Updated March 2021
Back in 2012 I set out on a research project to form a general guideline to build a blog post or white paper to answer the type inquiry we receive every week:
“My supplier did me wrong, they now don't reply. And when I do get thru to them, they won’t fix the problem. What can I do?”
I started with the intention of writing a white paper about the Better Business Bureau in China, but there is not a lot to write about.
Why not? Because there is no BBB or anything like it in China. The situation hasn't changed as I update this blog post a decade later. If you Google “Better Business Bureau China", you’re led to a question being asked: “Is there a Better Business Bureau in Changzhou, China?” One of the replies was “That’s a good joke.” The other respondents put it in softer terms, but they have the same general message- there is no Better Business Bureau in mainland China and nor anything remotely close.
If no Better Business Bureau in the mainland, what can you do if ripped-off in China?
If your order has a large monetary value there are intermediary firms that can help, such as our friends at www.AsiaBridgeLaw.com who handle loss recover/dispute resolution by charging a flat fee to issue a Chinese language demand letter or a block of time to assign a lawyer to coordinate the Chinese police or open a court case in China. The team at www.AsiaBridgeLaw.com was kind enough to let us re-post this great little flow chart they made for how to decide which options are best when a Chinese seller has ripped you off.
Q&A with the team at AsiaBridgeLaw about how to recover money when ripped off in China:
Jump right to litigation when a Chinese supplier has ripped you off?
Unless you are sure you have an "open & shut case" and all negotiations with the target company have been exhausted, in the interest of time and budget, it is probably not in your best interest to take the target company to court as your next move. Consider a demand letter first.
What's a demand letter?
In simple terms, a Demand Letter is essentially a “threat” delivered by a Registered Chinese lawyer. The stronger your case, the more leverage the demand letter will have. Having a Chinese registered lawyer issue the demand letter shows the target entity you are serious and they have one last chance to resolve the issue before going to court in China. Since most overseas courts have no jurisdiction in China, Chinese companies tend to ignore demand letters written in English or sent from a non-Chinese lawyer. For these reasons, a Registered Chinese Lawyer should issue the demand letter.
How to know if I have a strong case from a Chinese legal perspective?
Issuance of a demand letter is suitable in situations where the client has solid evidence allowing a sound legal case to be built against a real company/individual in China. Demand letters leverage the threat of legal action. If the subject company is not responsive to the demand letter, the case can be taken to court. The Demand Letter Service is invoiced as a fixed fee and no commission is applied to the recovered funds. Visit the rate sheet for more information.
What if you have a weak case from a Chinese court's perspective?
When the case is weak from a legal perspective (lack of evidence, for example) a reasonable settlement is possible when leverage is applied outside of court, using the proven tools & techniques offered by AsiaBridge Law's "Negotiated Settlement/ Loss Recovery Consulting" Service as a last resort.
As such, even if your case is weak, it is almost always best to engage AsiaBridge Law’s Demand Letter Service first, in hopes of achieving some type of resolution before exploring the "Negotiated Settlement/ Loss Recovery Consulting" option.
Why not skip the demand letter and start with litigation or police action to get money back from a bad supplier in China?
The simple answer is that those options require a deeper investment in time and money. Demand Letters are far less costly and can be enacted in a matter of days/weeks rather than months/years. While not always successful, they do provide the "most bang for the buck".
If no Better Business Bureau in the mainland, and you can't afford a lawyer, what can you do if ripped-off in China?
Many times each week we receive emails from buyers of who have made purchases of relatively small monetary value. Something has gone wrong and now they need help.
China purchases gone wrong: What if the payment was made via PayPal?
If these customers made their purchase through a service like PayPal they could try PayPal’s mediation services. However, the seller is most likely not going to respond and the only option you’re left with is receiving a chargeback. As the consumerist notes, this is a daunting, and most likely unsuccessful venture. (http://consumerist.com/2009/05/top-10-reasons-your-chargeback-will-be-denied.html_) If a service like Western Union is used, there are no options for the buyer to file a complaint.
China purchases gone wrong: What if the payment was made via Alibaba's Alipay Buyer Protection System?
Far too often we learn from buyers that Alibaba Trade Assurance is a joke. They explain to me that the supplier, not the buyer, is Alibaba’s customer, so that it where Alibaba's interest is aligned. And it’s unlikely you could take a mega-corporation like Alibaba to court and win, so going after the seller direct may be the better option.
