April 9, 2021

Exclusivity Agreement China

j$k1700177j$kIn the previous article, we focused on a number of issues that need to be considered before signing distribution agreements with Chinese parties. You will also find that some of the issue...

In the previous article, we focused on a number of issues that need to be considered before signing distribution agreements with Chinese parties. You will also find that some of the issues in our top 10 may apply generally to commercial contracts involving Chinese parties, including the need to take into account the protection of property rights and discussions on compensation and the effectiveness of liquidated damage rules. If you want to buy a custom or generic private label, there is no exclusivity. The Proforma invoice is the simplest and most common document you have to make in Chinese manufacturing. It is always provided by the supplier. Imagine the P.I., as we know it with love here, as a “light sales agreement”. In FB groups, I often see the question: “How are these agreements going to stop and what are your chances of winning an NDA dispute in China if you find out that your supplier has betrayed you?” To be honest, the odds are slim. Does it help to have a deal in Chinese? No no. Even if you hire an expensive lawyer in China and win the case, if you solve the problem, your expenses will have soared in the thousands of dollars. So it`s not even worth suing, it`s not even worth suing. I get my suppliers to sign an agreement, whether the order is worth $1,000 or $150,000.

You want to put the best foot forward and show suppliers that you are serious, especially as a small business or entrepreneur at an early stage. This is something that all plant staff and buyer is considered a “reference” (reference) in case there were small disagreements, delays, quality problems, etc. It will not be an iron agreement that will be respected until the haircut, but it will help. Personally, I am not aware of a single truly conclusive case in which a foreign company has advanced, supported by an exclusive contract. Of course, a supplier cannot be expected to invest in product development and grant exclusivity to anyone who can move 500 units per year. However, in most cases, these products are relatively generic and are largely based on their customers` OEM designs. Most suppliers simply do not have any intellectual property that can be talked about, so an exclusive agreement is a non-launcher. NNN agreements are an airtight NOA, which must include “non-use, non-disclosure and non-circumvention.” Non-use prevents the manufacturer from using your trade secret or idea to compete with you. You should have some kind of sales contract before sending a deposit for each order.

And remember, the above only applies to your own designs. This is a different story if you buy products from the rack perhaps with small modifications from a supplier you found on Alibaba for example. In these cases, it doesn`t make much sense to have NDAs or exclusive agreements, because that`s not your design. It`s the supplier. However, if you make significant changes and are able to place larger orders, it is helpful to have agreements. In this edition of our series on business activity in China, we discuss a few issues to consider before a foreign seller (the seller) enters into a distribution agreement with a Chinese party acting as the seller`s distributor (the “distributor”) to market and/or sell the seller`s products and/or services in the Chinese market. I did it… But that sums up, in my opinion, the activity in China and how the agreements should be fully seen. I learned this by working full-time in China since 2014, managing massive productions worth 6 digits in my consulting firm Source Find Asia, interviewing several Chinese experts on the Made in China podcast, and being surrounded by a community of more than 200 Chinese entrepreneurs called Enter China – which is now a partner.

And again, don`t forget to create the agreement in English and Chinese, if not practical, at least have translated the finer points into Chinese.