A client called me and asked my advice regarding an uncomfortable situation. One of his long-time suppliers, a manufacturer in Zhejiang, just announced they had gone bankrupt and had stopped all activity. My client has wired a 30% deposit for an order that is currently finished, packed, inspected, and accepted for shipment. But that order is not leaving the factory’s warehouse. The manufacturer’s contact person tells my client the situation is “difficult”. What does the situation look like, … [Read more...]
How to complain about counterfeit/fakes on Taobao
There has been a mounting concern about the role of e-commerce platforms in the distribution of fake products. For example, two years ago I wrote Does your China factory sell your products on Taobao.com?. And it seems like the situation is getting better for owners of intellectual property rights. Yesterday I attended an interesting European Chamber seminar that was chaired by Chris Bailey from Rouse, a global agency specializing in IP rights monitoring and protection. Mr. Bailey informed us … [Read more...]
Brand protection in China: Q&A with an expert
A few weeks ago, I met with Elisabeth Bourgeois, who is based in China and specializes in brand protection & anti-counterfeiting. She is the managing director of Bourgeois & Yang and is a member of the European Union Chamber of Commerce in China. Elisabeth accepted to answer a few questions about intellectual property risks for importers: Q: Let's say a European or American company needs to produce in China. They have their own brand, and they develop their own products. What are the … [Read more...]
The lack of professionalism of some Chinese suppliers
A few days ago, I was invited to speak in a seminar organized by the European Union Chamber of Commerce in China. The topic was "How to collect payments from Chinese suppliers". The first speaker was Javier Hernandez, a lawyer based in Beijing. From his presentation, I realized the main source risk factor is the fact that many Chinese suppliers don't follow what is considered normal business practice in the West. Here are three examples that are very, very common. Surprisingly, most … [Read more...]
Opening a HK company: all the details
I found a simple explanation of what it takes to set up a company in Hong Kong on the new website of my accountant in Hong Kong (whom I strongly recommend). I am reproducing that content below. The first step in setting up a business in Hong Kong A person of any nationality, of the age of 18 or above, can set up a business in Hong Kong. The first step in setting up a business in Hong Kong entails the choosing and the registration of the suitable form of business structure, which can be … [Read more...]
Why contracts are useful in China
China's legal system is unreliable and favors local companies against foreigners. True. Foreign courts' decisions are not enforced by Chinese courts, so litigation needs to take place in China. True. But then is it a waste of time to draft a contract and get it signed by your suppliers? No, it is not. Dan Harris wrote a long and thoughtful article about it (see Chinese Contracts. Because They Really Do Make A Huge Difference.) He explains the value of a legally-binding contract: Any contract … [Read more...]
Litigation in China: pros, cons, and alternatives
I just watched a video of Matthew Kowalak, an expert in Chinese law who runs Southern Perspective SZ. He describes the main three types of dispute resolution techniques (litigation, arbitration, and mediation) that are available to foreign buyers in China. His presentation is part of the "Hot Sourcing Topics of 2012" free seminar organized by Global Sources (at the same time as their trade shows). Here is the video that was posted by the CSIC on Youku (a Chinese competitor of Youtube): For … [Read more...]
Scams by Chinese suppliers: what to do?
At least once every 2 weeks, I get an email from the victim of a scam performed by a Chinese supplier. They ask me whether someone can help them recover the money. Sometimes it is a scam (seller asks for a deposit before shipment, then ships nothing and stops responding to emails), and sometimes it is just a brutal retaliation (seller estimates he was poorly treated by the buyer on a previous order, and cancels a transaction after receiving some pre-payment). Invariably, these people don't … [Read more...]
Don’t hire a Chinese citizen illegally
Many importers end up feeling good about a particular individual, and hire him/her for a fixed salary. The objective is usually to communicate with suppliers, to follow new developments, to inspect product quality, and to source new products/suppliers. Before you do that, you should be aware of the risks it represents for you. When is it legal? In theory, it is only legal in three cases: You have set up a company in mainland China (not in Hong Kong or Taiwan), and that company hires local … [Read more...]
How much legal protection do importers need?
From time to time, an importer asks me about everything he can do to protect himself. Let's say they just received a shipment of defective goods. Now they are willing to pay for extra protection. They will want to know how to check the components, then how to check the beginning of production, then how to check again later in production, and how to check what is loaded in the container. Then I explain that it's probably overkill, and that an inspection during production + a final inspection are … [Read more...]