Paying Attention to the Starting Time in Your Employment Contract

I’m working with a senior lawyer on an employment contract dispute. From two hearings held by the Chaoyang Labor Arbitration Committee, I really learned a lot. One of the most impressive lessons I want to share with employees, especially foreign employees is to pay attention to the starting time in your employment contract before signing it.

According to Chinese Employment Contract Law, the employer must sign a employment contract with the employee within one month after the employee starts working for the employer. If not, the employee can claim for double salary for the period (exceeding one month) without an employment contract. Nevertheless, there is another provision in an minutes of meeting issued by Beijing’s High Court and Beijing Labor Arbitration Committee, which provides that if both parties anti-date the employment contract to the day of starting working, the court or the arbitration can overrule the claim for double salary.

In practice, many employers take advantage of the said provision to avoid their liability. The employees, especially foreigners, however, generally don’t know about the employment laws and regulations, and sign the contract without understanding the legal results.  If the employee signs the contract, he will probably be deemed as waiving his right and will be in a disadvantage place in arbitration or in court.

So, my suggestion is to pay attention to the starting time in your employment contract. If the contract is anti-dated, and you don’t want to waive your right for double salary, you need to negotiate with your employer for your legal rights.

By Mike

Published by Mike Wang on June 25th, 2016 tagged Uncategorized | Comment now »

China’s Desert Prevention and Transformation

China has approximately 2.61 million square kilometers of soil undergoing desertification. Once arable lands now consist of sand, drought, and heat. Sandstorms continue to erode the land, exploiting the weaknesses left by overgrazing, poor agricultural practices, and the increased demand for water. Farmers are forced to abandon their land. Without intervention, desertification could affect a much wider area. Thankfully, this loss of land is a matter that China is not only aware of, but also addressing.

The Law of the People’s Republic of China on Desert Prevention and Transformation was the first of its kind in the world. It was formulated to prevent land desertification, transform affected land, protect the safety of environment, and promote the sustainable development of economy and society. Articles address planning desert prevention and transformation and the obligation of those who use the land to restore it. It speaks on the planting and protection of foliage, and the limits to livestock. There’s also a lengthy section on liabilities.

It’s a detailed law, and with implementation it has been getting excellent results. According to the National Monitoring of Desertification and Sandification, areas of desertification were reduced by a yearly average of 2,424 square kilometers between 2010 and 2014. In the Ningxia Hui Autonomous Region, arid areas have been reduced from 16,500 square kilometers to 11,620 square kilometers since the 1970s. Ningxia has experienced such success that the State Council approved the building of a sand control demonstration zone meant to share the region’s expertise with others.

To combat desertification, China employs a number of tactics. Shelterbelts are barriers of trees and shrubs planted to protect crops and soil. Green belts are established along foothills to block the flow of sand. The local conditions dictate which plants are utilized, with the majority being grasses. Drought resistant and local species of plants are preferred, while afforestation methods include low density, artificial, and natural techniques. Oasis protection and construction is highly strived for. If any plants exist in arid areas, protecting them is a higher priority than replanting.

China recognized the dangers of desertification early and was the first to create law to combat it. Since that time, the desert in China has been trying to expand. However, as long as the country and its people cooperate with the law and methods of implementation, China will keep pushing the desert back.

Published by Courtney Ruby on June 23rd, 2016 tagged Uncategorized | Comment now »

China’s Defense of Public Interest

China has declared a war on pollution, and not even the government is safe from prosecution. Born from the ever growing concerns regarding the problem of pollutants in the air, water, and soil, China has won its first administrative public interest litigation case. The reason behind the lawsuit? Sewage.

In 2014, Qingshun Chemical Technology Company was investigated by the county environmental agency and found to have produced dyes without the appropriate safeguards. However, the county environmental agency in Shandong province didn’t shut down their operations and enforce the implementation of proper equipment. Instead, the sewage firm was allowed to start trial operations, only suffering nominal administrative punishments. At that time, there was nothing to be done about the inadequate punishment.

In June of 2015, the Supreme People’s Procuratorate submitted a bill to the Standing Committee of the National People’s Congress requesting the authorization of a two-year pilot program. In a time where plaintiffs could only be citizens, corporations, or organizations directly tied to the lawsuit, this program would allow prosecutors to rise up as defenders of the public. Prosecutors could file civil and administrative lawsuits against any act or abuse of administrative power that compromised public rights related to food and drug safety, environmental protection, state assets, or state land use.

