Chinese Product Supplier Delivery Dates: Your Contract is Key

International Manufacturing Lawyers

One of the most common problems we see between foreign companies and their Chinese manufacturers is “late” delivery.  I put late in quotes because many times I think the problem is not so much that the Chinese manufacturer was late, but rather that the contract and the foreign buyer were unclear on the actual delivery date requirements.

Let me explain.

When my law firm’s international manufacturing lawyers draft a China Manufacturing Agreement (a/k/a Product Supply Agreement), we are always very careful regarding delivery times. Most of the time, our clients come to us with a term sheet or an oral agreement with their Chinese manufacturer dictating something like 30 days for delivery. We like strictly tying the Chinese manufacturer to the “agreed-upon” delivery date with a liquidated damages provision tied to late delivery. See China Manufacturing Agreements: Make Liquidated Damages Your Friend. Just by way of example, we might put into the Agreement a provision saying something along the lines of delivery shall be within 30 days and for every day beyond thirty days the Chinese manufacturer shall be required to pay US Company 1% of the purchase order price within ten days.

Perhaps more than any other contract provision, we tend to get blow-back on the delivery time provision from the Chinese manufacturer. Oftentimes when faced with the reality of having to pay a set amount for late delivery, the Chinese manufacturer gets serious about delivery times and reveals it cannot make deliveries within the previously “agreed” time frame. Our client usually realizes it is better to get real agreement (even if longer than originally anticipated) before ordering, rather than getting late delivery after ordering.

The other, somewhat related issue we face on delivery times is that when our client comes to us and says it has agreed with its Chinese manufacturer to a 30 day delivery schedule, we then have to figure out 30 days from what. We typically go with 30 days from the issuance of the purchase order, but oftentimes the Chinese company pushes for it to be 30 days from its receipt of payment or 30 days from its receiving proof of payment.

Bottom Line: 
Certainty is important for delivery dates and the best way to achieve that certainty is with a written contract, in Chinese, that sets out your delivery expectations and the penalties that will accrue if your manufacturer fails to meet them.

16 responses to “Chinese Product Supplier Delivery Dates: Your Contract is Key”

  1. “…the best way to achieve that certainty is a written contract, in Chinese (so that there is no doubt the manufacturer understands what is on the paper) clearing setting forth the delivery date.”
    I know a British bloke who had a terrible experience at a Chinese hospital that was attributable entirely to a mistranslation by the interpreter.
    Misnomer:Vasectomy should not be confused with castration, which is the surgical removal of the testicle(s).

  2. Dan – what happens when the goods are ready to ship five days late and the factory says “if you don’t pay us the full amount , we will not ship the goods.” You have a 30% deposit at the factory and your customer is already pissed its late so you can’t stall.

  3. Oh come on!!! You want priority for your multi-discounted box of cheap product and you expect premium service? Maybe your clients should pay a bit more, forget about nickle and dime deals and ramp up their importance in the China supply chain. This is typical American recessionary whinging. It’s all the Chinese suppliers fault but their own. This is nothing but cheap purchasing nonsense. Sorry to say but its true. You are rich on cheap China, please stop the whinge!!!

    •  An objective observer would notice that the original blog post does not assign blame to anyone, and he certainly does not single out the manufacturer.  The post provides a solution, rather than blame.  You would be well served to notice the distinction. 

  4. “…the best way to achieve that certainty is a written contract, in Chinese (so that there is no doubt the manufacturer understands what is on the paper) clearing setting forth the delivery date.”
    I know a British bloke who had a terrible experience at a Chinese hospital that was attributable entirely to a mistranslation by the interpreter.
    Misnomer:Vasectomy should not be confused with castration, which is the surgical removal of the testicle(s).

  5. Dan – what happens when the goods are ready to ship five days late and the factory says “if you don’t pay us the full amount , we will not ship the goods.” You have a 30% deposit at the factory and your customer is already pissed its late so you can’t stall.

  6. Oh come on!!! You want priority for your multi-discounted box of cheap product and you expect premium service? Maybe your clients should pay a bit more, forget about nickle and dime deals and ramp up their importance in the China supply chain. This is typical American recessionary whinging. It’s all the Chinese suppliers fault but their own. This is nothing but cheap purchasing nonsense. Sorry to say but its true. You are rich on cheap China, please stop the whinge!!!

    •  An objective observer would notice that the original blog post does not assign blame to anyone, and he certainly does not single out the manufacturer.  The post provides a solution, rather than blame.  You would be well served to notice the distinction. 

  7. You are giving Chinese manufactures way too much leeway. I have drafted numerous contracts with concrete delivery dates and these days 75% of the time they are late or fail to deliver altogether and want to renegotiate the terms some months later. This makes it very hard for foreign companies to find a reliable supplier and stick with them, because more often than not, those that were reliable in the past are no longer reliable.

  8. You are giving Chinese manufactures way too much leeway. I have drafted numerous contracts with concrete delivery dates and these days 75% of the time they are late or fail to deliver altogether and want to renegotiate the terms some months later. This makes it very hard for foreign companies to find a reliable supplier and stick with them, because more often than not, those that were reliable in the past are no longer reliable.

  9. What you need to do is split the supply chain, rather than depending on a vendor in China or vendors in China.  Believe I have seen where a Chinese vendor reduced the plastic in a product only then to be told to review the originla BOM specifics, for which they replied my costs are too high.  Further, the Chinese manufacturer knows you depend on them too much and this is why they delay of delivery and reduce quality.

  10. What you need to do is split the supply chain, rather than depending on a vendor in China or vendors in China.  Believe I have seen where a Chinese vendor reduced the plastic in a product only then to be told to review the originla BOM specifics, for which they replied my costs are too high.  Further, the Chinese manufacturer knows you depend on them too much and this is why they delay of delivery and reduce quality.

  11. Is it unheard of to offer a 1% bonus payment if products are ready to ship early? Is that even enough of an incentive?

  12. Is it unheard of to offer a 1% bonus payment if products are ready to ship early? Is that even enough of an incentive?

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