Scams Exposed + How To Recover Money From A Bad Supplier

China Business & Law Update for Busy Executives

2018 Q1: Mike’s China Sourcing Update

Hopefully your suppliers are doing a great job and never miss a lead time, ship defective goods or abuse your intellectual property.  But for the rest of you, you may find this first update for 2018 of interest as we will cover “how to recover losses caused by the actions of bad suppliers” and I’ll do my best to explain the pros and cons of using the courts, embassies, local police and lawyers to recover funds.

Topic 1: Recovery Money From Bad Suppliers

Have you been wronged by a supplier? Negotiations going nowhere? Here are some ways to get your money back.

Unfortunately there is no Better Business Bureau in most parts of Asia where you can take your grievances. Unless your loss is very large, you will find very little support from government agencies and local police. However, other remedies do exist.

This flowchart (used with permission of AsiaBridgeLaw.com)  is designed to help you decide which option is suitable for your particular case.

FAQ:  
Why not go right to court and skip the demand letter?

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.  For the vast majority of cases, because demand letters are fast, affordable and effective, the logical next step may be to send a demand letter in Chinese from a Chinese lawyer if you are unable to negotiate a settlement on your own. And if the demand letter doesn’t work, then go to court knowing that foreigners can indeed win in a Chinese court of law.
Is my loss large enough that it makes sense to hire a lawyer or pay a debt collection agent?

Keep in mind that in China you can include direct and indirect losses when seeking compensation.  But if the value of your direct plus indirect loss is not larger than 4,000 USD in total, it probably doesn’t make economic sense to retain the services of a lawyer as minimum service fees may be over 1000 USD in many cases.   Most collection agents keep between 30 and 50% of recovered funds (depending on how fresh the loss is), so they don’t want to get involved on small projects.
Related Content:

Important Business Decisions: Using a Lawyer from China vs Hometown Lawyer

Penalty Clauses: Do they work when sourcing from China?

How to motivate a non-responsive supplier?

Dispute Resolution in China: Tips for working with the BBB, Police & Embassy

Topic 2: Sourcing Gone Bad

Sadly, there is no shortage of buyers ending up with bad suppliers or falling into scams this month. Learn from these mistakes posted at www.SupplierBlackList.com.

Have you been let you down? Go here to expose the scam or under-performing suppliers!


Coming up next:

You may recall that the main topic of our Q4 2017 update was “safe sourcing” and we talked about how to answer 3 important questions when selecting a new supplier:

  1. Is the seller a legit business and not a scam?
  2. If they are a legit business, do they have the product experience and quality systems in place to make the specific product you want to buy?
  3. If they are legit, have the experience and quality control, are the terms & conditions of the transaction reasonable and fair to both parties?

Some of you wrote in asking for additional ways to protect yourself and over the next few updates I’ll offer the following:

  1. Avoiding Scams:  5 Red Flags the pros know + 5 Red Flags the pros sometimes miss
  2. Avoiding Quality Fade: 10 ways to prevent a good supplier going bad
  3. 10 Essential Terms to have in your contracts with Chinese suppliers

Let me know what other topics you want to me to cover and I’ll be happy to build them into the 2018 content calendar.

BTW, if you didn’t get the Q42017 update, we made this 3 minute video entitled “Essential Skills: Is my potential supplier legit?”

I hope you enjoyed this update.

Best Regards,

Mike Bellamy (LinkedIn Profile)
Celebrating 20 years in Asia!

P.S. – BTW, if you didn’t get last quarter’s update, you can find the library online at here.