Furthermore, allowing prosecutors to enter public interest litigation would establish a greater degree of accountability. A previous lack of effective supervision resulted in undermined governmental practices, particularly regarding environmental issues. By supervising administrative power and implementation of the law, this pilot program would ensure that social equity and public interests were protected.

The pilot program was approved in July of 2015. That December, the first administrative public interest litigation case was filed against the county environmental agency in Shandong province. Prosecutors successfully sued the agency in June of 2016 for illegal acts regarding the Qingshun Chemical Technology Company and its inadequate punishment. The first use of the pilot program was a success.

Environmental problems like pollution often affect the larger population rather than select individuals. The public needs defenders, and China’s pilot program stands to provide them. With its first administrative public interest litigation case won, China has made it clear that not even the government is immune to punishment.

Published by Courtney Ruby on June 23rd, 2016 tagged Uncategorized | Comment now »

7 Red Flags for Manufacturing in China

There was an excellent article written by Jacob Yount called Red Flags in Chinese Manufacturing (found at http://jacobyount.com/red-flags-china-manufacturing/). In this article, Mr. Yount goes through 7 different red flags that any foreign company should be aware of in its dealings with a Chinese manufacturer. I felt that these 7 red flags were still relevant to doing business in China today, so here is a summary of his points.

1. Unbelievably Good Pricing – A price is unbelievably good when it is very different from all of the other quotes you have received. Most likely, this happens when the supplier has misunderstood the request.

2. Quick Agreement to Tight Delivery Time – If the supplier has quickly agreed to your request and has not given you any proof of how they will meet the deadline, be careful. Normally, a supplier will either barely make a tight deadline or will be a little late. So if they agree, but don’t tell you how they will make it, just be very careful.

3. “We’ve never done this before” – This is a very typical response that is meant to convey that the supplier is unsure about whether or not they can do what you requested. At the very least, it shows a lack of confidence that should be a warning sign.

4. “It’s difficult” – If your supplier keeps saying “it’s difficult”, it means that there have been some issues. “It’s difficult” is worse than “we’ve never done this before” because it is a conveyance of a problem, not a lack of confidence. Remember, the Chinese way of telling you bad news is not to tell you directly. Instead, it is to give you vague hints and hope that you fill in the blank

5. No questions asked and no arguing – If a supplier does not have any questions for you, then they are probably not really thinking about the project. This can lead to incorrect quotes and a lot of time wasted. If your potential supplier is arguing with you and asking a lot of questions, it means that they are really thinking about the request that you are making. This is actually a very good sign.

6. Keep ignoring a specific request – If you continuously ask a supplier to confirm a specific request and they keep ignoring you on that point, then it is a bad sign. They most likely don’t understand what you are asking or they just cannot do it. A non-confirmation is not a confirmation.

7. Updates are few and far between – If your Chinese supplier has suddenly stopped communicating with you, this is extremely bad. Most likely, this means that a problem has arisen and they don’t want to tell you until they absolutely have to tell you about it.

Published by Burke Barnett on June 23rd, 2016 tagged Uncategorized | Comment now »

Getting Kidnapped in China Due to Debt? It really happens.

When someone talks about a hostage situation, most people immediately think of criminal groups holding important people against their will for money. Hardly anyone thinks about a normal businessperson being held against their will due to normal business dealings. But this still happens in SE Asia, especially in China. There have been numerous reports about a dispute between a US company and a Chinese company resulting in the unlawful imprisonment of the US company’s representative.

Why is it done? In Chinese culture, it seems as though it is socially acceptable to hold someone hostage in order to try to illicit payment from whoever that person represents or is represented by. One example is a story of a state-run hospital holding a baby hostage because the parents could not pay the hospital fee. Hardly anyone critiqued the hospital and some of the harshest words given were from one attorney in the area who called the hospital’s actions as “inappropriate”. This cultural acceptance is counter to what the letter of the law says in China, but don’t rely on the written laws to protect you. If the local government, courts, and police all think that taking someone hostage is a good way to collect on a debt, then the letter of the law is not going to help you much.

How can you prevent a hostage situation? The easiest way to avoid a hostage situation from developing is to have no debt with a Chinese company and to always keep using the same suppliers. One way these situations develop is when a US company either has to declare bankruptcy or is otherwise deciding to not pay the debt owed. The other way these situations tend to develop is when a US company decides to use a different supplier. If these situations cannot be avoided, then the second most effective way to avoid a hostage situation is to pull all of your US workers out of China and headed back to the US before you deliver the bad news to your Chinese contacts.  If your people are safely back in the US, your Chinese counterpart has no leverage and negotiations tend to be much easier. However, if you leave your people there, then there is the chance that they will be taken hostage.

