over common sense. Who knows? Bottom line is that you should never sign a contract without fully understanding it and you should virtually never sign a contract without the assistance of a qualified lawyer.
  2. Fast-forward two years, and unbeknownst to us, this man had filed a lawsuit, claiming that the business owed him the RMB 217k. The case was filed, and was ruled in his favor, since we had no knowledge of the case and thus never showed up to court to contest this man’s false version of events. Mistakes: Maybe none, or maybe this person received notice of the lawsuit but did not realize what it was. I say this because Chinese courts tend to be very good at getting their notices out and they also tend not to rule until it has been confirmed that notice was received.
  3. It wasn’t until John tried to leave the country that we came to find out about its conclusion as he was told that he would not be allowed to leave China. Mistakes: Chinese law allows the government to not allow people to leave who owe money. This is why our China lawyers are constantly telling people not to go to China if they MIGHT owe money and to get the hell out of China as quickly as possible if they are there. See Maybe Owe Money To China? Don’t Go There. 
  4. In China the legal system greatly favours Chinese, and the entire case was processed and closed without our knowledge and thus no response from us, and as it stands now we are being ordered to pay a whopping RMB 250k ($40K). Mistakes: I’m guessing a Chinese defendant would have had the same result as it sounds like a fairly garden variety loan agreement and this amount probably included interest and perhaps attorneys’ fees as well.
  5. We want to chance to set the record straight and show the court the documentation which shows the agreement we had and how this man has committed fraud. We want to re-open the case, and respond to the verdict that was passed without our knowledge. In order to fight the case we need to hire a lawyer and pay court costs and so are asking our family, friends and any citizens of the world who can support our cause and pursuit for the truth. Mistakes: Is it even possible to re-open the case at this point? I do not know but I doubt that it is. I could be wrong about this, but it seems to me that this person is doubling down on his mistakes by again not hiring a lawyer to figure out the best way to get out of this. Let’s just suppose it is not to late to try to “re-open” the case. In most countries of which I am aware, to be able to re-open a case like this you must not only show that you were not given notice of the case you also must show that if the case were to be re-opened that you have at least some chance of overturning the ruling on the merits. If this is a legal and valid and garden variety loan agreement, that chance may very well not be there. If re-opening the case is going to be impossible, no money should be spent on that route. It probably should instead be spent on trying to strike a deal with the lender and in return for whatever payment he accepts, a settlement agreement is signed (this settlement agreement should be in Chinese and pursuant to Chinese law) and then used to get the hold on leaving China lifted. 

But in the end, this person does need money to hire a Chinese lawyer (probably ideally based in whatever city in which the lawsuit was brought) to figure out how to figure out the situation and help this person get out of China.

International manufacturing contracts lawyers

In Part 1 of this series, we talked about how the product development stage is the highest risk stage for foreign companies manufacturing overseas and yet also the most neglected stage. In Part 2, we talked about how foreign companies often will use NNN agreements in the factory search stage and Manufacturing Agreements (ODM, CM and OEM) for the production stage, but rarely use Product Development Agreements during the product development phase because they often fail to recognize they are in that stage or because they believe their NNN Agreement will protect them. We then explained why this can be a big mistake, the results we often see from this “big mistake” and, most importantly, how to avoid it.

In this Part 3, I am going to make a slight diversion based on an email exchange I have been having with a European company that started with it wanting our international manufacturing lawyers to review an NNN Agreement and a Mold Ownership Agreement it had paid a Chinese law firm to draft. This company was having a “bad feeling” about the documents and wanted our manufacturing lawyers to make sure they “would work for China” before submitting them to its longstanding Chinese manufacturer, with which it had maintained a “superb” relationship for the last seven years. I very quickly looked at the contracts — they were probably passable — but immediately wrote back to the company to ask whether it had a Manufacturing Agreement with this Chinese manufacturer. The response from the Spanish company was essentially, “no, but why.”

The why is that a Manufacturing Agreement is exactly what this company needed and it could have saved time and money and even credibility with its Chinese manufacturer by getting it. I explained that due to the stage it was in with its Chinese manufacturer, it would have been faster, cheaper and way way better for it to have had its Chinese law firm draft a Manufacturing Agreement with its Chinese manufacturer that included a paragraph with NNN provisions and another paragraph simply making clear that the Spanish company owned the listed molds.

That very recently concluded email exchange got me to thinking of how incredibly common it is for companies to come to us after having spent good money for legal things they either did not need at all or barely needed, especially in comparison to what they truly did need. We see this sort of overbuying/overselling all the time. Just last week, I consulted with a company that came to us after having paid for four trademarks in China when due to its situation it clearly only needed one and another company that had paid for a China employment contract even though it had no Chinese entity, which is one of the most dangerous things any foreign company can do. See American Companies in China without a WFOE and the Impact of Donald Trump and US Tariffs and Why Hong Kong is not the Answer.

