China Manufacturing Protections: My Elevator Speech

Many years ago, my old law firm brought in a “legal marketing expert” to lead a marketing seminar for the firm. I do not remember a single thing from that session beyond that the expert forced each of us to describe our practice as though we had just been asked to do so by someone who had just gotten into the elevator with us heading to the top floor. I know elevator speeches are pretty standard these days, but back then it was a somewhat new concept.

Last week I Zoomed with a long-time, no nonsense, client regarding an ongoing matter. As we were wrapping up the meeting he mentioned his company was looking to start having its products made in China and he wanted me to tell him what his company needed to do to protect itself.

He wanted the soup to nuts version and I had five minutes max. This is my elevator speech on how to protect yourself when having your product made in China (or pretty much anywhere for that matter):

Obey the law. You will hear about companies that are violating this or that law and are getting away with it, but that just means they have been lucky so far. Everyone knows someone who smoked until they died in great health at 88.

Protect your Intellectual Property. IP is where your company’s value lies and you must protect it. Trademarks are valuable in China and cost little to register. But, if you do not register your trademark, someone else surely will and you will lose it. First to register a trademark in China gets it, so register your brand names and your logos in China right away. Do not wait. Copyrights and patents, we will discuss next time. Non- competes, non-disclosures (NDA), and trade secret agreements work in China and we will need to talk more about your need for those.

Manufacturing Contracts. You need good manufacturing contracts. NNN Agreements. Product Development Agreements. Manufacturing Agreements. Some or all of these. They must be specific and they should be in Chinese. Choice of jurisdiction for disputes is critical in any contract and that is even more the case for China. Choosing the wrong jurisdiction is probably the most common mistake our China lawyers see.

Due Diligence. Super important. With whom you do business overseas is key. If you team up with a crook, we lawyers cannot help you much, if at all. Our China team can help you conduct due diligence on your potential suppliers.

Done.

Sourcing websites – Don’t forget that these are designed to provide marketing channels for suppliers/exporters and aggregate product/supplier content for buyers/importers online. Read the User Agreements closely as they clearly state that you are essentially using the site at your own risk. Never rely solely on any ratings systems provided by these sites. Always conduct your own due diligence.

Trade shows
– The absolute best place to meet suppliers and learn more about the industry, manufacturing process, products, export issues, etc. The exhibitors can teach you many things and are willing to do so if they believe you are a serious buyer and potential customer. Like finding the right supplier, it is not easy selecting the right trade show to attend. Do your homework, ask other importers you know which shows they attend and also look for UFI approved events (www.UFI.org).

Quality Assurance
– There are companies that specialize in factory audits and product testing – use their expertise. Bureau Veritas is a good place to start.



Shipment –
Selection depends on the product and quantity. If by air, then speak to FEDEX, DHL, etc. to understand not only shipping costs but also import taxes. If by sea, look for a shipping company that can also help you manage the taxes. It’s also a good idea to speak to your local customs office.

Payment
– Never send cash. Talk to your bank about Letters of Credit and Escrow. There are systems to protect your money, so use them.

Patience
– Take your time, look at alternatives and start small. If something looks too good to be true, it is.

Makes good sense.

Your thoughts?