After goods have been received, is it too late do anything if the product’s quality is not acceptable?

ANSWER:

Unfortunately, unless you can check off the 5 items below, in most cases, especially if you order is small, the best advice is to “learn from your mistakes and do things right on your next order.

 

5 Essential Check Points

If the buyer has the following items in place, even a foreign buyer will have a decent chance of negotiating a resolution that is acceptable:

  1. a signed / chopped contract that clearly defines what is the acceptable level of quality
  2. a clear paper trailing showing proof of payment
  3. the seller named on the contract matches the receiver of the payments. (With so many trading companies out there it is a common mistake to have a contract with a supplier but pay a trading company!)
  4. your supplier has physical and financial assets (small “one-man-bands” disappear as soon as they feel a lawsuit is on the way)
  5. the jurisdiction on the contract matches the location of the supplier’s assets at a city, province or country level.

It is always nice to have future orders you can leverage as well.

 

4 Critical Steps

In addition to the 5 contractual points above, here are four critical steps to help ensure your next order is a successful one.

  • Use reputable suppliers like the ones found on www.GlobalSources.com’s verified supplier list.
  • Because situations can change so fast in China, check out even verified suppliers in person or via a 3rd party inspection firm and/or due diligence providers BEFORE singing a purchase order.
  • Have a good contract in place which defines not only price and lead time but acceptable quality and product standards in great detail.
  • Perhaps most important, do an inspection BEFORE the goods ship out from China and BEFORE final payment is made to the supplier

Now let’s assume that you have followed the tips above and somehow you still get defective merchandise.

The first step is to define the damage and put a value on the costs to repair or replace.

Second step is to negotiate with your supplier.

If negotiations fail, consider getting an English Speaking Chinese lawyer to write a demand letter.

KEY POINT:  Unlike most nations, in China you can sue for lost revenue.  Since the price you sell to your buyers is certainly much higher than the price you pay to your suppliers, your demand letter can “swing big” and put the fear of God into a supplier!

If the demand letter doesn’t work you can bring in 3rd party mediators or go right to court.

I have been involved directly or indirectly with 8 court cases during my 12 years in China. In all 8, the foreign party was victorious, BUT in all cases the buyer had the 5 critical items mentioned above in place.

 

This response was made possible thanks to the input of the following experts:

  1. Renaud Anjoran of the blog www.QualityInspeciton.com and the inspection agency Asia Quality Focus
  2. Mike Bellamy of  the (not-for-profit) China Sourcing Information Center and the sourcing agency PassageMaker
  3. Matt and Jamon, the professional mediators at Southern Perspectives

 

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