Pretty much every day, a client or a potential client will come to one of the attorneys at my firm — and this holds true for every area of law in which we practice, not just international law — saying that it wants to retain us for X when the client actually needs Y. Needless to say, our attorney never would say, “sure, I will charge you for Y and do Y” while all the while thinking “this client really needs X.” No. She would say, “wait a second,” what you need here is not Y, but X, and let me explain why this is the case. Unfortunately, Chinese lawyers — certainly NOT ALL Chinese lawyers have been trained differently and I talked about this in an interview I gave back in 2016 (See On Being a China Lawyer and on Doing Business In China: An Interview):

Dan: I’ll backtrack a little and tell you the problems American companies often have with Chinese lawyers.

An American company will hire a Chinese lawyer and tell the Chinese lawyer, “I want to do ‘A,’” and the Chinese lawyer will do “A.”

Three months later the American company will learn that no one’s doing “A” anymore. They’re all doing “B.” So it will go back to the Chinese lawyer and say, “Look, we did ‘A.’ Now everyone’s telling me that wasn’t a good idea.” The Chinese lawyer will then say, “Right, it was not a good idea.”

“Then why did we do ‘A’?”

“Because you told me to do ‘A.’”

It drives American companies nuts. If you had called up an American lawyer, he or she would have said, “Why do you want to do ‘A’? We do ‘B’ 99% of the time. Let’s talk about it.” When somebody tells me they want to do something, I don’t just say, “Yes.” I ask them 10 questions because I want to make sure that’s the right way to go.

The typical dynamic between Chinese companies and Chinese lawyers is, “I’m the boss. You’re my scrivener.”

One time we were brought in to help a Chinese company. Twenty years ago it had formed an American company, and then that American company had formed a Chinese company. It’s called a “roundtripper.” China once gave all sorts of preferences to foreign companies; Chinese nationals would form American companies, then go back to China to get the preferences. Not legal, but it was very common.

This Chinese company had gotten huge. They had a company in the United States that was formed by somebody’s cousin, had never paid taxes, and maybe had aspirations of going public. They needed to clean up their act. It was hugely complicated, and we brought in an international accounting firm to help on the tax side.

My colleague Steve Dickinson is based in China, and one of the lawyers we work with there invites him out to lunch. Steve is thinking, “That’s weird. This lawyer never invites me to lunch.” Steve goes to the lunch and the client is there, and the client has this idea on how to solve the problem in about 1/10 the time and at about 1/100 the cost of what we have said needs to be done.

Steve tells the client (nicely, I presume), “Are you kidding me? You know nothing about U.S. laws, you know nothing about U.S. taxes, you’re not a lawyer or an accountant in China, and you think you’ve just solved the problem? Give me a break.” Why was Steve brought to this lunch? Because the Chinese lawyer knew it was absurd, but he just was not comfortable telling this to his client because that is not his role.

When Chinese companies come over here to the United States, they often want to tell us exactly what to do. Once we took on a case where as soon as we were paid, the Chinese company told us how we were going to handle it. We told them that what they were asking us to do would be the dumbest thing we could possibly do. (I talked with about 10 other lawyers and they were like, “Seriously?”)

“No, we need you to do that,” the Chinese company said.

We responded, “Nope. Here’s your money back.”

As American lawyers, we can’t have that. Our reputations are on the line. We’re not going to do something that makes us look silly and just wastes the client’s time and money. We’ll do things for clients even if we disagree, but not when it’s absurd or unethical.

What does all of the above have to do with saving your shirt when manufacturing overseas? A ton. Because one of the ways you save your shirt is by getting all of the manufacturing contracts and protections you need and no more.

The below is a typical email I send in response to a company that writes saying that they need legal help with their overseas manufacturing and asking how we would propose to provide them with that help.

Working with our international manufacturing lawyers will in the end always depend on what makes sense for your company and your product, but to give you at least some idea of what we do, I can tell you that we usually do some combination of the following for our clients that are looking to have their products manufactured overseas:

NNN/NDA Agreements. We almost always do these in the language of the country of your manufacturer (the official version) and in English (for you) and they typically take us 4-5 business days to complete. You can learn more about our NNN Agreements here. We draft our NNN Agreements to protect confidentiality and to prevent your overseas manufacturer from competing with you or circumventing you. They make sense before you reveal any confidences. If you choose to have us draft an NNN Agreement, we first send you (via DocuSign) a one page Flat Fee Agreement setting out the fee structure. We next send you a questionnaire and when we have your answers to that we draft the NNN in English for your approval. Once you approve of the English language version, one of our lawyers will translate that into the official language and we then send that to you. You then send the full NNN Agreement to your overseas counter-party and if it proposes any changes we will revise it.

