How to Avoid Getting Bad Product from your Foreign Manufacturer

I just sent out an email to a U.S. company explaining why the international dispute resolution lawyers at my law firm do not think it makes sense to pursue the U.S. company’s bad product claims against their Chinese manufacturer. This email essentially recites all the things the recipient did to ensure the product it would get from its manufacturer would be substandard and why once it got that product, there was little or nothing our dispute resolution lawyers could do to secure compensation for the quality problems. My email focuses on China, but virtually everything I say holds true regarding outsourced manufacturing anywhere in the world.

I ran your case by our international dispute resolution lawyers and they are not interested in taking it  on a contingency fee basis and they also say they cannot in good conscience ask you to pay us to pursue it. Our lack of interest in your case stems from the following:

1. Your contract (even assuming this qualifies as a contract under Chinese law) is in English. Many courts in China will not hear a case with an English language contract. This is even more likely to be the case in a place like Hubei Province.

2. It looks like you did not pay the Chinese company with whom you have the contract. You instead paid some other company based in Hong Kong. This is a classic China ploy. If you sue the company with whom you have the contract, it will say you never paid them because you didn’t. Not sure who would win on this, but it is another expensive hoop you will have to jump through.

3. The “contract” says you will inspect the product before it ships. The manufacturer will contend you either did inspect the product and were fine with it or you chose not to inspect. Either way, it should make for a pretty good defense because you allowed the product to be shipped without voicing any complaint. If you are not going to inspect product before it gets sent to, you should not have this sort of provision in your contract.

4. China does not generally recognize samples as the standard that must be met. If you want your product to be of a particular quality, you need to lay out every specification that will get it to that quality and that must be made a part of your contract. Putting in a term like “good quality” in a contract with a China manufacturer is a waste of time because China has incredibly low quality levels that are just fine for Chinese commerce and for Chinese courts. It is not at all clear to me that your manufacturer failed to give you exactly what you ordered. You say that it is of “bad quality” but that is under Canadian standards, not under any standards that I see in your contract and that is what is going to matter to a Chinese court. For more on why this matters and for how you should handle this the next time you have product manufactured in China, check ou Getting Good Product from Your China Manufacturer: Specificity is Key.

You might want to try to interest a Chinese lawyer in taking this case, but even that might not be worth your time and money as you will almost certainly have to pay a fair amount of money just on the out of pocket costs for pursuing this litigation. Suing in the United States would almost certainly be a waste of time and money unless this Chinese manufacturer has assets in the United States, and very few do. China courts do not enforce U.S. judgments so even if you win over here, it will be of little to no value in collecting money from your Chinese manufacturer in China. For more on this, check out Enforcing US Judgments in China: Not Yet.

If you are going to continue buying product from China, you should start using a manufacturing contract works for China. You need a contract that convinces your manufacturer that you can win in a Chinese Court. With that sort of contract, your chances of getting bad product go way way down, and should you get bad product, your chances of winning at trial and getting your money go way up.