Selling Products in China via Distributors

China Distribution Agreement

For most companies, getting their products into China and then marketing, selling and delivering them is a big and difficult task. Using an experienced Chinese distributor or distributors is oftentimes the best way for these companies to quickly and relatively easily get their products into China.

Distribution contracts with Chinese companies are both similar to and quite different from US and EU distribution agreements, both of which make it difficult and expensive to terminate distributors. China makes no special allowances for distributors so my law firm’s China lawyers draft our China distribution agreements to take advantage of this by providing for Chinese law in a Chinese court. We also do not bother with provisions that try to work around distributor protections because there are no such protections.

One big issue in China with nearly all distributor agreements is intellectual property protection. To “further” protect the IP of our clients, we usually put into our distributor agreements what we call a “no registration” provision. In this provision, the distributor agrees our client exclusively owns all trademarks or other IP that might be at risk, the distributor gains no rights to those trademarks, and the distributor will not register any IP in any way related to our client’s IP. We use the words “further protect” because the first line of protection for your trademarks and other IP in China should always be to register your trademarks in China right away.

China’s Anti-Monopoly Law prohibits retail price maintenance — which includes requiring a distributor sell goods at a minimum resale price to third parties. Therefore your China distribution agreements should not require your Chinese distributor sell your goods at a certain price.

One final important difference between Chinese and US/EU distribution agreements is the signature line. Your Chinese distribution contract should provide a place for your Chinese distributor to affix its company seal because without that a Chinese court might find your distribution contract invalid.

A distribution relationship with an experienced Chinese distributor and a China-specific distribution agreement may be just the solution for getting your product into China.

What do you think?

2 responses to “Selling Products in China via Distributors”

  1. One way to control the end user experience would be to sell your products on Tmall.com or Tmall.hk. In this way, you control your brand, interact directly with consumers and maintain quality. If your first market entry is ecommerce-based, you can also establish an end user market price from which you can derive a wholesale price. Finally, in your distributor agreement, you should prohibit the distributor from selling directly to consumers without compensating you and maintain stock for you to sell online in China.

  2. Do you need to set up a legal entity in China to enter in to a distribution agreement with a Chinese entity such as Tmall?

Leave a Reply

Your email address will not be published. Required fields are marked *