Manufacturing Agreements. Once you have chosen your overseas manufacturer, you need a Manufacturing Agreement (a/k/a OEM Agreement or Product Supply Agreement) in the language of the country of your overseas manufacturer (official) and in English (for you). These typically take us 10-14 days to complete. You can find out more about our Manufacturing Agreements here. Our drafting process for these agreements is similar to our drafting process for our NNN Agreements. If you are already certain who you will be using as your overseas manufacturer you can probably skip the NNN Agreement and go straight to the Manufacturing Agreement as our Manufacturing Agreements contain all the substantive provisions of our NNN Agreements.

Trademarks. If you plan to put your company name or your brand name or your product name or your logo on your product or on its packaging, you need to register those as trademarks in the country in which you will be having your product made (there are some exceptions to this which we can discuss when you are clearer on where you will be doing your manufacturing). This is usually true even if you will not be selling your product in the country where your products will be made. Our trademark fees vary by the country. It also generally makes sense for you to have a trademark in those countries in which you have or expect to have substantial sales and we can help you with that also. It also sometimes makes sense to secure patents or trademarks as well.

In addition to the above (each of which depends on your situation and/or your product) and depending on how your production progresses, there may be other agreements necessary. If you want help finding the right factory, we can help with that also, either with our own people (for Vietnam or Thailand) or by referring you to outside sourcing experts.

Our goal is to provide our clients with customized solutions to fit their manufacturing needs. Towards that end, if you have any additional questions, please do not hesitate. In the meantime, if you can tell us more about your product, your situation, and your goals, we can help narrow down your actual needs. At some point I would be happy to get on the phone with you because in 10-15 minutes of my peppering you with questions I am confident I can figure out exactly what you need and if I can’t, I can refer you to one of our more specialized lawyers who can.

Bottom Line: When manufacturing overseas, what makes sense for you is what makes sense for YOU and that is not usually going to be what you read on the internet nor what some other company tells you it did nor what you tell some law firm you need nor what some law firm wants to sell you.

Your thoughts?

International lawyers for manufacturing contracts

In Part 1 of this series, we talked about how the product development stage is the highest risk stage for foreign companies manufacturing overseas and yet also the most neglected stage. Foreign companies will use NNN agreements in the factory search stage and Manufacturing Agreements (ODM, CM and OEM) for the production stage, but they rarely use Product Development Agreements during the product development phase, oftentimes because they do not recognize they are in that stage or because they believe their NNN Agreement will protect them. This is a big mistake that often leads to one of two disasters for the foreign company.

The failure to use a product development agreement often leads to one of two disasters for the foreign company.

The first disaster usually occurs when the overseas manufacturer does the product development work at no charge. In these situations, the overseas manufacturer often will claim the intellectual property rights in the developed product are its own and will “generously” offer to manufacture the product for the foreign company at the price, payment, quantity, quality and delivery terms chosen by the overseas manufacturer. No matter how outrageous the pricing or other demands from your overseas manufacturer, there is little you can do because you waited until development was finished before even considering who would end up with “your” IP and now your overseas manufacturer owns it all. Our international manufacturing lawyers see this all the time, especially with start-up companies involved in making products for the Internet of Things ecosystem. See The Internet of Things: Do You Really Own “Your” IoT Product?

The second disaster stems from foreign companies not considering the procedural/operational issues inherent in successfully developing a product. Foreign companies far often mistakenly assume their overseas manufacturers can develop any product within the tight timeframes and close tolerances required by modern business. This often leads to the following problems:

  • The product is never completed or never works properly.
  • The product is not completed until after the market opportunity has passed.
  • The product ends up costing far more than anticipated.

And again, Internet of Things companies seem particularly prone to this.

The best way to address the above product development risks is with a product specific product development agreement tailored to the country in which your manufacturer is located. A good product development agreement covers the period between the NNN agreement stage when you are figuring out which manufacturer to use and the Manufacturing Agreement stage when you have already selected your manufacturer and know exactly what you will have manufactured.

A good product development agreement generally includes provisions addressing the following:

1. The product to be developed.

2. The specific technology the foreign company and the overseas manufacturer will contribute.

3. Who will provide product specifications and in what form.

4. Who will own the IP rights to the resulting product. Our international manufacturing attorneys often review overseas product development projects where the overseas manufacturer has asserted it owns all of IP rights in the developed product. These overseas manufacturers typically had agreed to make “their” product available to our clients  while at the same time manufacturing the product for their own sales under their own trademark and for sales to competitors of our client. Our clients are usually stunned when we tell them that because they had no written agreement making clear they would own the resulting product and the resulting IP in that product, their overseas manufacturers are legally justified in claiming IP ownership because they contributed their technology to developing the product and because they incurred the product development costs.

