A manufacturing contract cannot guarantee that every production order will go smoothly. However, it can make it much clearer what the supplier is expected to manufacture, which quality standard applies, where production may take place, when inspections can be performed, and what happens when products do not meet the agreed requirements.
Without a suitable written agreement, buyers may discover that critical expectations were never clearly accepted by the supplier. Important commitments may instead be scattered across quotations, purchase orders, emails, calls, and WeChat conversations.
In this CMD Gold episode of China Manufacturing Decoded, Adrian and Renaud revisit a discussion about manufacturing contracts when working with Chinese suppliers.
They examine why some importers continue to place orders without adequate contractual protection and explain how several agreements may be needed at different stages of a product’s development:
An NNN agreement to help protect confidential information
A Product Development Agreement to define intellectual property and tooling ownership
A Manufacturing Agreement to control production, quality, inspections, delivery, pricing, and supplier responsibilities
The episode also explores an important issue for quality professionals and importers: the difference between a manufacturing defect and a design defect. A factory may correctly manufacture the specifications it received, but the resulting product can still fail because of an unsuitable design, material, or engineering decision.
Please note: This conversation was originally recorded in 2020. Chinese law and its application have evolved since then. The episode provides practical manufacturing guidance rather than current legal advice. Any agreement you intend to use should be drafted or reviewed by appropriate legal counsel familiar with current Chinese law and your specific circumstances.
Listen to the audio here or on Apple Podcasts · Spotify · Amazon Podcasts · Deezer · iHeartRADIO · TuneIn.
What do we discuss?
- Why importers still buy from Chinese suppliers without proper contracts
Some buyers assume that a manufacturing contract will not be enforceable in China. Others are accustomed to lower-value domestic transactions and do not fully appreciate the additional risks involved when placing larger orders with an overseas supplier. - Why the value of a contract starts before production
A good agreement is not only something to rely on after a dispute. Drafting it forces the buyer and supplier to discuss delivery delays, price increases, confidentiality, quality requirements, inspections, and other potential problems before money and production are committed. - Turning quality expectations into written supplier obligations
A defined quality standard can be attached to the agreement so the supplier knows exactly what it is committing to. This may encourage the factory to review the specifications and quality requirements more carefully before accepting the order. - How NNN agreements protect product information
An NNN agreement covers non-disclosure, non-use, and non-circumvention. It aims to prevent the supplier from sharing confidential information, using the product concept for another purpose, competing against the buyer, or approaching the buyer’s customers directly. - Clarifying IP and tooling ownership during product development
When a supplier contributes engineering work, technology, components, or tooling management, ownership can become complicated. A Product Development Agreement should clarify who owns the designs, files, molds, tooling, and other intellectual property created during the project. - What should be included in a Manufacturing Agreement?
The agreement may define the product specifications, quality standard, approved production site, pricing, payment terms, shipment dates, inspection rights, supplier obligations, and what happens when agreed requirements are not met. - … and more. Listen to the episode for the full details!
Further Reading
- How To Create A Valid Manufacturing Contract In China To Protect Your IP
- IP Protection in China When Developing a New Product
- Plastic Injection Mold Tooling Management & Risk Reduction
- Mold Tooling Ownership: The Shocking Term Chinese Suppliers Push For!
- 8 Ways to Prevent Chinese Suppliers from Subcontracting
- Agilian’s IP Protection
- Transfer Manufacturing to a New Chinese Factory With Fewer Risks
