Q2 Q3 2019 China Business & Law Update for Busy Executives
1. Trade War Strategies:
Getting Chinese Suppliers to Pay the US Tariffs
President Trump has made the argument that US importers will pressure Chinese suppliers for price concessions rather than pass on the tariff to the US consumer. That’s difficult to do when the margins are razor-thin at each stage of distribution and next to impossible if the US importer happens to be small with limited leverage over the seller. But US companies will certainly try their best to get Chinese suppliers to absorb the tariff.
In cases where the Asian factories have offered price concessions, the sad reality is that corners were probably cut in order to achieve a lower price point as suppliers have many tricks to protect their internal profit margins. Most buyers won’t know the impact on the quality until it’s too late.
In the following short video tutorial I offer an inside look at the strategies successful importers use to control quality during times of intense cost-down pressure:
2. Trade War Strategies: Preventing your supplier from selling to your competitors who aren’t subject to US tariffs
As the China-US trade war continues to heat up, Chinese suppliers are actively looking for new orders outside of the US. That could mean your supplier is about to jump into bed with your European, Canadian or Australian competitors. How to ensure your competition doesn’t have access to proprietary designs and information?
The short answer is to register your Intellectual Property (IP) in advance if possible and do structure a NNN (Non-Disclosure Non-Usage Non-Compete) Agreement.
But the trick is to get that IP registered in China and not just have a bilingual NNN, but also have a mechanism to monitor and enforce it if necessary. Here is a full seminar I did on those topics, broken down into 18 bite-sized videos, each a few minutes long. Watch them in order for the full tutorial or skip around if you are short on time.
- Inside look at the courts
- Domestic vs International Contracts
- Getting the supplier to give a $%#@
- Chop vs Signature
- How to find a good lawyer in China
- Penalty Clauses
- Official language & so-called verified suppliers
- Liability & Compliance
- Vendor code of conduct
- Protecting Ideas
- Intellectual Property
- Avoid this big mistake
3. Trade War Strategies: What can you do when the supplier doesn’t ship products at the agreed quality, lead-time or price?
It has always been a challenge to ensure suppliers ship on time at the agreed price and quality. But the situation has been exacerbated by the trade war. Here are some tips on what to do if the supplier fails to meet their side of the agreement. In simple terms,
- Have an agreement!
In writing, under signature/chop. If you don’t have a contract, you can’t expect a court to rule in your favor. The contract should be bilingual & written per local laws.
- Enforce that agreement!
Foreigners CAN get a fair shake in a Chinese court of law.
Here is a short video that I made for Global Sources to walk importers through the options for resolving a dispute with a Chinese supplier.
4. China Scams & Bad Suppliers Exposed
I’m an avid reader of www.SupplierBlacklist.com because it helps me stay away from the bad suppliers and the tricky scams. Here are two examples posted today:
Normally large suppliers aren’t interested in small orders. But this supplier gladly accepted the small order from the French client because they planned to copy it and sell to their big clients! Don’t let yourself become the free engineering department for your competition!
This Greek importer of electric vehicle parts skipped the due diligence phase and sent a deposit to a Chinese supplier without a contract. Guess what happened? Yep, the factory decided not to ship anything AND kept the deposit!