5. Who will pay for product development costs?

6. Who will pay for the molds and tooling? This becomes a major issue when the foreign company seeks to use a different manufacturer after product development is complete. In this situation, the overseas manufacturer that helped you to develop the product will likely do one of the following:

a. Refuse to release the molds, tooling, CAD drawings and other items required to manufacture the product.

b. Require you pay a substantial fee to give you the molds, tooling, CAD drawings and other items related to the product.

c. Claim ownership in the IP related to the product and threaten to sue you in its own country if anyone else manufactures the product.

You will be particularly badly positioned if your overseas manufacturer did the development work and produced the molds and tooling at its own cost, though it is also very common for overseas manufacturers to engage in the above tactics even when you paid for the molds and tooling. You are not going to be protected from this unless you have a written agreement (enforceable in your manufacturer’s country) making clear you own the molds and tooling and penalizing the overseas manufacturer for not immediately returning those to you. See Product Molds And Tooling Three Things You Must Do to Hang on to Yours.

7. Setting milestones. Overseas manufacturers will often agree to do your development work but then fail to do so in a timely manner. Your product development agreement should provide incentives for your overseas manufacturer to meet the listed milestones and a penalty if it does not. The following is a typical arrangement:

a. The overseas manufacturer does product development at its own cost and you pay all hard costs for molds and similar items.

b. Milestones and clear specifications for product development are set.

d. You and your overseas manufacturer agree on a target price and quantity for when the product is developed.

e. If your overseas manufacturer meets the milestones and specs and agrees to sell at the target price and quantity, you will then enter into a Manufacturing Agreement with it.

Overseas manufacturers (especially in China and especially in Chinese-owned factories in Vietnam and Thailand) usually prefer to cover all product development costs because they want to own the resulting product and foreign companies far too often go along with this, without realizing this likely means your overseas manufacturer will end up with “your” product and its related IP.

In part 3 of this series we will discuss how to protect your molds and tooling when manufacturing overseas.

Asia product development contracts

When a company comes to us looking to have its product outsourced for manufacturing in a foreign country, they often do not have a fully final product. By this I mean that their “product” can be anything ranging from a mere idea to a prototype needing further development before large scale manufacturing to a product needing minor refinements to a fully-fledged ready-to-go product. Our international manufacturing lawyers deal with less than fully-fledged products more than half the time.

Often, a client will believe its product is “ready to go” when it actually can (and should be) further modified to reduce production costs or simply to make it just a little bit better. It is quite common for good overseas manufacturers to suggest at least a few helpful changes to so-called final products.

Whenever an overseas manufacturer modifies (even slightly) one of our client’s products (and even when they don’t), we as lawyers immediately have the following three questions:

  1. Will our client own the IP rights to the modifications?
  2. Will our client own the IP rights to the final product?
  3. How can we as the lawyers best protect our client’s IP rights in the modifications and the products?

These are not merely academic questions either as our international IP lawyers get a fairly steady stream of American (United States, Canada, Brazil and Mexico, mostly), Australian,  and European companies seeking help to “recover” their IP rights taken by their (mostly) Asian manufacturers. Much of the time there is little our IP lawyers can do in these situations either because it is not clear who owns the IP rights or it is clear that our client unintentionally relinquished the IP rights to its manufacturer. Even worse, there are plenty of times where we have to tell our client that it is not clear who would prevail were we to bring a lawsuit but it is very clear that such a lawsuit will be incredibly time-consuming and expensive and require all sorts of highly paid experts.

Who owns the IP rights in your product? Do you really know? It is not uncommon for manufacturers to wait years before asserting their rights to “your” product. This assertion usually comes when your manufacturer decides the time has become right for it to begin selling its own products or when you decide you want to use another manufacturer. See Your China Factory as your Toughest Competitor and How to Stop Your China Manufacturer from Selling Your Product to Others: Don’t Let This Happen to You for how common the first of these scenarios has become and see Why Changing Suppliers Can Be So Risky for how incredibly common the second of these scenarios has always been.

The product development stage is the highest risk stage for foreign companies manufacturing overseas and yet also the most neglected stage. Foreign companies will use NNN agreements in the factory search stage and Manufacturing Agreements (ODM, CM and OEM) for the production stage, but they rarely use Product Development Agreements during the product development phase, oftentimes because they do not recognize they are in that stage or because they believe their NNN Agreement will protect them. This is a big mistake that often leads to one of two disasters for the foreign company.

In part 2 of this series we will set out why not having a timely and country-specific Product Development Agreement can a mistake, the two disasters our international lawyers often see that arise from this mistake and, most importantly, what you can do to prevent all this.

Stay tuned….