A lot of entrepreneurs desire to import products from China to minimize the cost of production. However, the process is not all roses as sometimes the products come out defective and it affects your popularity in the market. So, while preparing your OEM agreement or the original equipment manufacturer agreement you must take a few precautions to prevent this to happen to you.
Some major preventive measures you can employ are-
- Checking your containers before leaving the Chinese factory
- Repairing or reworking of the defective parts
- Completely destroying the rejected products
Moreover, one clause should be there in your contract which talks about the action taken by the clothing manufacturing companies in China with the faulty products and it should also include the amount, the manufacturer is liable to pay to you on failing to adhere to this clause. Experts say this is the most effective way of dealing with this matter.
Keeping the provision of divulging the details of rejected products in your contract put you in an advantageous position.
- Chances are that your Chinese manufacturer will stay true to the contract
- It increases the chances of you avoiding any legal hassles if your Chinese manufacturing partner fails to keep the contract
- It enables you to take quick action if want to sue your Chinese manufacturer
The Chinese manufacturers fear for such provisions in the contract and will work to deliver products in the most perfect manner. When they know that any breach of contract may lend them in the court with subsequent indemnities, they will work in the most ethical manner.
So if this provision is exercised under the right conditions, it will help you to overcome any obstacle in the dealing of defective products.
Preparing the provision
You must know how to write this provision in your contract in the most effective manner. It is said that much experience is needed to write this.
You would want that amount of compensation to be sufficient enough to prevent the Chinese manufacturer from breaking the contract and let the defective pieces to float around the market. At the same time, you want the amount to be less so that your Chinese manufacturer will not hesitate to sign the contract.
Similarly, the amount should be such that it would seem reasonable. Otherwise, if the Chinese court feels the amount is too high then they may reject the case. The Chinese companies and the lawyers over there know this well and often give a too high amount to cover the damages so that the Chinese court will reject it outright.
You can make your manufacturing agreement in the Chinese language as well to prevent this to happen. When you do not have a written agreement with your Chinese manufacturer it will lend you in trouble.
Other measures that should be included in your contract
- In case you cannot physically present in China, your designated person should be given the authority to examine your products before they are shipped to you and you complete the payment.
- Do you know you are the legal owner of all the tools and accessories used in the production? Any delay on the part of the Chinese manufacturer while returning them will be liable to a certain amount of compensation. It is often seen that many importers complain about Chinese manufacturer for delaying the delivery of production parts.
- It forms a part of your contract that your Chinese manufacturer cannot promote or sell your products. This is because there is a risk associated with it. When your product is market friendly, the manufacturer will have no interest in revealing your products. However, it can still have an interest in stealthily accessing your IP address so that they can earn money from it.
- Your manufacturer should not bypass you by making money by sending the products directly to your customers. It should be included in your contract.
- If your manufacturer decides to change the suppliers they should immediately inform you. They must obtain your approval before hiring a new supplier. You should know how long you need the supply chain.
- Your manufacturer should know about all the subcontractors involved in your product making and should stay responsible for any of the action they have taken all by themselves
It has been observed in many instances when a manufacturer is secretly engaged in passing your products to another facility. So you should be aware of these subcontractors. Many of them are involved in forgery and illegal marketing of products. Ultimately your agreement should be confirmed all the norms of the Chinese laws and it should be qualified to be presented to the Chinese court.
So, you should be careful while importing China manufacturing products. Your OEM agreement or original equipment manufacturer agreement should be such that it can protect your interest but at the same time, it should not be so perfect that no manufacturer would want to sign it.