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Due Diligence in China — Is Your “Supplier” a Middle-Man?

November 16, 2017| Mr. David A. Dodge, Esq. | Uncategorized

We are regularly contacted by clients to conduct due diligence on their Chinese suppliers in Shenzhen, Guangzhou and Dongguan in the Guangdong Province. After a few years of doing business with their supplier, they start to wonder — are we really dealing with the factory here or are we dealing with some middleman who is charging us a premium and may not be a reliable company in the future and as our business grows?

As an example, one of the lawyers in our firm out of our office in the Futian District in Shenzhen, who previously worked for the largest law firm in China focused on foreign clients, yesterday conducted a due diligence for our California-based client.

It seems that after doing 2 plus years of steady business with their Ningbo based supplier who claimed to be a manufacturer of plastic injected mold products, our client became concerned with repeated and recent supply disruptions.

A few hours of work by Mr. Zhang of our firm confirmed:

“As assumed by ——, there is no evidence to show that ————– Co Ltd. has any qualification on manufacturing. It seems to only be a front trade company.

I have searched the shareholding structure, there is no evidence to show that the shareholders of ————— Co Ltd. has invested in any factory, at least in China. The employment information of ————– Co Ltd. only shows that they are hiring sales manager instead of any position related to manufacturing. It shows that ——————– Co Ltd. has only been granted the license related to import and export. In China, a factory will have at least an environment report filed with the government and available to the public. However,  there is no evidence to show that —————- Co Ltd. has submitted such environment report.

Enclosed please find the Due Diligence report in Chinese and translated into English for our client.”

Now that the client has their suspicions confirmed (who wants to do business with a middle-man?) we can provide secure sourcing services to help the client find a factory to do business with and Mr. Danan of our firm can arrange for them to tour several good factories that specialize in their type of product for the client to do direct business with. Obviously, a TM should be filed in China for their company name and product, and an NNN should be entered into. Since our client does millions of dollars of sales on Amazon, they will be relieved to have a more reliable footprint in China for their future business needs.

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August 28, 2017| Mr. David A. Dodge, Esq. | Uncategorized

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How a Chinese Lawsuit Works – Trials (Part 2)

September 13, 2016| Mr. Bowen Zhang, Esq. | Uncategorized

Judge System

According to the Law on the Organization of People’s Court and other laws, trials of People’s Courts take the following forms:

  1. Sole Judge Court

This kind of court is presided over by one judge for trying simple cases. Legally speaking, these cases are simple civil cases and cases involving economic disputes handled by grass-roots courts and their detached tribunals.

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April 19, 2016| Mr. Sam Danan | Uncategorized

Solving Most of the Problems of Piece Rate (PR) in a Nutshell and Implications of Piece Rate (PR) on Small Customers Who Order Directly from Factories in China. Piece Rate (PR) is a widely used method for paying workers who do repetitive work and it is meant to link between worker’s effort and reward. In a PR payment system the worker is being paid per unit of work completed rather than by the hour. In a well designed PR payment system

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Brief Introduction: Public Courts vs. Private Arbitrations in China and the $1 M...

February 13, 2016| Mr. Hong Choo, Esq. | Uncategorized

There are two principal methods for resolving commercial disputes on the ground in China legally, which can be enforceable against Chinese companies in the People’s Court: one is arbitration and the other is public court litigation. China arbitration matters can be classified in three types:foreign related arbitration, ordinary commercial arbitration and labor arbitration.

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Inherent Risks in the China Manufacturing Process

Inherent Risks in the China Manufacturing Process and Ways to Mitigate These Ris...

January 27, 2016| Mr. Sam Danan | Uncategorized

We live in a time where electronic markets allow access to suppliers in China and to the final customer very easily. This has opened significant opportunities to small companies and individuals who wish to trade or develop and market their own products; options which 10 years ago were reserved to large multinational companies only. These new possibilities however come with risks and for many, these risks are novel and not easily managed.

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Chinese Manufacturer from Infringing a Non-Chinese Inventor’s Patent Rights

How to Prevent a Chinese Manufacturer from Infringing a Non-Chinese Inventor’s...

January 12, 2016| Mr. Hong Choo, Esq. | Uncategorized

We resolved a case this past week involving a U.S. inventor who relied upon their Chinese supplier to properly file for a Chinese patent. The device was a very successful and unique electronic device that was invented by our client here in the U.S. Once our client set up manufacturing in China, they relied upon their trusted supplier to file for a Chinese patent since the invention was totally unique and novel.

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Non-Disclosure, Non-Circumvent and Non-Compete Chinese Translation Examples

December 22, 2015| Shen Li | Uncategorized

Recently I’ve been working on contractual projects, one of them is translating customized Non-Disclosure, Non-Circumvention and Non-Competition Agreements (NNN) which translated into Chinese is 保密,禁用,非竞争协议. This type of technical and legal translation sometimes can be challenging due to English words in Chinese that have many common meanings in general; however, in the context of legal translation, these common Chinese meanings

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China Dispute Resolution Agreements

China Dispute Resolution Clauses – When Things Go Wrong and Keeping Them from ...

December 12, 2015| Mr. David A. Dodge, Esq. | Uncategorized

Oftentimes, clients come to us with issues related to how they can enforce their legal rights in foreign jurisdictions (mostly China) when things go wrong. Unfortunately, many times this occurs after things have already gone wrong.When international legal relationships are improperly established (much like in life), significant and unnecessary legal expenses are incurred in helping the client

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