A reader directed me to an excellent article in Material Handling & Logistics Magazine, setting out the basics for succeeding at outsourcing product manufacturing to China. The article is by Michael Zakkour of Technomic and it is called The Ten Rules for Contract Manufacturing in China.
The article starts out by noting that “there are three overarching ‘must haves’ for producing/buying in China: a good supplier, a good contract and good IP protection.” It goes on to say that if “you pay attention to the tiniest of details on all three you will likely have a profitable experience,” but “small lapses in any of the three could spell disaster.” I completely agree.
It then maps out ten “simple rules to follow,” of which I will be discussing only the following, which are all legally related.
- “Register all of your trademarks, copyrights and patents in China. China is first to file, not first to use. If you are not diligent with this, you will at some point lose your IP.” I 100% agree. See File Your Trademark In China. Now.
- “Craft a comprehensive non-disclosure agreement and when you use it be sure to get the factory’s official “Chop” (company signature) on it.” I 100% agree. See Why Non Disclosures (NDAs) Alone Are Not Enough For China and Why Non Disclosures (NDAs) Alone Are Not Enough For China, Part II.
- “Once a vendor is chosen, draft a comprehensive OEM agreement/contract. A purchase order is NOT a contract. Ensure the agreement includes clarity on payment terms, penalties for non-compliance. China as a venue for conflict resolution, quality control regimes and standards and every other possible positive or negative contingency.” Again, I 100% agree. See China OEM Agreements. Why Ours Are In Chinese. Flat Out. and Drafting A China Manufacturing Agreement. Watching The Sausage Get Made.
For more on best methods for China product manufacturing, check out the full article here.