Last November my daughter advanced money to one of our manufactures to lock in the price of a fabric that we expected to be popular. The manufacturer took the money but did not order the full amount of cloth.
Unfortunately, the “they took the money and ran” is not uncommon in China. Fortunately, in my experience
1. It can be avoided if some protocols are followed in advance of placing the PO or giving funds
2. The party who has been wronged does have some options and should not casually walk away just assuming the funds are gone forever.
Assuming all diplomatic efforts fail, the next step is often 3rd party mediation. For example, the CSIC where I volunteer offers a dispute resolution service (www.ChinaSourcingInfo.org) where they will call up the supplier and try to get to the bottom of things. While I do not know the details of your daughter’s situation, often the root cause is a misunderstanding exacerbated by language, time and distance barriers. Sometimes a quick phone call from a Chinese person with the buyer’s best interest in mind can sort out the problem.
If that doesn’t work, don’t be afraid to go the legal route assuming the buyer has a clear paper trail with proof of payment and signed PO. The first step is to have a local lawyer write a demand letter. In my experience, 9/10 suppliers settle once they see the buyer is serious about going to court. If you need an English speaking lawyer, shoot me an email and I’ll introduce the firm that has been doing a good job for me in past years. If you do go to court, keep in mind the following:
a) Just like factory labor, legal fees are much lower in China than USA. It’s almost fun to go to court because you can assembly your own “dream team” of support at a fraction of what it costs back home.
b) Due to the overcrowded legal system, the judge will most likely try to mediate a solution rather than book court time. Because in most cases it is pretty clear the supplier is in the wrong, you may find the judge is your best advocate to push the supplier to correct things. Let’s me give you a real example from my experience a few weeks ago in China
I’m not sure if I was lucky, simply well prepared, or perhaps I started with very low expectations, but my experience in the Chinese court overall has been pleasantly surprising (knock on wood). Here is an example.
A supplier was holding some funds that belong to me and diplomacy had failed, so my assistant and I got up early and made it to the court to be the first in line to submit our notarized documents and present our papers to the clerk in order to book a date for the hearing. Clerk went over our papers and everything was in order, except a very technical suggestion in their SOP that we needed a formal letter from my company’s board of directors stating that I have the right to represent the company in submitting the paperwork. That request was quite silly because I am the sole owner of the company and carried the company chop and passport and even business license stating I was sole owner with me that day. But a government officer has a lot of room to interpret the rules as they see fit. So we explained the situation. Plus it helped that I went in person as having a westerner kow-tow to the clerk to ask to speak to her supervisor to explain our case actually worked, and after a bit of a wait we got an audience with one of the judges that very afternoon. We once again explained the situation and politely mentioned how the costs of lawyer fees, court fees and notarization, combined with my time away from the office, travel back from out of town to come to court and so on… are significant when you consider the whole case is for less than 20K USD. Believe it or not, the judge was receptive and wanted to help. But he couldn’t easily overturn his subordinate’s stance that we should submit more documents as that would cause his subordinate to lose face. But he did want to help, so he actually picked up the phone and called the defendant in our case to explain that he was “sitting here with Mike, the foreign boss, who is very serious about this case and after reviewing the case, if he was the judge, he would probably rule in Mike’s favor,” so the defendant would be better off paying the amount now rather than risking a loss and even larger payment once court cases and perhaps damages were applied.”
The situation made me really pause to reflect on how much China has changed over my 10 years living here. Even as recent as a few years ago: 1. the courts would certainly not go out of their way to help a foreign entity 2. The clerk would no way allow her superior to be bothered. But today was remarkable, the system was working fairly and both the clerk and even the judge went way out of their way to help.