Dealing with Defective and Non-conforming Goods in China
In this blog post, let’s talk about where the quality and contracts meet. Based on my 20 years’ experience in China, I’ll share with you some tips on dealing with defect and non-conforming goods in China.
Situation:
If you're buying something so simple like a commodity, you're buying Mickey Mouse watches that haven't changed in five years. You would assume that the factory is going to get it right but if you're taking that Mickey Mouse watch and you're adding a solar panel and you're putting some Brazilian leather on it. So you're making something new that maybe the supplier hasn't made before. In that case, you almost have to assume that there will be quality issues so ask the supplier if there are defects who pays for the rework.
In my 17 years of dealing with suppliers in Asia I've had lots of mislead times in 17 years not once. If I had the supplier say to me “Mike we missed the lead time by a week let us pick up the FedEx charges to send the replacements to Las Vegas”, not once, until I started putting into my contract so that the lead time is missed by X days I get x discount. Sometimes the suppliers forget about this and I get a call at the 11th hour saying “Mike, you know, we're friends and I hope you understand but we just got this new big order from Disney. This is ok if I ship your watches a week late Mike, you know can you do me a favor on this one.
Tips:
“Mr. Wong, sorry to hear about that and luckily I knew that this might happen because it's close to Chinese new year so I built in a two-week window or some padding with my customers. But more importantly, I'm so glad we have this contract in place because I could really use that five percent discount. So you take your time I'll give you 14 days.”
So having the contract with penalties pre-agreed and Mr. Wong can't say to me “Oh let's debate what the penalty term” No it's in this clear contract that we went over in front of you and all your co-workers at that lunch meeting two years ago so relationship and saving face and contract terms they all overlap
ABL Blog: Sr. Editor and Primary Content Creator: Michael J. Bellamy
Originally from Upstate New York, Mike moved to Asia in 1993 and is a China business advisor to both Fortune 500 companies and small businesses. Recognized as an expert on doing business in China, he has been interviewed by WSJ, CNBC, FT & Bloomberg.
A featured presenter on China issues at seminars, trade shows and corporate events across the globe.
Learn more about Mike and AsiaBridge Law at
https://www.asiabridgelaw.com/business-advisory-services/
Mike is the author of “The Essential Reference Guide to China Sourcing”
(available on Amazon).