If you don’t have people there, but you still have to tell your Chinese counterpart that you can’t pay them and/or are deciding to use a different supplier, do not send anyone over to China. The best thing to do is to do all of your communications from the US. If you cannot avoid having to send a representative, the best thing to do is bring a bodyguard or two and be very careful who you meet with and where. The best places would be lobbies of very nice, western hotels during the day. However, this is not a guarantee that nothing bad will happen. Frequently, the local police will actually assist the Chinese companies in detaining your representative or workers in order to try to collect on unpaid debt. It doesn’t matter where you meet or if you have a bodyguard or not if the local police are the ones who are going to be detaining you.

To avoid this from happening, the best thing to do would be to countersue the Chinese company before you send anyone over to China. Once the lawsuit is underway, keep copies of the lawsuit on your representative’s person at all times. This is important because then your representative can claim that they are not being detained in order to collect a debt, but instead out of revenge for the lawsuit going on in the US. In these kinds of cases, the police are unlikely to help the Chinese company and the Chinese company will likely be deterred from trying anything in the first place.

If you follow all of the above advice, then it is unlikely that any hostage situations will develop. But do not limit your research to this one blog post. This is a very serious danger for both yourself and your company, so try to learn as much as you can about this issue and seek out legal advice from both local attorneys and also law firms who have had experience with these kinds of issues. Best of luck!

Published by Burke Barnett on June 23rd, 2016 tagged Uncategorized | Comment now »

China’s Agricultural Undertakings

China is the third largest country in the world, and it has a lot of people. A lot of people need a lot of food. Yet, as China continues its urban expansion, there is a rising concern that the country will be unable to sustain its population agriculturally. Arable lands are the only ones available for agricultural production, yet the availability of arable land decreases as soil pollution and overuse results in tainted foods and lower yields.

To ensure that it can still feed its people, China has set a “red line” of reserve arable lands to guarantee it never falls below 120 million hectares. Under the Land Administration Law of the People’s Republic of China 2004, arable land is strictly protected. If a land is deemed arable, its purpose remains an agricultural one. Article 31 addresses this, explaining that the “State protects cultivated land and strictly restricts conversion of cultivated land to non-cultivated land.” Yet, as arable lands decrease, China looks to remediation, reclamation, and new methods of adapting agriculture to urban growth.

Remediation is a primary method of combating the decrease in arable lands. When soil is polluted, the land is remediated, often by the company responsible for the degradation. For example, it was recently discovered that a textile dye manufacturer in northwest China had been illegally discharging dyed wastewater into the ground for more than ten years. The company was ordered to close its factory, demolish it by the end of the year, and restore the environment after demolition was complete.

Reclamation is another method of increasing arable lands. In one situation, the once depleted mines on the Popeng Mountain were restored to the point they could sustain agricultural pursuits in growing tea. For resource exhausted cities, this is not just the creation of arable land to meet the reserve, but also a new source of work in the tea fields for those who have none.

China also works to adapt agriculture to urban growth, including the use of hydroponic factories. Located entirely within the urban environment, these factories utilize no pesticides, fertilizers, or soil, yet they shield crops from pollutants, droughts, floods, and pests. Crops are ready for harvest in as little as fifteen days, and the factory can produce six times more vegetables than a traditional farm of the same size. Furthermore, these factories have made it possible to grow plants almost anywhere, from regions unsuitable for certain vegetables to the heavily polluted cities. Hopes for this technology include the ability to grow plants underground, in abandoned workshops, the wastelands, desert, and eventually even on the moon and other planets.

China has a lot of people, and those people need food. Whether remediating polluted arable land, creating more through the reclamation of exhausted work sites, or utilizing growing technologies like the hydroponic factory, the odds are China will be able to sustain its people. It will require continued diligence of the law and its enforcement, but agricultural success means not only food for the people, but also work and the potential for international exportation of surplus crops.

Published by Courtney Ruby on June 22nd, 2016 tagged Uncategorized | Comment now »

How to Not Lose Your Molds in China

When a US company hires a Chinese manufacturer to make goods, the US company will frequently give the Chinese manufacturer the molds that are needed to make the good. However, problems can arise when the US company wants the molds back. The reasons for wanting the molds back can vary, such as wanting to use a new manufacturer. One of the major issues that can arise is that the Chinese manufacturer might not want to give the molds back. So what can the US company do in this situation?