China purchases gone wrong: What if the payment was made direct to the seller and the order size is small?
As minimum service fees are involved when you retain a lawyer, it may not make economic sense to hire a lawyer to go after losses less than $4,000 unless there were substantial indirect losses that could be claimed. What about the embassy or police?
- Chinese Embassy
It can’t hurt to contact the Chinese embassy in your country, but keep your expectations realistic. They will likely explain (in varying degrees of politeness) why they are too busy and that you should contact the local police. The number of cases is so large that the embassy and consulates don’t get involved unless the case has political ramifications.
- Chinese Police
Unless your loss is very large, you will find little support from the police in China as they are simply overwhelmed. If you are lucky enough to get their attention, you will be asked to file a report, which must be done in person and in Chinese. That means you fly to China or appoint somebody to represent you. Be careful when granting a power of attorney!
- Your Embassy
Depending on what county you are from, your embassy in China may be a bit more helpful than the Chinese embassy, but do not expect the embassy staff to lead the charge to get your money back. Most of the time they will suggest you contact a local lawyer.
- Visit China and take matters into your own hands
If you are in the middle of a heated dispute with a Chinese entity is it not advised that you fly to China in hopes of applying pressure. Even if you have the high moral ground with clear evidence in hand, don't think you are going to bust in the office of the factory boss and beat on his desk. This is a great way to get tossed into a Chinese jail!
Most factories have a security team that works in close concert with the local police. The police aren't going to even ask for your side of the story, they will cart you off and let the judge decide your fate. That is not a position you want to find yourself in.
Even worse off would be if you fly to China only to find out that the seller is part of an organized crime syndicate. There is no shortage of cases where international buyers have flow into China to settle a dispute, only to find themselves kidnapped and held random.
- I personally know a manager from Michigan that was sent over to negotiate a settlement with a sub supplier. The Chinese entity was working in concert with a gang and they kidnapped her for 48 hours. Her boss back home had to capitulate in order to secure her release.
- I also interviewed a Filipino manager that was kidnapped for 6 hours the moment he stepped out of the train station. He was driven around to multiple ATM machines until he maxed out his daily limit. Then he was left tied in a hotel room for the cleaning staff to find him a few hours later.
- Apply pressure from afar without visiting China in person
If your order is small, and if you can't afford a lawyer but you have the time and energy to keep fighting to try to get your money back, you may be able to put pressure on the seller in hopes they settle the matter to your satisfaction:
- Are there industry platforms (online and off) where you can write reviews that may impact the Chinese seller's reputation?
- Does the seller attend trade shows? Perhaps if you camped out at their booth and warned other buyers, they would settle the matter with you.
- Do you know any of the seller's sub supplier or even customers? Perhaps those are points of potential pain that you can leverage.
How can you get some emotional satisfaction even if you are unable to recover funds from the Chinese supplier?
If you can't help yourself, at least get some emotional satisfaction by exposing the rip off artist to the world and help other buyers avoid falling into the same pitfall. While there is no Better Business Bureau, there is a Supplier Blacklist.
From their website:
In 2012, www.SupplierBlacklist.comwas created by a group of international buyers who fell victim to the poor performance and lack of professionalism among certain overseas suppliers. This group decided to do something about it by creating this website in hopes of giving buyers a platform on which to voice grievances and help other buyers avoid bad suppliers. The motto has always been:
If you have developed a good supplier, keep that secret to yourself. But if your vendor has done you wrong, tell the world about it at www.SupplierBlacklist.com!
All of the major supplier directories (Alibaba, Global Sources…) receive listing fees and sometimes commissions from the suppliers. As a result, there is little incentive to de-list poorly performing suppliers even when buyers are abused. The legitimacy of so-called “verified supplier” directories is highly debatable. To complicate matters, there is no functional Better Business Bureau or government entity willing to crack down on scams and unethical practices overseas. SupplierBlacklist.com is a free, user-generated platform designed to fill this void in the marketplace.
Related Content (from original post in 2011)
Some helpful links to help even small buyers avoid problems with suppliers in China in the first place:
Related Content (updated in 2021)
Some helpful links to help buyers of all sizes source safely in China and avoid getting ripped off in the first place:
- For Video Tutorials and Whitepapers on the topic of "how to source safely from China", check out www.asiabridgelaw.com/resources
- Here are some recent blog posts on the topic of "how to source safely from China?"