One of the most common emails we get are those from someone having problems with their China manufacturer. Those problems are all over the map, but one of the more common ones is the Chinese manufacturer starting to make the foreign company’s products and starting to compete with the foreign company in the foreign company’s own market. There is a simple remedy for this and that is to have your manufacturing agreement forbid your China manufacturer from making or selling your product and from using your trade name or your logos. The other thing to do is to register your brand name as a trademark in China and wherever you sell your products. But nearly always when we get an email from someone with this sort of problem with their China manufacturer, they have done few or none of these things.
The below is a very typical email exchange, modified in various ways to hide any identifiers. I am running this because it is a good lesson of how planning is essential when you are having your products made in China. For the basics on protecting your company when manufacturing in China, check out Having Your Product Made In China: The Basics on Protecting It and You.
EMAIL FROM CHINA CONSULTANT TO ONE OF MY FIRM’S CHINA LAWYERS: I hope you are doing well. I’ve got an interesting story for you which could potentially mean some contract work for your China team. This is our largest client who would definitely see the value in paying for an enforceable contract in China. They currently have a contract, but it was badly written. We knew this going in, however it’s sometimes a little tricky telling your client that their contract is not good, or even that their colleagues have no idea what they are doing. I’m sure you can relate.
Our client has a Chinese factory producing product for them. There is a contract in place which details minimum order quantities annually and clauses related to exclusivity in the EU. For the last year or so, our client has failed to meet the minimum order quantities, hence exclusivity would not be certain. The main reason for not meeting the order quantities is problems the factory has had with packing the product in a way that protects it during shipment and also problems with the product itself. These issues have now been sorted out my client is ready to move ahead with up to 60 containers a month. There are also moulds involved that are worth well over a half million RMB.
My client received an email from the factory last week telling them they will be attending the ___________ trade fair, and asked for my client to send a sales person to represent them. So they want to exhibit in Europe and show my client’s product! Though this email was quite amusing as they also asked for
China Manufacturing Gone Bad
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