The best way to handle this situation is to not get into it in the first place. This may seem obvious, but it is important to remember to make a good contract first so that this situation never happens. A good contract that could prevent your molds from being taken will make taking your molds too expensive for the Chinese manufacturer.

In order to do this, have your Chinese manufacturer sign a contract that makes it very clear that the molds belong to the US company. The contract should also be written in Chinese. This will make it more easily enforceable in a Chinese court. Typically, a Chinese court does not like to enforce contracts that are not written in Chinese. So before anything else, have this contract written in Chinese that says very clearly that the US company owns the molds, not the Chinese manufacturer.

In addition, there should be a penalty if the molds are not returned or if they are not returned on time. This kind of stipulation might make a Chinese manufacturer think twice before trying to take the molds. Even better, the contract should require a deposit in order to have the loans given to the Chinese manufacturer in the first place.

The key is that the contract has to make taking the molds not worth the price. A Chinese manufacturer is usually trying to take the molds either out of revenge for not buying from them anymore. Another reason could be that the Chinese manufacturer wants to start making the product itself. But with the kind of contract described above, it is much less likely to have the molds taken. And even if the molds are taken, the US company will have a contract that describes how they own the molds very clearly and the contract will be enforceable  in a Chinese court because it is written in Chinese. Best of luck!

Published by Burke Barnett on June 21st, 2016 tagged Uncategorized | Comment now »

China’s Water Situation

In China, tap water is undrinkable before it is boiled. A side effect of rapid urbanization, water pollution levels can be extremely high and varied. For example, the most common pollutants in the drinking water of Shanghai include bacteria, chlorine, lead, and toxic heavy metals. Lead and other heavy metals come from corroding pipes. The bacterium comes from improper dumping of sewage and other biological contamination. Attempts at treating this bacteria result in high amounts of chlorine being added to the water. However, this chlorine reacts with biological matter and can lead to byproducts that increase the risk of cancer.

As an alternative to tap water, bottled water is sold and offered almost everywhere, but it’s not enough. People still have to shower, and studies have shown that people absorb more toxic byproducts of chlorine through one ten minute shower than by drinking four liters of unfiltered water. If taking a hot shower, the warm water opens pores and increases the rate of absorption of chemicals through the skin. Additionally, any steam inhaled sends the contaminants straight to the lungs. Unlike ingested contaminants, which are partially filtered by the liver and kidneys, inhaled contaminants directly enter the bloodstream. Water filters for single households are manufactured and sold by private companies, but these are often too expensive for many families.

The problem of water pollution is a national one, and China is working to address it. Laws applying to the water can be found in many places. The Marine Environment Protection Law of the People’s Republic of China applies to internal waters as well as those beyond the coast, with Article 4 stating that “All units and individuals shall have the obligation to protect the marine environment and have the right to watch for and report on actions causing pollution damages to the marine environment by any unit and individual”. Another is the Law of the People’s Republic of China on the Prevention and Control of Environmental Pollution by Solid Waste, which forbids the construction of facilities for storage or destruction of industrial waste by drinking water sources.

Perhaps most important is the Law of the People’s Republic of China on Prevention and Control of Water Pollution. Solely dedicated to the issue of water pollution, it contains a host of articles regarding supervision, penalties, and definitions. Under this law, “Any unit or individual that has suffered losses directly from a water pollution hazard shall have the right to claim damages from and demand the elimination of the hazard by the polluter.” Given the fact that everyone who showers in tap water is being harmed, this is an excellent law. However, it also appears difficult to enforce; with so much illegal dumping, finding the culprit could be impossible.

China is working towards the reduction of water pollution, and it’s not alone in the endeavor. A partnership between two Nevada-based environmental research institutions and the Hohai University will focus on managing the toxic algae blooms in Lake Taihu. These algae blooms are a result of runoff from fertilizers used in agriculture and household cleaning chemicals, and has left millions without clean water. Similar partnerships are continually established between China and other countries, not only for the benefit of China and its people, but those of similarly polluted countries as well. If such partnerships continue, along with the observation and enforcement of the law, China’s water situation will vastly improve. Until that time, drink bottled water while keeping the showers cool and short.

Published by Courtney Ruby on June 21st, 2016 tagged Uncategorized | Comment now »

Make Sure the Contract is With the Right Party

One of the most important parts of a contract is to include penalties for a breach of contract from one party or another. However, what happens when the company you are forming the contract with does not have enough assets to pay for this penalty? Essentially, the contract doesn’t have nearly the same amount of bite that was expected. So one of the first steps in forming a contract with a Chinese corporation is to make sure you are forming the contract with the party that can actually pay restitutions if something goes wrong.

