How to Move Your Manufacturing From China: Rule One, Be Careful

International Location Lawyers

This is the first in what will be an ongoing series of posts we will be writing on how to move your manufacturing from China.

The South China Morning Post did a story yesterday whose title says it all: Coronavirus could be ‘death blow’ for many of China’s small manufacturers if not under control by April. The article itself consisted mostly of interviews with Chinese factory owners who talked about how bad things are for factories in China right now and how if things do not improve by, variously, the end of February, March or April, we should expect massive numbers of them to go under.

Judging by what our international manufacturing lawyers are hearing from our own clients, these predictions are likely spot on. We have clients that have already moved their manufacturing from China and we have clients that are in the process of moving their manufacturing from China and we have clients that are looking to move their manufacturing from China. And we even have some clients with no interest (at least pre-coronavirus) interest in moving their manufacturing from China. This series is intended for those companies looking to move their manufacturing from China, probably the largest and most sensitive of the categories.

About once a week now we are getting emails or phone calls from foreign companies that moved their manufacturing from China and have just learned that their former manufacturer in China is selling their products directly to the foreign companies’ own customers or to the world or have just realized that this is what their former manufacturer will soon be doing. These companies want to know what we can do to help them and FAST.

There is only so much we lawyers can do for a company in the situation above, but there is a heckuva lot more we can do for companies that come to us BEFORE they say goodbye to their Chinese manufacturer and we will in the next week or so be discussing those things. For now, just realize that you need to plan well in advance for terminating your China supplier. And by plan in advance, I mean you need to secure your molds and all of the product for which you have already paid before you do anything that might tip off your China supplier regarding your plan to start manufacturing elsewhere. And you need to protect your intellectual property and your people and your customers and even your ability to return to China for manufacturing someday. We will explain all this in detail in our coming posts.

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