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Importing from China, legal advice for UK companies

If your business is already importing from China, or considering Chinese imports, you will want to ensure the process, and the relationship with your Chinese suppliers, goes smoothly right from the beginning.
Stories of lost sales and key promotions unfulfilled due to a slip up at the Chinese factory are common and can make companies cautious of taking the first step.
Here are some key tips and useful practices to adopt with your Chinese suppliers, to ensure that your goods arrive as expected, on time, and in the right quantity, consistently. We’ve included some front line advice on what to do if problems do arise. First things first, do your research.

Check the validity of your potential supplier’s chinese factory & company.

  • Speak to other customers to confirm the quality your potential supplier’s goods.
  • Visit the factory of your potential supplier at an agreed date.
  • Double check by arriving “on spec” unannounced at the factory a second time. Doing this won’t  jeopardise your relationship with the potential supplier.

    Ask to see the plant, the process, and the goods that you are planning to order whilst you are there. Arrange to stay for a few days so that if there is no one to meet with you straight away, you can always return in the following days.

  • Ask the same questions of different people at the factory to check for consistent answers. Ensure you are buying directly from the chinese factory and not via an agent of the factory.
  • Set up a Letter of Credit to show payment will be made and goods will be shipped. Your bank should know how to do this, or contact us.

How to ensure goods purchased from your chinese factory are of the quality required

  • Send your agent, or better still, visit the factory yourself to check the quality of goods before the first order is shipped.
  • Request that one batch of the first shipment is sent by air rather than sea, then check the quality of this batch when it arrives.

How to ensure goods purchased from your chinese supplier do arrive

  • Agree small orders first, over a period of time, so trust builds up.
  • Pay in stages with an amount withheld until delivery
  • Ask for goods to be delivered to a warehouse in your country. Once delivery arrives, pay for the goods as they are released.

Protecting your intellectual property

If your chinese factory is involved in assembling an innovative product, or has exposure to your intellectual property, patent details or knowledge in the factory process, this will be a key concern and you will need to be even more vigilant. The Government has published useful guidance on the intellectual property risks to UK companies of operating in China.

How to approach issues with your chinese factory supplier.

  • The best ways to approach disagreements and difficult issues with chinese business people is to talk, meet face to face and go to dinner together.
  • If you are in a position to talk the issue out over a meal, be ready to address it only at the end of the meal. This is the chinese way and you should get better results for your patience.
  • If you can’t get out to the factory, use Skype as the next best alternative, or speak by phone rather than email. Email will be less effective unless you’ve had face to face conversations already.

Managing Negotiations with chinese suppliers

  • Allow time for any decision to go up through the Chinese decision making tree.
  • Ask how long it will take for an answer to come back from above, so you know time scales you are working with.
  • Get to “yes” at each stage of the negotiation process, follow up what’s been agreed at a meeting in writing and ask for confirmation from your supplier that this is what both you and they agreed to during the meeting.

    Recognise that “yes” in Chinese is ambiguous, it can mean “yes, I’ve heard what you are saying” not necessarily ”yes I agree”.

  • Avoid the silence vacuum. Silence from a chinese supplier means “no”.
  • You must have a trusted interpreter/translator, to  establish credibility and show you are serious in negotiations.
  • It helps to have a trusted interpreter/translator, to establish credibility and to show you are serious in negotiations.

There are many ways of limiting the damage if things go wrong in the first months, or even after years, of dealing with a chinese factory or supplier. The Legal Partners are expert commercial negotiators, with experienced practicioners who know how to do business in, and negotiate with chinese companies. Please get in touch.

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For more information or queries about issues discussed in this article, please contact by email.

To speak directly with Hongbing or any other of The Legal Partners team of specialist business and HR lawyers based at our Richmond UK office, or our partner lawyers in Singapore or Guanzhou, please call +44 203 755 5288

This article explains the main legal issues and common situations to consider. It is not a substitute for legal advice. Please get in contact to discuss your particular issue or queries.