A very common tactic is to have a shell company or a sourcing agent that handles all of the sales contracts. This means that the foreign company has a contractual relationship with that sourcing company or agent, but not the actual manufacturer that has all of the assets. This prevents the foreign company from recovering from the manufacturer itself because they did not have any direct contractual relationship. So if the contract is violated, and the foreign company tries to recover, they find that the agent they had a contract with only has a small office, a chair, and an old computer that he does his work on. This is not useful in order to recover from any sort of large contract that could be worth hundreds of thousands of dollars.

In order to prevent this kind of situation from developing, it is important for any company seeking to form a contract to first perform a due diligence check. This due diligence check will verify whether or not the company that you are trying to form a contract with actually exists, has any assets, and the nature of the relationship, if any, with the actual manufacturer. This can help prevent a foreign company from being tricked into contracting with an agent that has no resources to pay up in case an issue arises.

If a foreign company does learn that the purported company is actually just a sourcing agent, they should try to contract the manufacturer directly instead. If this does not work, another idea would be to ask the manufacturer to be a co-signer. This would still allow the agent to get his cut, but also hold the manufacturer liable if there are any delays or other issues that arise out of the contract. If neither of these plans works, then the foreign company should be extremely careful in moving forward with contract negotiations.

Published by Burke Barnett on June 20th, 2016 tagged Uncategorized | Comment now »

China’s Goals for Improving the Environment

The environment is a vital part of human life. People breathe air, drink water, and rely on arable lands to grow food. However, in areas of industry and dense urban growth, the environment often becomes polluted. The air becomes difficult to breathe. The water contains contaminants too harmful to drink. The soil yields less food to eat. Humans exposed to these polluted environments often suffer a wide range of ailments. One of those is cancer.

China has experienced rapid growth in the past years, and its environment isn’t in the best shape. Thankfully, the government not only has existing laws to improve the environment, but has set goals going forward. The largest of these goals are held in the recently proposed 13th Five Year Plan, but significant goals lie elsewhere as well.

China’s 13th Five Year Plan stretches between the years 2016 to 2020. It’s pretty ambitious, particularly regarding environmental improvement. Each new Five Year Plan contains a series of social and economic development initiatives designed to combine long and short term goals, deal with current challenges, and resolve long-term problems. When backed with the law, enforcement mechanisms, and financial support, these plans guide China’s future. Plan number thirteen is no exception.

Of the highlighted thirty-two proposals of China’s 13th Five Year Plan, two focus on agricultural reform. Proposal 17 is dedicated to improving water quality, calling for the “strictest management system for water resources to be implemented and a national monitoring system established for groundwater”. Number 18 focuses on the air, requiring a “nationwide real-time online environmental monitoring system to be set up and an emission permit system will cover all companies with stationary pollution sources”.

Finally, proposal 19 is about China’s greenery, calling for the “Forest protection plan to be improved, with commercial deforestation banned and forested areas increased. The amount of land returned to farmland and forest areas are to be expanded and pasture protection improved.”

This isn’t the first ban on deforestation in China. Commercial deforestation had been banned previously in national forests and in the extreme northeast portion of China near the Hinggan Mountains. Considered a world leader in afforestation, China’s focus has been on planting trees rather than cutting them down. So while a complete ban on deforestation might seem unusual, this is likely a goal that China has been working towards for some time.

Goals for the year 2020 are being made outside China’s 13th Five Year Plan as well. Related to the focus on agricultural reform and an increase in greenery, it has been stated that China is determined to clean up 90% of polluted arable land by 2020. Approximately 16% of surveyed lands in China are polluted by heavy metals like cadmium, arsenic, lead and mercury. Additionally, an approximate 19% of surveyed arable land had pollution levels higher than the national standard, which means almost 3.33 million hectares of arable land are not suitable for growing crops. If 90% of these lands are remediated by 2020, that would be almost three million hectares of land able to be used for agricultural production.

China has proposed ambitious goals for improving the country’s environment. In a country where people can’t drink the tap water before boiling it and have to be plan their outdoor exposure according to the quality of the air, these are eagerly welcomed goals. Some might fear they are unobtainable. Yet, with the establishment and enforcement of related laws, and a healthy dose of financial support, these goals might very well become realities.

Published by Courtney Ruby on June 20th, 2016 tagged Uncategorized | Comment now »