Tips To Protect Yourself In International Trade

As an international law firm, our China lawyers are often contacted by foreign companies seeking our assistance in dealing with international trade disputes. In just this last week, we received two new inquiries from potential clients which hope to engage our service to get back a payment made to a supplier in China. One American company had paid $80,000 to a Chinese company for a shipment of white socks, but when the socks arrived, they were discolored and made with low quality material. The client couldn’t get anyone to buy them, and come to us for help. However it turns out this client didn’t sign a formal contract with the Chinese supplier, they just sent the money.

The other case to cross our desks was a Polish company which had paid over $130,000 to buy a certain chemical to be used in a production process. However after they tested the received material it was discovered that the content of the containers was not as pure as the supplier had originally indicated. While this company did have a contract, the contract did not include the purity requirements.

We see these kinds of disputes all the time. In order to help all of those companies which potentially do business with China, here are some tips to follow in the process of international trade with Chinese companies.

1. First, perform due diligence research on your Chinese clients or vendors.

Before doing any business, it is wise to do a deep due diligence review on the other party of the business. This means checking relevant original certificates, such as the official Business License, any permits or qualifications for the manufacturing or in/exporting of the products; examine the production capacity or scale of the target partner; if possible examine the financial status, credit record etc. The more you get to know your international partner, the safer you will be.

2. Prepare a comprehensive and effective China enforceable contract.

This is the best way to make sure your China transaction is safe. Before you send any money to the Chinese company or send any product, hire a good China lawyer to prepare a sound legal contract with terms on the quality, inspection method, shipment arrangements, payments arrangements, dispute resolution method etc. to clearly list out the responsibilities of each party and the methods to resolve potential disputes. In our experience, most of our clients who encounter international trading disputes have ignored the importance of having a good contract. Lack of contracts or unclear responsibilities for the parties are the common causes international trade problems. This is the most important and professional part in the International Trading, the most prudent way is engage a local professional lawyer to draft or review the international trading contract.

3. Pay more attention to the payment method.

In the modern world, it is very fast and easy to make an international payment. But once those funds have left your account, they can be impossible to get back, when doing so may rely on the legal system of a foreign country. The recommend way to make payment during the international trading is make payment by using an old fashioned Letter of Credit. A Letter of Credit is issued by a reliable bank and before the money is paid to the other party, relevant supported documents must be provided to and examined by the bank.

Published by Bonnie Zhang on December 5th, 2017 tagged China News

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