What to Do When You Get Bad Product from China

Our international dispute resolution lawyers must get some form of the following at least twice a week:

I just received a shipment of bad product from China and my manufacturer is ignoring my requests for a refund. What do I do? Do I have a case?

Our attorneys usually answer with a “that depends”.  That depends on the following:

1. How much is at stake.

2. The history of the relationship with the Chinese company.

3. The city in which the Chinese company is located.

4. The legitimacy of the Chinese manufacturer.

5. The nature of the defects in the product.

6. Whether there is a written contract and, if so, whether that contract clearly addresses the defect.

7. What the contract says about dispute resolution.

Much of the time there is either not enough at stake or not a good enough China Manufacturing Contract to warrant my law firm’s involvement. In those cases we tell them that it would not be worth retaining our firm and they usually then ask what else they should do.

Much of the time I suggest that they do nothing and just make sure to do the right things the next time so as to prevent this sort of thing from recurring.  Occasionally, I suggest they try to find a China licensed lawyer who will take the case on a contingency fee basis. If they ask about involving “the Chinese government” or the Embassy or Consulate from their home country — this is actually quite common —  I tell them that if they want to try either or both of those things, they should, but that I am not aware of this ever having helped anyone.

I have learned that my advice is not terribly different from this article entitled, Is It Too Late to Do anything if I receive bad quality products? [link no longer exists]

This article sets out five “essential check points,” which if you cannot “check off,” you probably should just “learn from your mistakes and do things right on your next order.

On the other hand, foreign buyers of Chinese product who have the following five items in place, “have a decent chance of negotiating an acceptable resolution”:

1. A signed/chopped contract that clearly defines the acceptable level of quality.

2. A paper trail showing proof of payment. This is sometimes much tougher than you would think because if you paid some Hong Kong holding company your Chinese product supplier will likely claim that you actually never paid for your product at all. Be very wary of this, both with respect to who you pay and in analyzing the value of your bad product claim.

3. The seller named on the contract matches the receiver of the payments. With so many trading companies out there it is a common mistake to have a contract with a supplier but pay a trading company! See number 2 re Hong Kong.

4. Your supplier has physical and financial assets (small “one-man-bands” disappear as soon as they feel a lawsuit is on the way).

5. The jurisdiction on the contract matches the location of the supplier’s assets at a city, province or country level.

It then adds that “it is always nice to have future orders you can leverage as well.”

Good advice.

What do you think?