From August 19 to August 30, I will be responding to buyers’ questions on this forum on Alibaba’s website:
Talk With Experts-When Buying Chinese Products,
How do You Identify & Mitigate Risks?
I expect buyers to post questions related to their particular situation, and to describe some strategies and tools at their disposal.
Examples of strategies for mitigating risks:
- Starting small;
- Spending the time to audit factories, check supplier references, and so on;
- Developing backup suppliers.
Examples of tools for mitigating risks:
- Paying by letter of credit;
- Working with a lawyer to draft a legally enforceable contract;
- Performing quality inspections on each production batch.
I hope to have interesting questions and suggestions. It will give me ideas for other good articles.
In your experience, how enforceable would you say contracts are. Even if a contract is well written by a lawyer, the costs for entering in litigation (arbitration chamber or other) in China are usually pretty high, so the threshold for the possible loss you are trying to recover is quiet high, right?
Of course you don’t want to go into litigation. But you can have a lawyer intimidate the Chinese company with a demand letter. It gives you leverage.
If really you go into litigation (maybe they are holding your molds, or they owe you a huge sum of money), it is an option on the table. And the Chinese company knows that the contract IS enforceable (if it was well written).